The best growth stocks are often those companies that continue to release more and better products over time. This is the basic formula that fuels more growth for the business and higher share prices over time.
The following two companies are executing on this simple strategy to create wealth for their shareholders. These stocks have outperformed the S&P 500 over the last year and still offer attractive long-term return prospects.
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1. Take-Two Interactive
Some of the most sophisticated investors in the world are taking an interest in leading video game companies. In 2023, Microsoft bought out Activision Blizzard for $75 billion, and just recently, an investor consortium led by Saudi Arabia's Public Investment Fund (PIF), Silver Lake, and Affinity Partners announced a $55 billion deal to acquire Electronic Arts.
Take-Two Interactive (TTWO -0.27%) is the last one standing of the big three U.S.-based video game companies. After rising 70% over the last year, Take-Two's market cap is currently $47 billion. It should be of interest to the smart money, as it owns one of the most valuable entertainment properties with the Grand Theft Auto franchise, among other titles for console, PC, and mobile platforms. Grand Theft Auto V has sold over 215 million copies since its launch in 2013. Next year's release of Grand Theft Auto VI is a major catalyst for Take-Two that should sustain its momentum and drive record financial results through the end of the decade.
Top game companies are valuable because they have highly engaged player bases, not to mention that video games are the largest entertainment industry. Analysts expect Take-Two to generate $6.1 billion in bookings, or non-GAAP revenue, for fiscal 2026 (which ends in March). By fiscal 2028, the consensus estimate calls for earnings per share to reach $10.26, which is three times Take-Two's expected earnings this year.
In the most recent quarter, Take-Two's net bookings grew 17% year over year to $1.4 billion. The most telling feature of Take-Two's business that makes it a solid investment is the growth of in-game spending, or recurrent consumer spending. This line item grew 17% year over year and totaled 83% of Take-Two's total bookings in the quarter.
In-game spending on virtual currency and other digitally delivered content is high-margin revenue. It is also a good indicator of how deeply engaged players are with Take-Two's biggest games like Grand Theft Auto. There is tremendous anticipation for the next installment, with the launch of the official trailer breaking viewing records earlier this year on YouTube.
Grand Theft Auto VI is set to release on May 26, 2026. Analysts expect bookings to hit $9.1 billion in fiscal 2027, which will create a new plateau of earnings power for Take-Two that should support market-beating returns for investors.
2. Spotify Technology
Shares of leading music streamer Spotify Technology (SPOT -0.17%) have soared 90% over the last year supported by strong user growth and financials. Spotify may not have a monster near-term catalyst like Take-Two, but the reason the stock could hit new highs is how it is using artificial intelligence (AI) to drive higher engagement with its user base.
Spotify's monthly active users have increased from 433 million in Q2 2022 to 696 million in Q2 2025. It's become a large entertainment platform, and while management is aiming to reach 1 billion users, its ability to expand margins through premium services powered by AI makes it a compelling stock to buy for the long term.
Spotify's AI DJ feature, which curates a personalized playlist for each user, requires a premium subscription to access it. This has been a very popular feature for Spotify, contributing to more users signing up for premium subscription plans. Premium subscriptions drive most of the company's revenue, with advertising making up a small portion of the top line.
Spotify is essentially turning into a generative AI-powered service that offers a high degree of personalization. Engagement with AI DJ has nearly doubled over the last year, but Spotify's new Create feature, where users can chat with the AI and provide specific instructions on what they want to listen to, could drive significant growth in premium subscriptions in the coming years, which would be beneficial to margins and earnings growth.
Spotify reported a 53% year-over-year increase in operating profit last quarter. Analysts are expecting the company's earnings per share to grow at an annualized rate of 33% in the coming years. This is enough earnings growth to potentially double the share price to around $1,400 within the next three to five years.
