In this article, we will explore the 7 most profitable gaming stocks to invest in.
Gaming Evolution: Key Trends Shaping the Market
The gaming industry is currently experiencing significant changes driven by technology and evolving consumer preferences. One of the most notable trends is the integration of artificial intelligence (AI), which is transforming game development and player experiences. AI is being used to create more realistic environments and enhance gameplay by adapting to individual player styles. Here’s a short excerpt from our previous article “7 Best Gaming Stocks To Buy Now” that discusses this in more detail:
“According to Bernard Marr, a world-renowned futurist and author of ‘Generative AI in Practice: 100+ Amazing Ways Generative Artificial Intelligence is Changing Business and Society’, generative AI is revolutionizing video game development by providing tools that enable developers to create engaging content, realistic visuals, and immersive gameplay experiences. Marr believes that generative AI can help developers create vast, unique game environments through procedural generation, allowing for dynamic gameplay experiences that change with each session.”
Another major trend in the gaming market is the rise of microtransactions, particularly in free-to-play games. This monetization model has become increasingly prevalent as developers look for sustainable revenue streams.
On March 24, CNBC reported that two of the largest video game companies in the US, Electronic Arts and Take-Two Interactive, are increasingly relying on live-service games, subscriptions, and in-game purchases for their revenue. Microtransactions, which allow players to buy virtual items or features within games using real money, have become a significant source of income. Popular titles like Fortnite, Call of Duty: Warzone, and Clash Royale utilize this model, where players pay for ongoing updates and seasonal content through subscriptions or battle passes.
Mat Piscatella, executive director of video games at Circana, noted that the industry has shifted towards a “battle pass” system, which packages seasonal content in a way that players find valuable. This approach has led to a more positive response from gamers, as they feel they receive consistent value for their money. The trend indicates that game publishers must continuously engage players with new content to maintain their interest in these live service games.
According to Comscore’s 2024 State of Gaming Report, around 82% of American gamers made in-game purchases in freemium games in 2023. The report also highlighted that 62% of adults over 18 participate in gaming activities, showcasing the widespread appeal of video games across various age groups.
Esports is becoming increasingly popular, especially among younger audiences. The report found that 86% of Gen Z and 80% of millennials watched esports last year. Additionally, 53% of Gen Z and 61% of millennials interacted with esports content, highlighting the increasing popularity of competitive gaming among these age groups.
With an understanding of the gaming industry’s landscape, let’s now look at the 7 most profitable gaming stocks to invest in.
A close up of a person’s hands using a home console gaming device.
Methodology
To compile our list of the 7 most profitable gaming stocks to invest in, we used the Finviz and Yahoo stock screeners to find the largest gaming companies. We also reviewed our own rankings, sifted through ETFs, and consulted various online resources.
Next, we focused on profitability. From this initial list of more than 20 gaming companies, we narrowed our choices to stocks that had positive trailing twelve-month (TTM) net income and stocks that have grown their net income positively over the past 5 years.
To ensure the reliability of our findings, we consulted reputable sources such as SeekingAlpha, which provided insights into the net income CAGR over the past five years, and YCharts, which offered information on TTM net income.
Finally, from this list of the most profitable stocks that met our criteria, we focused on the top 7 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s database of 912 elite hedge funds. The 7 most profitable gaming stocks to invest in are ranked below in ascending order based on the number of hedge funds holding stakes in them as of Q2 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Most Profitable Gaming Stocks To Invest In
7. Gravity Co. Ltd. (NASDAQ:GRVY)
TTM Net Income: $67.71 Million
5-Year Net Income CAGR: 11.63%
Number of Hedge Fund Holders: 3
Gravity Co. Ltd. (NASDAQ:GRVY) is a South Korean video game company best known for the development of the popular multiplayer online role-playing game, Ragnarok Online. Founded in April 2000, the company has played a significant role in the development of Korea’s online gaming industry and has expanded its reach globally with eight subsidiaries and offices in North America, Japan, and Thailand. The company focuses on providing games based on the Ragnarok IP to players around the world while continuously working to grow and strengthen its business operations.
The company is actively pursuing growth through strategic game launches and expanding its presence in key markets. In the second quarter of 2024, Gravity Co. Ltd. (NASDAQ:GRVY) reported a year-over-year increase in online game revenues, primarily driven by the success of Ragnarok Online in Thailand. This growth reflects the company’s focus on enhancing its popular franchises and tapping into new regions. The recent launch of Ragnarok Origin across the Americas and the introduction of THE RAGNAROK (Ragnarok: Novice Hearts) in Taiwan, Hong Kong, and Macau are part of its strategy to attract more players and boost revenue.
