Winking Studios half-year results 2026: revenue rises 21.1% as investment weighs on profit

Winking Studios Limited delivered strong top-line growth in the first half of 2026, but the cost of building its next growth engines took a sizeable bite out of margins, profit and cash flow.

Revenue increased by 21.1% to US$23.5 million, including organic growth of 8.9%. However, adjusted EBITDA almost halved to US$1.2 million and the statutory result swung to a US$2.5 million net loss.

Management is deliberately investing in North American expansion and AI-enabled game development. The question for investors is whether those investments can produce enough profitable growth to justify the near-term financial pressure.

Winking Studios' key financial figures

Metric	1H2026	1H2025	Change
Revenue	US$23.5 million	US$19.4 million	+21.1%
Gross profit	US$5.6 million	US$5.9 million	-4.1%
Gross margin	24.0%	30.2%	-6.2 percentage points
Adjusted EBITDA	US$1.2 million	US$2.4 million	-49.2%
Adjusted EBITDA margin	5.3%	12.6%	-7.3 percentage points
Adjusted net result	US$0.2 million loss	US$1.4 million profit	Not meaningful
Statutory net result	US$2.5 million loss	US$0.9 million profit	Not meaningful
Operating cash flow	US$5.3 million outflow	US$0.6 million inflow	Not meaningful

Adjusted EBITDA means earnings before interest, tax, depreciation and amortisation, excluding certain items management considers non-underlying. It is useful for comparing operating performance, but investors should also pay attention to statutory profit and cash flow.

Art outsourcing remains the main growth engine

Art Outsourcing revenue rose 25.4% to US$19.9 million and represented 85.0% of group revenue. This included an additional first-quarter contribution from Mineloader, acquired in April 2025, and a full six-month contribution from Vertic Studios, established in July 2025.

Game Development revenue increased by a more modest 2.3% to US$3.5 million, while Global Publishing and Other Services contributed just US$0.04 million.

The number of AAA titles supported by the group reached 142 by 30 June 2026, up from 117 at the end of 2025. AAA generally refers to games produced with large budgets and substantial development resources.

Follow-up projects with existing customers represented 37.4% of revenue, compared with 38.8% a year earlier. The slight decline is not necessarily alarming, but repeat work remains important because it provides evidence of customer retention and revenue visibility.

Geographical diversification also progressed. Revenue from Japan more than doubled to US$3.6 million, while the United States generated US$3.1 million, equal to 13.3% of group revenue.

Why margins fell despite higher revenue

The uncomfortable part of these results is that revenue growth did not translate into higher gross profit. Gross profit fell 4.1% to US$5.6 million, taking the gross margin down from 30.2% to 24.0%.

Winking Studios identified three main causes:

• Mineloader's seasonally softer first quarter was included in the latest period.
• Around US$0.9 million of internal resources was allocated to AI-enabled game development rather than revenue-generating production.
• Upfront investment in Ampera increased North American business development, sales and marketing costs.

The company said its underlying gross margin would have been 30.1% when excluding Mineloader's first-quarter consolidation, Ampera and AI-related investment. That compares with 30.2% in 1H2025.

This suggests the established operation has not suffered a major deterioration in underlying economics. Even so, the reported margin is what ultimately feeds into profit and cash, and the new initiatives will need to produce commercial returns rather than remain permanent adjustments.

Distribution and marketing expenses increased by 52.3% to US$1.6 million. Administrative expenses rose 40.4% to US$6.1 million, reflecting acquisitions, the expansion of Vertic and Ampera, and share-based compensation.

Ampera and AI are the strategic bets

Winking Studios acquired Quebec-based Studios Ampera in April 2026, establishing a direct North American presence. It invested approximately US$0.4 million in the business during the period.

The strategy is to combine a Western customer-facing operation with Winking Studios' larger Asian production base. Ampera has been invited to bid on several large projects, although awards are now anticipated in 2027 due to longer sales cycles.

This is potentially attractive because larger development contracts can carry higher values, longer durations and better margin potential. The drawback is that the timing and probability of conversion remain uncertain.

The group also allocated approximately US$0.9 million to AI-enabled workflows and game development. Initial client projects were secured, although the resulting revenue was described as modest.

Importantly, management said its AI work is focused principally on game development workflows rather than replacing artists. Revenue from AI-created art assets has represented less than 1% of art services revenue over the past three years.

Investors can review the figures and management commentary in the original company announcement.

Cash flow needs watching

Net cash used in operating activities was US$5.3 million, compared with US$0.6 million generated in the prior-year period. The outflow reflected strategic investment, higher employee payments and Mineloader's softer seasonal performance.

Contract assets, representing work completed but not yet billed, rose by 47.1% to US$9.1 million. The company said almost all contract assets from the previous period had converted into receivables or cash, which provides some reassurance, but the growing balance still merits attention.

Cash and cash equivalents ended the period at US$23.2 million, down from US$27.4 million at the end of 2025. Cash, cash equivalents and bond investments totalled US$24.6 million. The group also took on US$4.0 million of short-term bank borrowings to establish credit facilities and strengthen banking relationships.

The balance sheet therefore offers room to fund investment, with net assets of US$53.4 million and low gearing. However, continued operating cash outflows would gradually reduce that flexibility.

No interim dividend was proposed, matching the position in 1H2025.

Outlook combines strong demand with lower earnings

Indicative bookings for the next 24 months stood at US$51.6 million, subject to final customer confirmation. Of this, US$22.4 million is expected to be recognised in the second half of 2026.

Management expects 2H2026 revenue to exceed the first half's US$23.5 million. That is the clearest positive signal in the outlook.

The sting is that a fuller period of Ampera and AI investment means the board now expects a modest adjusted EBITDA loss for the full year. The scale of that loss was not disclosed.

For investors, this is a trade-off between a growing core operation and weaker near-term profitability. Revenue, art outsourcing demand, Japanese expansion and bookings all look encouraging. Against that, margins have contracted sharply, cash generation has turned negative and the larger Ampera opportunities may not be awarded until 2027.

The next important evidence will be whether second-half revenue growth arrives as expected, whether operating cash flow improves and whether the new AI and North American projects begin converting into meaningful revenue. Until then, Winking Studios is asking investors to accept lower short-term earnings in exchange for the possibility of a broader and more valuable business later.