10-K: Snail, Inc. Reports $27.2M Net Loss Amid Revenue Dip, Nasdaq Warning

Snail, Inc. reported a significant net loss of $27.2 million for fiscal year 2025, a sharp decline from the prior year's net income, alongside a revenue decrease and a Nasdaq deficiency notice.

Summary

• Net revenue for the year ended December 31, 2025, decreased by 3.8% to $81.2 million, down from $84.5 million in 2024.
• The company reported a net loss of $27.2 million for 2025, a substantial shift from a net income of $1.8 million in 2024.
• Gross profit declined by 25.8% to $22.4 million in 2025 from $30.3 million in 2024.
• Total operating expenses surged by 50.7% to $39.7 million in 2025, up from $26.4 million in 2024.
• The ARK franchise continued to be the primary revenue driver, accounting for 89.4% of net revenues in 2025.
• Daily active users (DAUs) for ARK: Survival Evolved and ARK: Survival Ascended combined increased to 224,000 in 2025 from 213,000 in 2024 on Steam and Epic platforms.
• Units Sold increased by 32.7% to 6.3 million in 2025, primarily driven by the ARK franchise.
• Bookings, a key operating metric, increased by 16.2% to $87.8 million in 2025, reflecting strong sales activity despite revenue deferrals.
• Snail, Inc. received a deficiency letter from Nasdaq on December 30, 2025, as its Class A common stock closed below the minimum $1.00 bid price for 30 consecutive business days.
• The company launched several high-impact ARK franchise DLCs in 2025, including ARK: Astraeos, ARK: Aquatica, and the highly anticipated ARK: Lost Colony, which had pre-sales exceeding 372,000 units.
• ARK: Survival Ascended's inclusion on PlayStation Plus in May 2025 generated over 8 million downloads.
• ARK: Ultimate Mobile Edition surpassed 10 million downloads on mobile platforms in 2025.
• The company expanded its gaming portfolio with three game acquisitions, six indie releases, and new in-house IP announcements.
• Film and TV initiatives advanced with SaltyTV releasing 140 short film dramas and the launch of the interactive full-motion video game 'The Fame Game: Welcome to Hollywood'.
• A strategic digital asset initiative was announced to evaluate the launch of a proprietary stablecoin, with official branding unveiled at the December 2025 Investor Day.
• The 2021 Revolving Loan maturity date was extended to March 31, 2030, and its maximum principal amount was reduced to $5.0 million.
• Convertible notes totaling $6.6 million in principal were issued in February, October, and November 2025, with maturities in 2026.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative report due to the significant net loss, decreased revenue, and substantial increase in operating expenses, coupled with the Nasdaq deficiency notice. While there are positive developments in game releases and strategic initiatives, the financial performance indicates considerable challenges.

Positives

• Daily active users (DAUs) for ARK: Survival Evolved and ARK: Survival Ascended increased to 224,000 in 2025 from 213,000 in 2024.
• Units Sold increased by 32.7% to 6.3 million in 2025, indicating strong product uptake.
• Bookings increased by 16.2% to $87.8 million in 2025, suggesting robust underlying sales performance.
• Successful launch of ARK: Lost Colony DLC in December 2025, with pre-sale performance exceeding expectations (over 372,000 units sold).
• ARK: Survival Ascended's inclusion on PlayStation Plus in May 2025 generated over 8 million downloads, significantly expanding the player base and boosting DLC sales.
• ARK: Ultimate Mobile Edition surpassed 10 million downloads in 2025, reinforcing the multi-platform strategy.
• Broadened gaming portfolio with three game acquisitions, six indie releases, and new in-house IP announcements.
• Expansion into Film and TV with SaltyTV releasing 140 short film dramas and the interactive FMV game 'The Fame Game: Welcome to Hollywood'.
• Announced a strategic digital asset initiative to evaluate a proprietary stablecoin, with official branding unveiled at the December 2025 Investor Day.
• The 2021 Revolving Loan maturity date was extended to March 31, 2030, providing longer-term financial flexibility.
• Remediation of a prior material weakness in internal control over financial reporting related to warrant valuation was completed as of December 31, 2025.