Additionally, Gravity Co. Ltd. (NASDAQ:GRVY) is expanding its offerings with game releases planned for different markets. Ragnarok Online officially launched in China in late June 2024, while Ragnarok: Rebirth is set to launch in Taiwan, Hong Kong, and Macau in the fourth quarter of 2024. By continually introducing new content and expanding into new territories, Gravity is positioning itself for long-term growth, making it an appealing stock for investors looking for opportunities in the gaming industry.
GRVY is one of the most profitable stocks in the gaming industry. Over the past 5 years, the company has grown its net income at a compound annual growth rate (CAGR) of 11.63%.
According to Insider Monkey’s Q2 database of over 900 hedge funds, 3 hedge funds held stakes in Gravity Co. Ltd. (NASDAQ:GRVY).
6. Accel Entertainment Inc. (NYSE:ACEL)
TTM Net Income: $48.44 Million
5-Year Net Income CAGR: 32.01%
Number of Hedge Fund Holders: 14
Accel Entertainment Inc. (NYSE:ACEL) is a gaming operator in the United States, known for providing comprehensive gaming solutions to non-casino venues like bars, restaurants, and convenience stores. The company specializes in installing, maintaining, and operating gaming terminals, slot machines, ATMs, and various entertainment devices and related equipment such as jukeboxes, dartboards, and pool tables.
The company is actively pursuing growth strategies that highlight its strength in the distributed gaming market. In the second quarter of 2024, the company achieved record revenues of $309 million, a 5.7% increase from the previous year, demonstrating the effectiveness of its local gaming offerings. Accel Entertainment Inc. (NYSE:ACEL) expanded its footprint by adding nearly 50 new locations in the second quarter. This growth is complemented by positive same-store sales driven by increased demand and new gaming machines.
As of June 30th, the company had a total of 25,757 gaming terminals and 4,034 locations. This represents a year-over-year growth of 5.7% in terminals and 4.7% in locations.
Accel is also making strategic moves to enhance its operations further. The company announced the acquisition of Fairmount Holdings for approximately $35 million, which is expected to close in the fourth quarter of this year. This transaction includes a master sports betting license and a partnership with FanDuel. The acquisition will allow Accel to diversify its revenue streams and develop a locally focused casino.
These initiatives position Accel Entertainment Inc. (NYSE:ACEL) well for continued growth and profitability in the competitive gaming landscape, making it an attractive stock for investors.
Over the past five years, the company has seen its net income grow at a compound annual growth rate (CAGR) of 32%, with revenue increasing at a CAGR of 26%.
ACEL has received a favorable outlook from analysts, who have a consensus buy rating for the stock. The 1-year median price target of $15.00 set by analysts indicates a potential upside of 28% from current levels.
As of the second quarter of 2024, Accel Entertainment Inc. (NYSE:ACEL) was held by 14 hedge funds, according to Insider Monkey’s database.
5. Sony Group Corporation (NYSE:SONY)
TTM Net Income: $6.61 Billion
5-Year Net Income CAGR: 3.18%
Number of Hedge Fund Holders: 29
Sony Group Corporation (NYSE:SONY) is a leading Japanese multinational company. It is known for its strong presence in the gaming industry through its subsidiary, Sony Interactive Entertainment. Its PlayStation brand has become iconic, with successful consoles like the PlayStation 4 and PlayStation 5 attracting a dedicated fan base. As of June 2024, Sony reported 116 million monthly active PlayStation accounts, reflecting a 7% increase from the previous year, alongside an 8% rise in total playtime.
Despite not launching new titles recently, the company’s gaming segment continues to thrive. Engagement remains high due to the growing user base of the PlayStation 5 and popular games like Helldivers 2 and Ghost of Tsushima on PC. Upcoming releases, including the live service game Concord and God of War Ragnarok for PC, are expected to boost player interest even further. In the first quarter of fiscal year 2024, which ended on June 30, 2024, Sony’s Network Services saw a notable 13% increase in sales, driven by premium services like PlayStation Plus.
In September, Sony Group Corporation (NYSE:SONY) unveiled the PlayStation 5 Pro, set to launch on November 7, 2024. This upgraded console features enhanced graphics capabilities with a more powerful GPU, allowing for better performance and smoother gameplay. With improvements like advanced ray tracing and AI-driven upscaling, the PS5 Pro promises an exceptional gaming experience.
As one of the most profitable stocks in the gaming industry, Sony Group Corporation (NYSE:SONY) has a trailing twelve-month net income of $6.61 billion as of June 30, 2024.
