GameStop Corporation

06/11/2026 | Press release | Distributed by Public on 06/11/2026 04:16

Quarterly Report for Quarter Ending MAY 2, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the information contained in our condensed consolidated financial statements, including the notes thereto set forth in Part I, Item 1 of this Form 10-Q. Statements regarding future economic performance, management's plans and objectives, and any statements concerning assumptions related to the foregoing contained in Management's Discussion and Analysis of Financial Condition and Results of Operations constitute forward-looking statements. These statements are only predictions based on current expectations and assumptions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. All forward-looking statements included in this Form 10-Q are based upon information available to us as of the filing date of this Form 10-Q, and we undertake no obligation to update or revise any of these forward-looking statements for any reason, whether as a result of new information, future events or otherwise after the date of this Form 10-Q, except as required by law. You should not place undue reliance on these forward-looking statements. The forward-looking statements involve a number of risks and uncertainties. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Certain factors, which may cause actual results to vary materially from these forward-looking statements, accompany such statements and are discussed in our 2025 Annual Report on Form 10-K, including the disclosures under Part I, Item 1A "Risk Factors."
OVERVIEW
GameStop Corp. ("GameStop," "we," "us," "our" or the "Company"), a Delaware corporation established in 1996, offers games, collectibles, and entertainment products through its stores and ecommerce platforms. As we navigate the evolving commercial landscape, our business model is expanding beyond traditional retail to include value creation through disciplined capital allocation, and we view our significant cash and other sources of liquidity as a strategic asset to be deployed into investments, acquisitions, and control transactions that we believe offer long-term value.
BUSINESS PRIORITIES
Our strategy has evolved into two distinct but complementary pillars:
•Capital Allocation: Utilizing our significant capital resources to actively evaluate and execute on opportunities to acquire, invest in, or partner with businesses that offer long-term value.
•Operational Excellence: Maximizing the cash flow of our legacy retail business by optimizing our store fleet.
Capital Deployment and Investment Strategy
The Company views its balance sheet as a strategic asset. We continue to review the best use for our cash and other sources of liquidity, including potential control transactions and transformational acquisitions.
While we do not limit our review to specific industries, our Investment Committee is actively evaluating opportunities that offer long-term value.
Investment Policy & Guidelines
Investments are made in accordance with the guidelines of an Investment Policy that is reviewed at least annually by the Board. Permissible investment instruments include cash and cash equivalents (e.g., bank obligations, money market funds, and commercial paper), fixed income securities (e.g., obligations of the U.S. Treasury), equity securities (limited to those listed on major exchanges), derivative instruments and options, and certain crypto-currencies, including Bitcoin.
To ensure the Company can act on these opportunities with speed and efficiency, the Board has delegated authority to an Investment Committee of the Board to manage the Company's cash and other sources of liquidity and to review potential acquisition and control opportunities.
•Structure: The Committee consists of the Company's Chairman and Chief Executive Officer, Ryan Cohen, and two independent members of the Board.
•Alignment of Interests: Depending on certain market conditions and various risk factors, Mr. Cohen or other members of the Investment Committee, each in their personal capacity or through affiliated investment vehicles, may at times invest in the same securities in which the Company invests. The Board anticipates that such investments will align the interests of the Company with the interests of related parties because it places the personal resources of such directors at risk in substantially the same manner as resources of the Company.
Retail Business
We are optimizing our retail footprint. We view our extensive domestic network of physical locations not merely as stores, but as fulfillment and service anchors that provide immediate capabilities.
Expand Our Addressable Market
The Company continues to explore ways to increase the size of its addressable market through new product and service offerings.
•Strategic Validation: Our recent initiatives have validated our thesis that consumers value transactional speed and convenience. By utilizing our stores as efficient trade-in destinations, we have demonstrated that our infrastructure can drive transaction volume and customer engagement.
•The Network Effect: We believe our dense store network serves as a competitive advantage.
Maximize Profitability
The Company continues to focus on cost containment to maximize operating income.
•Indirect Spend: We have focused on eliminating non-income generating spend. In fiscal 2025, we significantly reduced indirect costs and intend to continue this discipline in 2026.
•International Streamlining: We continue to evaluate our international assets for strategic relevance. In the past three years, the Company has exited operations in Ireland, Switzerland, Austria, Germany, New Zealand, Italy and Canada. In addition, the Company has signed an agreement related to a potential sale of its operations in France to a strategic buyer.
•Store Fleet Optimization: Each year, the Company performs a comprehensive store portfolio optimization review which involves identifying stores for closure based on many factors, including an evaluation of current market conditions and individual store performance. This review resulted in the closure of 727 stores in the United States in fiscal 2025. At this time, we do not anticipate closing a significant number of stores in fiscal 2026, as we view our domestic footprint as a core component of our logistics infrastructure strategy.