Negatives

• Net revenue decreased by 3.8% to $81.2 million in 2025 from $84.5 million in 2024.
• Reported a net loss of $27.2 million in 2025, a significant reversal from a net income of $1.8 million in 2024.
• Gross profit decreased by 25.8% to $22.4 million in 2025.
• Total operating expenses increased substantially by 50.7% to $39.7 million in 2025.
• Advertising and marketing expenses saw a significant increase of 243.8% to $5.2 million in 2025.
• Impairment expenses of $1.5 million were recognized in 2025 due to the underperformance of certain short films and game titles.
• Received a Nasdaq deficiency letter on December 30, 2025, for its Class A common stock closing below $1.00 for 30 consecutive business days, posing a delisting risk.
• The company has significant debt obligations, including convertible notes maturing in October and November 2026, coming due within one year.
• The Equity Line Purchase Agreement, which committed an investor to purchase up to $5.0 million in shares, expired on December 31, 2025, without any Class A common stock being sold under it.
• A full valuation allowance has been recorded against net deferred tax assets, indicating uncertainty about future profitability and the realization of these assets.
• Involved in a legal proceeding (Bel Air Soto, LLC lawsuit) for breach of contract with potential damages exceeding $3 million, and an affiliate (INDIEV) that was to indemnify the company has filed for bankruptcy.

Risks

• Dependence on the future success of the ARK franchise and the need to consistently publish hit titles or sequels to compete successfully.
• Risk of not consistently delivering popular, high-quality content in a timely manner, or if consumers prefer products from competitors.
• Reliance on license agreements, particularly with related party SDE Inc. for the ARK franchise; failure to renew or obtain additional licenses would materially harm the business.
• Dependence on key management and product development personnel, including Studio Wildcard.
• Management team has limited experience managing a public company.
• Business is subject to risks of natural catastrophes, man-made problems (e.g., power disruptions, computer viruses, data security breaches), war, or terrorism.
• Industry is subject to rapid technological change; failure to adapt to emerging technologies (e.g., cloud-based game streaming, AI) and business models (free-to-play, subscriptions) could negatively impact the business.
• Reliance on third-party platforms (e.g., Xbox Live, PlayStation Network, Steam, Epic Games Store, Apple App Store, Google Play Store, Amazon Appstore) for distribution and revenue collection, with risks from changes in terms or platform issues.
• Dependence on servers and networks for online games; vulnerability to service disruptions due to large-scale Distributed Denial-of-Service (DDoS) attacks.
• Inability to effectively manage continued growth and complexity, including expansion into untested business models (eSports, NOIZ, animation) and adjacent opportunities with large, established competitors.
• The interactive entertainment software industry is highly competitive.
• Product development risks, which could result in delays and additional costs, and the need to adapt to changes in software technologies.
• Ability to develop commercially successful products for current video game platforms, with potential volatility and difficulty in predicting results during console transitions.
• Reputational harm from objectionable consumeror third-party-created content, or if distributors, retailers, development, and licensing partners act in ways that put the brand at risk.
• Products or services released may contain defects, bugs, or errors.
• External game developers may not meet product development schedules or otherwise fulfill their contractual obligations.
• Failure to successfully invest in, establish, and maintain awareness of the brand and games, or incurring excessive expenses promoting and maintaining them.
• Operating results may fluctuate from quarter to quarter, making future results difficult to predict.
• Expansion of operations into new products, services, and technologies, including content categories like short film drama, is inherently risky and may subject the company to additional business, legal, financial, and competitive risks.
• Utilization of artificial intelligence (AI) could expose the company to liability or adversely affect its business due to reliance on complex algorithms, potential biases, cybersecurity threats, and evolving regulations.
• Failure to meet Nasdaq's continued listing requirements (e.g., minimum bid price, proposed Market Value of Listed Securities rule) could result in delisting, negatively impacting stock price and ability to raise additional capital.
• Inability to protect the intellectual property relating to material software could adversely affect the commercial value of products and competitive position.
• Risk of infringing, misappropriating, or otherwise violating, or being alleged to infringe, misappropriate, or otherwise violate, the intellectual property rights of third parties.
• Inability to protect the confidentiality of trade secrets.
• Claims that employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers.
• Involvement in lawsuits to protect or enforce intellectual property, which could be expensive, time-consuming, and unsuccessful.
• Inability to enforce intellectual property rights throughout the world, particularly in jurisdictions with weaker protection.
• Trademarks and trade names may not be adequately protected, harming name recognition and competitive position.
• Use of open source software in connection with certain games and services may pose particular risks to proprietary software.
• Any cybersecurity-related attack, significant data breach, or disruption of the information technology systems or networks could negatively impact the business.
• Changing data privacy and security laws and regulations (e.g., CCPA, GDPR) could increase operational costs and subject the company to possible sanctions, civil lawsuits, and other penalties.
• Business and products are subject to potential legislation and other governmental restrictions (e.g., China's online gaming regulations for minors).
• Involvement in legal proceedings that could have a negative impact on the business.
• If general economic conditions decline, demand for games could decline, as in-game purchases involve discretionary spending.
• General economic factors, domestically and internationally (e.g., inflation, energy costs, trade policies, tariffs), may adversely affect the business.
• Debt obligations with short-term durations that are coming due within one year.
• Subject to restrictive covenants as a result of outstanding debt obligations; default could lead to foreclosure on assets.
• Full valuation allowance against deferred tax assets, with no assurance that any portion of these assets will be realized.
• The Share Repurchase Program may not be fully implemented, nor will it guarantee enhanced stockholder value, and share repurchases could affect the price of Class A common stock.
• The dual-class structure may result in a lower or more volatile market price of Class A common stock and exclusion from certain indices.
• Securities analysts may not publish favorable research or reports, or may publish no information at all, which could cause the stock price or trading volume to decline.
• Estimates or judgments relating to critical accounting policies, if based on assumptions that change or prove incorrect, could cause results of operations to fall below guidance or expectations.
• Provisions in the amended and restated certificate of incorporation and bylaws and under Delaware law could make an acquisition more difficult and may prevent attempts by stockholders to replace or remove current management.
• No anticipated cash dividends on capital stock in the foreseeable future; capital appreciation, if any, will be the sole source of gain.
• Default on credit obligations could interrupt operations and seriously harm the business.
• Risks related to stablecoins: additional capital required, licensing requirements, significant compliance costs, regulatory uncertainty, and negative publicity regarding the broader digital asset industry.
• Mr. Shi, the Founder, Chief Executive Officer, Chief Strategy Officer, and Chairman, controls the company, preventing other stockholders from influencing significant decisions.
• Mr. Shi is a Chinese national; changes in U.S. and Chinese laws in the future may make it more difficult for the company to operate as a publicly traded company in the United States.
• The Committee on Foreign Investment in the United States (CFIUS) may modify, delay, or prevent future acquisition or investment activities due to Mr. Shi's ownership.
• If Mr. Shi chooses to reside in China, it may be more difficult for investors to bring suit against him or enforce a judgment obtained against him in the United States.

