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Image: Take-Two Interactive Software.

For a long time, many investors have believed that the video game industry is in danger of becoming obsolete, with competition from online and mobile games threatening console-game specialists like Take-Two Interactive Software (NASDAQ:TTWO). Yet Take-Two has defied doomsayers for years, and coming into Monday afternoon's fiscal first-quarter financial report, Take-Two investors were hopeful that the company would continue to enjoy strong performance. Unfortunately, Take-Two didn't quite live up to all the expectations its shareholders had, but the company's growth was still quite impressive. Let's look more closely at Take-Two Interactive to see where the game-maker took a hit this quarter.

Take-Two can't set a high score
Take-Two Interactive's fiscal first-quarter results looked extremely strong compared to last year's results. Adjusted revenue soared by 142% to $366.4 million, topping the expectations investors had by about $15 million. The disappointment came on the bottom line, though, where even though adjusted net income reversed a year-ago loss, adjusted earnings of $0.31 per share were still a nickel below the consensus forecast among investors. On a GAAP basis, Take-Two posted an even wider loss than last year's blaming deferrals of net revenue and costs of goods sold for some of the declines.

Digitally delivered content is the wave of the future for game-makers, and Take-Two has done a good job of cashing in on the growing trend. Adjusted revenue from digitally delivered content jumped 139% to $254 million, and so Take-Two gets more than two-thirds of its overall sales from its digital channel. In addition, the strength of key franchises like Grand Theft Auto, NBA 2K, Evolve, Borderlands, and WWE 2K were extremely helpful in building up digital sales. Recurring revenue from in-game spending once again jumped by nearly half from year-ago levels.

Take-Two expressed satisfaction with its growth. In CEO Strauss Zelnick's words, "These results were driven by strong consumer demand for Grand Theft Auto V, NBA 2K15, and an array of other titles, along with better-than-expected growth in recurrent consumer spending."

Can Take-Two grow faster?
Zelnick seems excited about the company's future prospects as well. "Fiscal 2016 is off to a solid start," Zelnick said, and "we have a robust development pipeline and are well-positioned to generate revenue growth and margin expansion."

Yet Take-Two's guidance didn't quite live up to the hopes that investors had for the game-maker. For the fiscal second quarter, the company's guidance was fairly strong, with revenue between $275 million and $325 million producing adjusted earnings per share of $0.05 to $0.15, far better than the sizable loss that investors were expecting. Take-Two disappointed long-term investors by choosing not to make any adjustments to its full-year fiscal 2016 guidance, once again projecting between $1.3 billion to $1.4 billion in sales and adjusted earnings of between $0.75 and $1 per share. Both figures are below the estimates that those following the stock anticipate.

One big key will be the success of Take-Two's coming releases. New versions of NBA 2K16, WWE 2K16, XCOM 2, and Sid Meier's Civilization Beyond Earth are planned before 2015 ends, which it hopes will improve revenue growth even beyond current levels. Take-Two also noted that deals with action-film star Arnold Schwarzenegger could support sales from the WWE franchise going forward.

Interestingly, Take-Two didn't move forward on the increase in buybacks that it authorized last quarter. Indeed, although purchases of short-term investors climbed to $187.5 million for the quarter, Take-Two didn't announce any share repurchases during the quarter, calling into question why the company made the authorization in the first place.

Take-Two Interactive investors didn't seem happy with the earnings miss and mixed guidance, sending the company's shares down about 2.5% in the first two hours of after-market trading following the announcement. Even with somewhat conservative guidance, though, Take-Two is still doing an excellent job adapting to a digital world and finding ways to grow that have eluded many of its game-making peers in the industry.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Take-Two Interactive. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.