Forward-Looking Statement on Acquisitions

While the Company has no binding agreements for a specific transaction at this time, we are actively evaluating opportunities that could require significant capital deployment. Shareholders should understand that our strategy is now explicitly focused on leveraging our cash, flexible capital structure, and stock to acquire assets that we believe will undergo a significant re-rating under our stewardship.
Subsequent to the end of the first quarter of fiscal 2026, the Company announced a non-binding proposal to acquire eBay Inc.
First Quarter Developments
During the first quarter of fiscal 2026, we continued to advance the strategic priorities we pursued throughout fiscal 2025. Net sales increased 14.0% to $835.3 million compared to the prior-year period - a positive comparison achieved notwithstanding the smaller store base and reduced international footprint resulting from the actions we took during fiscal 2025, including the closure of underperforming stores in the United States, the divestiture of our Canadian operations, and the wind-down of our operations in New Zealand. The increase was driven primarily by continued growth in our collectibles category.
Consistent with our focus on the growth of collectibles, we continued to expand the store space and roll out new fixtures dedicated to the category to support in-store collectibles sales.
We also continued our profit-optimization efforts during the quarter, including further reductions in selling, general and administrative expenses through ongoing cost-discipline and indirect-spend initiatives.
Consistent with our capital allocation strategy, during the first quarter of fiscal 2026 we obtained economic exposure to approximately 5% of eBay's outstanding common stock through a series of put and call option transactions. These transactions resulted in a Derivative asset and an Unrealized gain on derivative asset, net recognized during the quarter. See "Liquidity and Capital Resources" below and Part I, Item 1, "Notes to the Condensed Consolidated Financial Statements" for additional information.
Our balance sheet continued to reflect the proceeds of our 0.00% Convertible Senior Notes due 2030 and 2032, our Bitcoin treasury reserve holdings and related receivables, and the Warrant Distribution completed in fiscal 2025 (NYSE: GME WS), under which a nominal number of warrants were exercised during the quarter. Total Cash, cash equivalents, Marketable securities, Digital assets and related receivables, and Collateral pledged for derivative assets were $9,721.0 million as of May 2, 2026. This total included $7,397.6 million of Cash and cash equivalents, $970.5 million of Marketable securities, $983.3 million of Collateral pledged for derivative asset during the quarter, and approximately $369.6 million in Digital assets and related receivables.
As previously announced, we have entered into an agreement for the potential sale of our operations in France. We do not anticipate closing a significant number of stores in fiscal 2026, as we view our domestic store footprint as a core component of our logistics and fulfillment infrastructure.
CONSOLIDATED RESULTS OF OPERATIONS
The following table presents certain statement of operations items and as a percentage of Net sales:
Three Months Ended
May 2, 2026 May 3, 2025 Change
Amount Percent of Net Sales Amount Percent of Net Sales $ %
Net sales $ 835.3 100.0 % $ 732.4 100.0 % $ 102.9 14.0 %
Cost of sales 495.0 59.3 479.6 65.5 15.4 3.2
Gross profit 340.3 40.7 252.8 34.5 87.5 34.6
Selling, general and administrative expenses 201.6 24.1 228.1 31.1 (26.5) (11.6)
Asset impairments
(4.6) (0.6) 35.5 4.8 (40.1)
NM(1)
Operating income (loss) 143.3 17.2 (10.8) (1.5) 154.1
NM(1)
Interest income, net (83.7) (10.0) (56.9) (7.8) (26.8) 47.1
Unrealized gain on derivative asset, net (268.4) (32.1) - - (268.4) 100.0
Gain on digital assets and related receivables (1.1) (0.1) - - (1.1) 100.0
Other income, net (9.9) (1.2) (2.2) (0.3) (7.7) (350.0)
Income before income taxes
506.4 60.6 48.3 6.6 458.1 948.4
Income tax expense
116.8 14.0 3.5 0.5 113.3
NM (1)
Net income
$ 389.6 46.6 % $ 44.8 6.1 % $ 344.8 769.6
(1) "NM" identifies data that is not meaningful.