Future Outlook

Snail, Inc. plans to continue growing its successful ARK franchise by releasing new DLCs and supporting the modding community. The company has seven console and PC games under development expected to be released in the next five years. It intends to expand its NOIZ micro-influencer marketing business and invest in new technologies, including AI advancements, to build a metaverse and enhance efficiency. International market expansion, particularly in South America, and strategic acquisitions are also key growth strategies. The company is iterating on NOIZ 3.0 and seeking to expand licensing opportunities. Management expects to continue seeking additional capital through public and private sales of securities and intends to permanently reinvest future foreign earnings to support its Poland subsidiary's growth.

Management Comments

• "Our mission is to provide high-quality entertainment experiences to audiences around the world."
• "We are called Snail because we admire a snail's perseverance in achieving its goals."
• "We maintain a disciplined approach to our game development, financial management and strategic acquisitions as we seek to deliver long-term value."
• "We believe innovation is at the core of a highly engaging entertainment experience."
• "The Company is strategically integrating artificial intelligence technology into our game development process."
• "We will transform our art pipeline with an innovative text to 3D model and pioneer the generation of resources and biomes on a planetary scale."
• "Management believes that building a stablecoin infrastructure may position the Company as an early innovator within the digital entertainment industry."
• "Management considered all available evidence, both positive and negative, including but not limited to the Company’s historical operating results, income or loss in recent periods, cumulative losses in recent years, forecasted earnings, future taxable income, and significant risk and uncertainty related to forecasts, and concluded the deferred tax assets are not more likely than not to be realized."

