(WKS SP / WKS.SI)
FY26 investment weighs on margins; recovery shifts to FY27
Media
Winking Studios’ 1H26 revenue increased 21.1% YoY to US$23.5mn, including organic growth of 8.9%. Art Outsourcing revenue rose 25.4% to US$19.9mn and accounted for 85.0% of group revenue. The cumulative number of AAA titles supported increased from 117 at end-FY25 to 142 on 30 June 2026.
Gross profit declined 4.1% to US$5.6mn despite the increase in revenue, with gross margin falling 6.2ppts to 24.0%. Adjusted EBITDA declined 49.2% to US$1.2mn, while the group recorded a net loss of US$2.5mn compared with a US$0.9mn profit in 1H25. Management attributed the margin decline to Mineloader’s seasonally softer first quarter, US$0.9mn of internal resources allocated to AI-enabled development and upfront expenditure on Ampera.
We lower FY26F revenue by 14.4% to US$48.0mn and forecast an adjusted EBITDA loss of US$0.3mn, compared with our previous forecast of a US$1.5mn profit. Our forecast implies 2H26 revenue of US$24.6mn and an adjusted EBITDA loss of approximately US$1.6mn, reflecting a full six months of investment in Ampera and AI-enabled development.
We maintain our OUTPERFORM rating on Winking Studios with a lowered 12-month target price of S$0.29, from S$0.30 previously, reflecting our revised DCF valuation. The investment case is increasingly dependent on a recovery in earnings and cash flow from FY27.
Key downside risks include (i) slower conversion of indicative bookings; (ii) delays in Ampera project awards; (iii) a slower return of AI-development staff to billable projects; (iv) weaker-than-forecast gross-margin recovery; (v) acquisition and integration risks; (vi) further cash outflows from expansion; (vii) USD/SGD exchange-rate fluctuations; and (viii) dilution from deferred and performance-linked share issuances.