Analysts are bullish on SONY. Analysts currently hold a consensus buy rating on the stock and the 1-year median price target of $22.63 set by analysts indicates a potential upside of 21% from current levels.
Overall, SONY represents a strong investment opportunity in the gaming sector. With a solid lineup of exclusive games and continuous innovation in hardware, the company is well-positioned to expand its market presence.
According to Insider Monkey’s Q2 2024 database of 912 elite hedge funds, 29 hedge funds held stakes in Sony Group Corporation (NYSE:SONY).
4. NetEase Inc. (NASDAQ:NTES)
TTM Net Income: $4 Billion
5-Year Net Income CAGR: 26.92%
Number of Hedge Fund Holders: 35
NetEase Inc. (NASDAQ:NTES) is a Chinese technology company that specializes in gaming, education, and e-commerce. Its diverse portfolio includes popular mobile and PC games that appeal to both local and international audiences. Over the years, the company has successfully expanded its offerings by developing its own games and collaborating with global partners.
NetEase Inc. (NASDAQ:NTES) is launching new titles as it focuses on growing its gaming business. Its recently launched multiplayer survival game, Once Human, quickly attracted over 230,000 concurrent players shortly after launch, ranking among the top five games on Steam in July. Following an update in August, it reached the top of Steam’s best-seller chart in 12 countries and accumulated over 10 million downloads. In July, the company launched Naraka: Bladepoint Mobile, a battle royale game that features fast-paced combat and a unique AI co-pilot system. This title achieved the third spot on the iOS grossing chart shortly after its release.
Financially, the company is performing well. In the second quarter of 2024, NetEase Inc. (NASDAQ:NTES) reported net revenue of $3.5 billion, a 6% increase year-over-year. Revenue from games and related services rose by 7%, driven largely by mobile titles like Identity V and Justice Mobile. Mobile games contributed about 76.4% of total online game revenue, highlighting their importance to the company’s growth.
NTES is one of the most profitable gaming stocks to invest in. Over the past five years, the company has achieved a compound annual growth rate (CAGR) of 16.57% in revenue and 26.92% in net income.
NetEase Inc.’s (NASDAQ:NTES) commitment to innovation and community engagement positions it favorably in the competitive gaming market. According to Insider Monkey’s Q2 database of over 900 hedge funds, 35 hedge funds held stakes in NetEase Inc. (NASDAQ:NTES). As of June 30, Orbis Investment Management holds 1.9 million shares of the company, valued at $182.28 million, making it NetEase Inc.’s (NASDAQ:NTES) most prominent shareholder.
3. Advanced Micro Devices Inc. (NASDAQ:AMD)
TTM Net Income: $1.35 Billion
5-Year Net Income CAGR: 47.95%
Number of Hedge Fund Holders: 108
Advanced Micro Devices Inc. (NASDAQ:AMD) is an American multinational semiconductor and technology company that ranks among the top 3 on our list of the most profitable gaming stocks to invest in. The company specializes in designing and developing central processing units (CPU), graphics processing units (GPU), accelerated processing units (APU), data processing units (DPU), field-programmable gate arrays (FPGA), and System-on-chip (SoC) for various markets like data centers, personal computers, gaming, and embedded systems.
The company’s gaming solutions are used across PCs, handhelds, consoles, and cloud gaming. Advanced Micro Devices Inc. (NASDAQ:AMD) has gained popularity for its Ryzen processors and Radeon graphics cards, which are known for delivering strong performance.
AMD is actively enhancing its gaming and computing offerings, making it a compelling stock for investors. The company recently launched its new Ryzen 9000 Series processors based on the innovative “Zen 5” architecture. This series is designed to deliver high performance in gaming, productivity, and content creation. Additionally, Advanced Micro Devices Inc. (NASDAQ:AMD) introduced new mobile and desktop processors with advanced features for enterprises, showing its commitment to catering to a wide range of customers.
Despite a decline in gaming revenue in Q2 2024 due to softer demand for semi-custom chips in consoles, AMD’s gaming graphics segment has seen growth from improved sales of its Radeon 6000 and 7000 series GPUs.
With a robust product lineup and ongoing innovations in AI and gaming technologies, Advanced Micro Devices Inc. (NASDAQ:AMD) is well-positioned for future revenue gains.
AMD ranks among the most profitable stocks to invest in. Over the past five years, the company has seen its net income grow at a compound annual growth rate (CAGR) of 47.95%, with revenue increasing at a CAGR of 31.70%.
As of the second quarter of 2024, Advanced Micro Devices Inc. (NASDAQ:AMD) was held by 108 hedge funds, according to Insider Monkey’s database.