Industry Context

StockSavvy.ai notes that Snail, Inc. operates in a highly competitive and rapidly evolving interactive entertainment market, facing competition from industry giants like Activision Blizzard, Electronic Arts, Take-Two Interactive, Ubisoft, Epic Games, Tencent, Netmarble, Sony, Microsoft, and Nintendo, as well as smaller independent studios. The company's focus on the sandbox survival genre, particularly with its ARK franchise, positions it against competitors like Embracer Group, Saber Group, Enand Global 7, FunCom, Axolot Games, and Facepunch Studios. The expansion into mobile gaming, film/TV, and digital assets (stablecoin) reflects a broader industry trend of diversification and ecosystem building to capture wider entertainment spending and leverage IP across multiple media formats, a strategy also pursued by larger multimedia companies. The increasing integration of AI into game development is a key industry trend Snail is actively pursuing, aiming for efficiency and creative enhancement. The company's reliance on third-party distribution platforms is standard for the industry, but also exposes it to platform-specific risks and fee structures.

Comparison to Industry Standards

• ARK: Survival Evolved was ranked #1 by market share within the sandbox survival genre on Steam within one year of its Early Access release, indicating strong initial market penetration compared to peers.
• ARK: Survival Ascended was ranked in the top 100 on Steam in 2025, demonstrating continued relevance in a competitive market.
• The premium mods program for ARK: Survival Ascended offers creators an "industry leading 50% of the revenue generated," which is a highly competitive revenue-sharing model designed to attract and retain modding talent, potentially surpassing offerings from platforms like Steam or Epic Games Store.
• The average playing time of 161.4 hours per user for ARK series games, with 21.5% of players spending over 100 hours, suggests strong user engagement and retention, comparable to successful long-running online games.
• The company's reliance on third-party platforms for 95.1% of its revenue is a common industry practice for game publishers, similar to how companies like Ubisoft or Take-Two Interactive distribute their titles, but also highlights a concentration risk.
• The effective tax rate of (64.6)% in 2025, primarily due to a full valuation allowance against deferred tax assets, is significantly lower than the U.S. federal statutory rate of 21% and deviates from typical profitable industry peers, reflecting financial challenges rather than tax efficiency.

Management Changes

Corporate Governance

Legal Proceedings

• **Myth of Empires Lawsuit**: The company and Studio Wildcard sent a DCMA Takedown Notice to Valve Corporation regarding the game Myth of Empires. Angela Game and Imperium sued the company, which then filed counterclaims and a third-party complaint against Tencent. A settlement agreement was reached with Angela Game on September 8, 2023, including an upfront payment and ongoing payments.
• **Bel Air Soto, LLC Lawsuit**: On March 14, 2023, Bel Air Soto, LLC filed suit against Snail Games USA Inc. and INDIEV (an affiliate owned by Mr. Hai Shi) for breach of contract related to a commercial lease, seeking damages exceeding $3 million. The complaint was amended to add Mr. Hai Shi and the company as additional defendants, alleging alter ego liability. The company denies these allegations and is vigorously defending. The present trial date is December 2, 2026. INDIEV has filed for bankruptcy and will not be able to indemnify the company. The company believes the likelihood of a material adverse effect is remote.

Related Party Transactions

• **ARK Franchise License**: The company licenses intellectual property rights for its ARK franchise from SDE Inc., an entity controlled by the spouse of Mr. Hai Shi (Founder, CEO, CSO, and Chairman). This includes a $2.0 million monthly licensing fee and royalty payments of 25% for ARK: Survival Ascended and 40% for ARK: Survival Evolved. In 2025, $24.0 million in license costs and $18.6 million in royalty costs were incurred.
• **Suzhou Snail Agreements**: The company has licensing agreements with Suzhou Snail (where Mr. Hai Shi is also founder and CEO) for mobile and PC games. In 2025, $7,495,192 in R&D costs and $137,993 in license costs were incurred from Suzhou Snail. Payments to Suzhou Snail for royalties and R&D costs totaled $7,029,600 in 2025.
• **Accounts Receivable/Payable with SDE Inc.**: As of December 31, 2025, there was a net outstanding receivable of $1.5 million from SDE Inc. An offset agreement allows the company to offset $0.5 million per month against payables due to SDE.
• **Accounts Payable with Suzhou Snail**: As of December 31, 2025, the company had a gross accounts payable balance of $53.2 million to Suzhou Snail, partially offset by $37.6 million in accounts receivable from Suzhou Snail. Suzhou has committed not to collect more than 20% of the net outstanding payable within the next twelve months.
• **Loan and Interest Receivable Related Party**: A loan of $200,000 was made to a wholly-owned subsidiary of Suzhou Snail in February 2021, later assumed by Suzhou Snail. The outstanding balance was $107,759 as of December 31, 2025.
• **Loan Guarantees**: Hai Shi and Ying Zhou (spouse of Mr. Shi) are guarantors for the company's loans with Cathay Bank.
• **INDIEV**: An affiliate company owned by Mr. Hai Shi, involved in a legal dispute where it was to indemnify Snail Games USA Inc. but has since filed for bankruptcy.

