What happened

Take-Two Interactive (TTWO -0.05%) shareholders leveled up against the market this week. Their stock gained 7% through 12:30 p.m. ET on Friday compared to a 3% slump in the S&P 500, according to data provided by S&P Global Market Intelligence.

The rally wasn't enough to put the video game developer back into positive territory compared to the market in 2022. Shares are still down 30%, while the S&P is down 18%. But the boost was sparked by positive news on the earnings front.

A person plays a game on their smartphone.

Image source: Getty Images.

So what

Take-Two executives announced on Monday that sales rose 11% for the first-quarter selling period that ended in late March, amid robust demand for digital entertainment. A few standout franchises were NBA 2K22, Grand Theft Auto V, and Red Dead Redemption. These brands continued to attract more gamers, who have been happy to sign up for seasonal content additions, executives said in a conference call with Wall Street analysts.

Now what

Management is excited about the close of the Zynga acquisition, which will make Take-Two a much bigger industry player. The regular pipeline of content releases in its core franchises is packed, too.

The delay of one or more of those titled could pressure Take-Two's sales in 2022, as they have for rival Activision Blizzard. And the wider digital entertainment industry is likely to see reduced demand for a time following two consecutive years of soaring growth in earlier phases of the pandemic.

But Take-Two is signaling record sales and improving profitability over the next several years, notwithstanding rocky results in the short term. Success around these targets would be the surest way for the video game company to deliver solid returns for its shareholders.