Take-Two Interactive Software, Inc. (NASDAQ:TTWO) reported its fourth-quarter results on Monday after the closing bell. Profit was lower than a year ago but beat analysts’ estimates. The publisher of “Grand Theft Auto” reported a drop in demand from pandemic highs.

Q4 Highlights

Net revenue increased 11% to $930 million in the quarter ended March 31, while the cost of goods sold increased 43% to $399 million, driven by the amortization of software development costs for the company’s fourth-quarter releases.

Operating expenses increased 32% to $403 million due to the addition of Nordeus, including its price supplement, as well as higher marketing and transaction costs.

Take-Two’s net profit fell to $110.97 million ($0.95 per share) for Q2 2022, from $218.81 million ($1.88 per share) a year earlier.

Excluding items, the video game company earned $1.09 per share, beating estimates of $1.04 per share. Quarterly net bookings rose 8% to $845.8 million, but the figure remains lower than estimated. The company’s new titles, WWE 2K22 and Tiny Tina’s Wonderlands surpassed its expectations, just like Red Dead Redemption 2.

Demand for Video Games is Cooling

Take-Two Interactive is the latest U.S. video game company to forecast annual sales below estimates as demand begins to plateau in a post-pandemic world.

The return of social life in a re-opening economy and a shrinking lineup of big game titles herald tougher times for the video game industry as sales cool after hitting dizzying heights during lockdowns.

For the full year, Take-Two is forecasting adjusted revenue of $3.75 billion to $3.85 billion, while analysts had expected $3.96 billion, according to IBES data from Refinitiv.

The company’s forecast for first-quarter adjusted revenue of $700 million to $750 million is also below estimates of $777.9 million.

However, the forecast did not take into account the pending acquisition of “Farmville” maker Zynga, nor any interest charges related to the transaction, which is expected to close in May.

Take-Two CFO Lainie Goldstein commented during an earnings call:” In closing, we have great confidence in our ability to drive accelerated growth into fiscal 2023 and beyond, and we believe that our pending combination with Zynga will take our business to an even greater level of scale and profitability. As we execute on our strategic initiatives, we believe that we can deliver sustainable, profitable growth for our shareholders.”

Shares of Take-Two soared 10% on Tuesday morning.