Take-Two Interactive Software Inc (NASDAQ:TTWO) is using AI to improve operational efficiency and support certain areas of game development, but does not expect the technology to significantly reduce the cost of producing major video game titles, according to Jefferies analysts following a meeting with the company's CEO Strauss Zelnick.
In a note, Jefferies wrote that management reiterated that AI is creating measurable productivity gains in day-to-day business functions and helping streamline mobile game level creation and user acquisition advertising. However, the company does not expect AI to materially lower development costs for AAA games and continues to invest in game creation tools while anticipating further growth in its development workforce, which currently stands at roughly 10,000 employees.
According to the firm, Take-Two believes that any future AI-driven improvements in large-scale game development would likely raise consumer expectations for quality rather than make blockbuster games substantially cheaper to produce.
Jefferies also highlighted improving trends in Take-Two's mobile advertising business. The company's mobile advertising revenue grew 6% year-over-year in fiscal 2026, compared with a 29% decline in fiscal 2025. Management expressed confidence that growth could continue as the company expands monetization of non-paying users.
The analysts noted that Take-Two identified non-gaming advertisements within mobile games as a potential growth opportunity. Since acquiring Zynga, the company has also adopted a more disciplined approach to user acquisition spending, requiring stronger evidence of return on investment before increasing marketing budgets for new titles.
On user-generated content (UGC), Take-Two reiterated that it is not seeking to build a platform similar to Roblox, where third-party developers create the majority of content. Instead, the company plans to continue offering creator tools within its own game ecosystems.
Jefferies pointed to FiveM, the role-playing platform built around the Grand Theft Auto franchise, as an example of this strategy. Management indicated that FiveM serves a different player base and business model than GTA Online and is expected to continue operating separately following the launch of Grand Theft Auto VI.
The firm also highlighted the growing contribution of college basketball content within the NBA 2K franchise. According to management, the addition of College Basketball mode, combined with changes to season passes and early-access offerings, has helped drive growth in recurring consumer spending for NBA 2K26.
While Take-Two sees the possibility of a standalone college basketball game in the future, management indicated the feature is more likely to remain part of the NBA 2K ecosystem. International markets were identified as the largest opportunity for future player growth, reflecting the NBA's ongoing global expansion efforts.
Looking ahead, Jefferies wrote that the next major catalyst for Take-Two shares will likely be the launch of Grand Theft Auto VI pre-orders, which the firm expects to coincide with the game's summer marketing campaign.
The firm added that pre-orders could provide insight into the game's pricing strategy and the structure of its online offering, particularly through premium editions and associated digital bonuses.
Jefferies noted that Take-Two shares rose about 20% between the start of pre-orders for Red Dead Redemption 2 in June 2018 and their peak in early October before pulling back around the game's release.
Jefferies maintained its 'Buy' rating on Take-Two and a $300 price target. Shares traded up almost 5% at about $223 on Tuesday afternoon.