2. NVIDIA Corporation (NASDAQ:NVDA)
TTM Net Income: $53.01 Billion
5-Year Net Income CAGR: 80.81%
Number of Hedge Fund Holders: 179
NVIDIA Corporation (NASDAQ:NVDA) is a prominent American technology company that is also known for its role in the gaming industry, particularly through its powerful graphics processing units (GPUs). Since inventing the GPU in 1999, NVIDIA has transformed computer graphics and fueled the growth of PC gaming. The company’s GeForce line of GPUs is particularly popular among gamers, providing high-performance graphics for an immersive gaming experience.
Additionally, the company offers GeForce NOW, a cloud-based gaming service that allows players to stream games directly from the cloud to various devices, including laptops, desktops, and smartphones. This service enables gamers to access their game libraries on any supported device, making gaming more accessible and convenient.
NVIDIA Corporation (NASDAQ:NVDA) is playing a significant role in the booming artificial intelligence (AI) market. The company has seen massive growth in revenue, especially from its data center business, which has now become its primary source of income, surpassing the gaming segment that used to be the biggest. Despite this shift, NVIDIA remains one of the largest companies in the gaming industry.
The company is focusing on innovative strategies to strengthen its position in the gaming market. In the second quarter of fiscal 2025, NVIDIA Corporation (NASDAQ:NVDA) reported gaming revenue of $2.9 billion, reflecting a 9% increase from the previous quarter and a 16% rise from the same period last year. NVIDIA has introduced several exciting technologies, such as NVIDIA ACE, which uses generative AI to create lifelike digital characters and enhance player interactions. This technology allows game developers to build intelligent digital characters that can engage in realistic conversations, significantly improving the gaming experience.
Moreover, NVIDIA’s GeForce NOW service has surpassed 2,000 games and expanded into new markets like Japan. The launch of popular titles and partnerships with developers to integrate AI features further solidifies the company’s role in shaping the future of gaming. With these advancements and a strong revenue growth trajectory, NVIDIA Corporation (NASDAQ:NVDA) is well-positioned to capitalize on the growing demand for innovative gaming experiences.
NVIDIA Corporation (NASDAQ:NVDA) has managed to grow its top line at a compound annual growth rate (CAGR) of 56.73% over the past five years, while its bottom line has increased at a CAGR of 80.81% during the same period. Over the past 5 years, the company has also grown its levered free cash flow at a CAGR of 84.47%.
According to Insider Monkey’s database, 179 hedge funds held stakes in NVIDIA Corporation (NASDAQ:NVDA) in the second quarter of 2024. This brings NVDA to the 2nd spot on our list of the most profitable gaming stocks to invest in.
1. Microsoft Corporation (NASDAQ:MSFT)
TTM Net Income: $88.14 Billion
5-Year Net Income CAGR: 17.57%
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is a leading player in the technology sector. The company is known for its development of Xbox consoles and gaming services. It has also made a number of acquisitions to grow its gaming business. In October 2023, the company made headlines with its acquisition of Activision Blizzard for approximately $69 billion, which significantly boosted its gaming portfolio. This acquisition includes popular franchises like Call of Duty and Warcraft, positioning Microsoft as one of the largest gaming companies globally. Such strategic moves not only enhance its offerings but also open new revenue streams across mobile, PC, console, and cloud gaming platforms.
In its financial report for the fiscal fourth quarter of 2024, Microsoft Corporation (NASDAQ:MSFT) showcased impressive growth, with total revenue reaching $64.7 billion, reflecting a 15% increase from the same quarter in the previous year. The gaming division was a standout performer, experiencing a remarkable 44% rise in revenue. Xbox content and services saw a 61% surge in revenue as well. Growth in these businesses was largely driven by the Activision Blizzard deal.
The company also highlighted its expanding user base in gaming, which now exceeds 500 million monthly active users across various platforms. This substantial engagement is further bolstered by the success of new titles and services, which continue to attract gamers.
Microsoft Corporation (NASDAQ:MSFT) has achieved a compound annual growth rate (CAGR) of 14.26% in its revenue over the past five years, while its net income has grown at a CAGR of 17.57% during the same period.
Overall, the company’s strong financial performance and strategic acquisitions in gaming make MSFT a compelling investment opportunity for those looking to capitalize on the growing gaming industry. As of the second quarter of 2024, Microsoft Corporation (NASDAQ:MSFT) was held by 279 hedge funds, according to Insider Monkey’s database.
Overall, MSFT ranks first among the 7 most profitable gaming stocks to invest in. While we acknowledge the potential of gaming companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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