The Three Months Ended May 2, 2026 Compared to the Three Months Ended May 3, 2025
Net Sales
The following table presents Net sales by significant product category:
Three Months Ended
May 2, 2026 May 3, 2025
Net
Sales 		Percent of Net Sales Net
Sales 		Percent of Net Sales
Hardware and accessories $ 333.7 39.9 % $ 345.3 47.1 %
Software 152.7 18.3 175.6 24.0
Collectibles 348.9 41.8 211.5 28.9
Total net sales $ 835.3 100.0 % $ 732.4 100.0 %
The following table presents Net sales by reportable segment:
Three Months Ended
May 2, 2026 May 3, 2025
Net
Sales 		Percent of Net Sales Net
Sales 		Percent of Net Sales
United States $ 651.1 78.0 % $ 537.5 73.4 %
Canada - - 38.2 5.2
Australia 99.6 11.9 81.9 11.2
Europe 84.6 10.1 74.8 10.2
Total net sales $ 835.3 100.0 % $ 732.4 100.0 %
During the three months ended May 2, 2026, total Net sales increased $102.9 million, or 14.0% compared to the prior year. Net sales increased 21.6% in Australia, 21.1% in the United States, and 13.1% in Europe, while Net sales declined 100.0% in Canada. The overall increase in consolidated Net sales was primarily driven by a $137.4 million or 65.0% increase in collectibles sales, partially offset by a decline in software sales of $22.9 million or 13.0% and a decline in hardware and accessories sales of $11.6 million, or 3.4%. The decline in the Canada segment reflects the divestiture of that business in the second quarter of fiscal 2025.
Gross Profit
Gross profit increased $87.5 million, or 34.6% during the three months ended May 2, 2026, compared to the prior year. Gross profit as a percentage of Net sales increased to 40.7%, from 34.5% in the prior year.
The increase in Gross profit and gross margin was primarily driven by a shift in sales mix towards higher-margin product categories, particularly collectibles. Sales of collectibles increased to 41.8% of total Net sales for the three months ended May 2, 2026, compared to 28.9% in the prior year.
Selling, General and Administrative Expenses
Selling, general, and administrative ("SG&A") expenses decreased $26.5 million, or 11.6% for the three months ended May 2, 2026 compared to the prior year. SG&A as a percentage of Net sales decreased to 24.1% in the current year period compared to 31.1% in the prior year.
The reduction in SG&A was driven by a $9.5 million decrease in labor-related costs, consulting services, and marketing expenses as part of our ongoing cost-optimization initiatives. In addition, store-related rent and occupancy costs and depreciation expense decreased $15.1 million and $1.0 million, respectively, primarily due to store closures and international divestitures completed in recent periods.
Asset Impairments
Asset impairment was a benefit of $4.6 million for the three months ended May 2, 2026, compared to an expense of $35.5 million in the prior year. As a percentage of Net sales, Impairment expense was (0.6)% during the current year period, compared to 4.8% in the prior year. The change was primarily attributable to management's plan, approved in the first quarter of fiscal 2025, to divest the Company's operations in Canada and France, resulting in the reclassification of the related assets and liabilities as held for sale. We recorded $18.3 million of Impairment expense related to the Canadian disposal group in the first quarter of fiscal 2025, and the divestiture was completed during the second quarter of fiscal 2025. We recorded $17.2 million of impairment expense related to the French disposal group in the first quarter of fiscal 2025, and the divestiture is expected to be completed during the current fiscal year.
Interest Income, net
Interest income, net increased $26.8 million to $83.7 million for the three months ended May 2, 2026, compared to $56.9 million in the prior year. The increase was primarily driven by higher Cash and cash equivalent, and Marketable securities balances resulting from the issuance of the Convertible 2030 Notes and Convertible 2032 Notes.
Unrealized Gain on Derivative Asset, net
During the three months ended May 2, 2026, Unrealized gain on derivative asset, net increased $268.4 million or 100% compared to the prior year. The increase in the Unrealized gain on derivative asset, net for the three months ended May 2, 2026 was due to the Company entering into the Put/Call Pairs that provide economic exposure to the eBay Common Stock.
Gain on Digital Assets and Related Receivables
Gain on digital assets and related receivables increased to $1.1 million for the three months ended May 2, 2026, compared to no such gain in the prior year.
Income Tax Expense

We recognized Income tax expense of $116.8 million for the three months ended May 2, 2026, compared to an Income tax expense of $3.5 million for the three months ended May 3, 2025. Our effective income tax rate was 23.1% for the three months ended May 2, 2026 compared to 7.2% for the three months ended May 3, 2025.
The increase in income tax expense was driven primarily by significantly higher pre-tax income for the three months ended May 2, 2026 compared to the three months ended May 3, 2025. The increase in the effective tax rate reflects the recognition of certain tax benefits available during the three months ended May 3, 2025, which reduced income tax expense in that period but were substantially all utilized in fiscal 2025. The difference between our effective tax rate and the U.S. federal statutory rate of 21% is primarily attributable to state income taxes. The difference between our effective tax rate and the statutory income tax rate in the current year period is primarily due to the state income taxes.
See Note 12, "Income Taxes," for additional information.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and marketable securities
May 2,
2026 		May 3,
2025 		January 31,
2026
Cash and cash equivalents $ 7,397.6 $ 6,385.8 $ 6,304.7
Marketable securities 970.5 - 2,709.1
Cash, cash equivalents and marketable securities $ 8,368.1 $ 6,385.8 $ 9,013.8
Sources of Liquidity; Uses of Capital
Our principal sources of liquidity are cash on hand and cash from operations. As of May 2, 2026, we had $7,397.6 million of unrestricted cash and cash equivalents, and $970.5 million of marketable securities.
