Swedish games developer Embracer (EMBRACb.ST) reported a 50 per cent drop in first quarter operating profit this week after the owner of the Tomb Raider franchise released fewer games.

The company said it still expects to release games with a value of 3.9 billion Swedish crowns ($372.70 million) for the financial year, but its shares were down 10 per cent by 0700 GMT as it also reported a much bigger than expected slide in first quarter sales in its Entertainment & Services segment.

Embracer, like other game developers, benefited from growing demand for video games during COVID-related lockdowns, but has since been hit by development delays, falling demand and poor reception for some of its new titles.

Entertainment & Services segment sales dropped 54 per cent year-on-year in April-June to 848 million crowns, it said, a bigger-than expected 37 per cent drop from the company’s consensus.

After years of studio acquisitions to become a top global and European games publisher, the company took on $1.5 billion in debt.

However, it suffered a major setback last year after a $2 billion partnership deal with an undisclosed company fell through, which led it to announce a major restructuring plan in June last year.

Following the failed partnership, Embracer has divested some studios to reach its debt reduction target and is charting a new course by splitting into three publicly traded entities by 2025, redefining its future in the gaming industry.

Embracer’s planned three-way split would be carried out through the listings of Asmodee, which recently secured a $976 million loan to help repay the company’s debt, Middle-earth Enterprises & Friends and Coffee Stain & Friends.

The company said its adjusted operating profit fell 50 per cent to 828 million Swedish crowns in its first quarter, just below analysts’ forecast of 839 million crowns in a company-provided consensus.

“Out of the mix, PC and console performed well, but the volatile Entertainment and Services segment dragged results,” Jefferies said in a note.

Embracer’s shares have lost around 80 per cent of their value from their 2021 peak.

($1 = 10.4641 Swedish crowns)