Stakeholder Impact

• **Shareholders**: Face negative impacts from the net loss, decreased revenue, and the Nasdaq deficiency notice, which could lead to delisting and reduced stock price. Potential dilution from future capital raises (ATM offering, convertible notes) and limited influence due to the dual-class structure are also concerns. Positive impacts could arise from successful game launches and strategic initiatives.
• **Employees**: Experienced an increase in salaries and wages ($3.0 million) due to headcount growth in 2025. The integration of AI technologies is expected to lead to changes in workforce requirements, with investments in training and development.
• **Customers/Players**: Benefit from new game releases (ARK: Astraeos, ARK: Lost Colony), content updates (Bellwright), and multi-platform availability (PlayStation Plus, mobile). However, they face risks of service disruptions from DDoS attacks or game defects. Enhanced experiences are anticipated through AI integration and premium modding programs.
• **Suppliers/Developers**: The company maintains collaborative relationships with independent studios and related-party developers (Studio Wildcard, Suzhou Snail). There is a risk of disputes with external developers and reliance on key related-party vendors.
• **Creditors**: The company has significant debt obligations, some with short-term maturities, but has successfully extended some loans. Compliance with debt covenants is critical, and secured loans provide some protection. The bankruptcy of an affiliate (INDIEV) could impact recovery in certain legal matters.

Next Steps

• Continue to enhance market-leading gaming franchises including ARK: Survival Evolved, ARK: Survival Ascended, ARK: Ultimate Mobile Edition, Voyage, Bellwright, West Hunt and PixArk.
• Release new DLCs such as Bobs Tall Tales, Fantastic Tames, Astraeos, Lost Colony, etc. to further enhance the player experience and growth of the ARK franchise.
• Support the modding community through the premium mod program.
• Release seven console and PC games currently under development within the next five years.
• Expand NOIZ, the micro-influencer marketing business, and use the platform to bolster marketing initiatives and eCommerce revenue.
• Invest in new technologies and platforms, including AI advancements, to efficiently capitalize on emerging trends and build a metaverse.
• Scale operations through international market expansion, particularly in South America, and strategic acquisitions.
• Iterate on NOIZ 3.0 to update its interface and product model for more versatile campaign issuance.
• Expand licensing opportunities to new platforms and geographies.
• Actively monitor the closing bid price of Class A common stock and consider available options to regain Nasdaq compliance, including seeking to effect a reverse stock split, if necessary.
• Continue to assess the impact of China's online gaming regulation on minors.
• Evaluate performing a Section 382 analysis in future periods.
• Permanently reinvest any future foreign earnings to support operations and business growth of its affiliated company in Poland.
• Continue to scale production of short film dramas under the strategic Memorandum of Understanding with Mega Matrix Inc.
• Evaluate the feasibility of introducing a proprietary stablecoin designed to enable secured digital payments across its entertainment ecosystem.

Key Dates

Recommendation

The company's significant net loss of $27.2 million in 2025, coupled with a decline in net revenue and a substantial increase in operating expenses, indicates a deteriorating financial position. The Nasdaq deficiency letter for its stock price falling below $1.00 signals severe market underperformance and poses a material risk of delisting, which would further impair liquidity and investor confidence. While strategic initiatives and new game releases show some operational activity, they have not translated into profitability. The heavy reliance on related-party transactions and substantial debt obligations, some with short-term maturities, add layers of financial risk. The expiration of the Equity Line Purchase Agreement without utilization also suggests challenges in accessing capital on favorable terms. Given these factors, a seasoned investor or institution would likely recommend selling the stock due to the significant financial and operational headwinds.

Keywords

Video Games, Gaming, Interactive Entertainment, ARK Franchise, ARK: Survival Ascended, ARK: Survival Evolved, DLC, Mobile Gaming, PC Gaming, Console Gaming, Sandbox Survival, MMORPG, Digital Assets, Stablecoin, NOIZ, Influencer Marketing, SEC Filing, 10-K, Financial Results, Net Loss, Revenue, Nasdaq Delisting, Debt, Capital Raise, Intellectual Property, Cybersecurity, AI, Corporate Governance