Our Cash and cash equivalents are carried at cost, which approximates fair value, and consist primarily of cash, money market funds, cash deposits with commercial banks, and highly rated direct short-term instruments with original maturities of 90 days or less.
Our Marketable securities are carried at fair value and include investments in certain highly-rated short-term government notes, government bills, commercial paper, and time deposits. As of May 2, 2026, $970.5 million of these investments had original maturities in excess of 90 days and less than one year and are classified as "Marketable securities" on our condensed consolidated balance sheets.
In fiscal 2025, we reclassified Cash and Marketable securities associated with the French disposal group to Assets held for sale on the condensed consolidated balance sheets. As of May 2, 2026, the French disposal group included $28.5 million of cash and an immaterial amount of marketable securities within Assets held for sale. See Note 9, "Asset Held for Sale," for additional information.
During the first quarter of fiscal 2026, we pledged $983.3 million of cash as collateral in support of our Derivative asset positions, reducing our available liquidity by a corresponding amount. See Note 10, "Derivative Asset," for additional information.
On an ongoing basis, we evaluate and consider certain strategic operating alternatives, including divestitures, restructuring or dissolution of unprofitable business segments, uses for our excess cash, as well as equity and debt financing alternatives that we believe may enhance stockholder value. The nature, amount and timing of any strategic operational change, or financing transactions that we might pursue will depend on a variety of factors, including, as of the applicable time, our available cash and liquidity and operating performance; our commitments and obligations; our capital requirements; limitations imposed under our credit arrangements; and overall market conditions.
Gains and losses on marketable securities may fluctuate significantly from period to period in the future and could have a significant impact on the Company's results of operations. However, the amount of gain or loss on marketable securities for any given period may have no predictive value and variations in amount from period to period may have no analytical value.
In fiscal 2021, six separate unsecured term loans held by our French subsidiary, Micromania SAS, for a total of €40.0 million were extended for five years. During the first quarter of fiscal 2025, we reclassified the French Term Loans to Liabilities held for sale on the consolidated balance sheets where it continues to be measured at the lower of its carrying amount and fair value less costs to sell. As of May 2, 2026, $8.9 million remains outstanding and classified in "Liabilities held for sale."
Some of our vendors have requested and may continue to request credit support collateral for our inventory purchase obligations and the levels of such collateral will depend on a variety of factors, including our inventory purchase levels, available payment terms for inventories, favorable credit terms, and costs of providing collateral.
We maintain uncommitted facilities with certain lenders that provide for the issuance of letters of credit and bank guarantees, at times supported by cash collateral. As of May 2, 2026, we had letters of credit and other bank guarantees outstanding in the amount of $7.2 million.
Bitcoin
In the first quarter of fiscal 2025, we announced that the Board approved the addition of Bitcoin as a treasury reserve asset, allowing a portion of our cash or future debt and equity proceeds to be invested in Bitcoin. During the second quarter of fiscal 2025, we purchased 4,710 Bitcoin for $500 million. In the fourth quarter of fiscal 2025, we entered into an agreement (the "Collateral Agreement") with Coinbase Credit, Inc. (the "counterparty"), under which we sold covered call options on a portion of the Bitcoin we own. In connection with this covered-call strategy, we pledged 4,709 Bitcoin (the "Pledged Bitcoin") as collateral.
Under the terms of the Collateral Agreement, the counterparty retained the right to rehypothecate, commingle, or unilaterally sell the Pledged Bitcoin. As a result of these rights, we concluded that control of the Pledged Bitcoin transferred to the counterparty. Accordingly, we derecognized the Pledged Bitcoin as an Intangible asset and recognized Digital assets receivable within Digital
assets and related receivables on our condensed consolidated balance sheets representing our contractual right to receive equivalent amount of Bitcoin in the future. Although the classification of these assets has changed, our economic exposure is consistent with direct ownership of the underlying Bitcoin.
We recorded a gain of $1.1 million related to the Digital asset receivable during the first quarter of fiscal 2026, reflecting the increase in the market price of Bitcoin during the period.
At-the-Market Equity Offering Program
On May 17, 2024, we entered into an Open Market Sale AgreementSM (the "Sales Agreement") with Jefferies LLC (the "Sales Agent") providing for the sale by the Company of shares of our Class A common stock, par value $0.001 per share ("Common Shares"), from time to time, through the Sales Agent in connection with an "at-the-market offering" program (the "ATM Offering").
Convertible Senior Notes
On April 1, 2025, we completed a private offering of $1,500 million aggregate principal amount of 0.00% Convertible Senior Notes due 2030 (the "Convertible 2030 Notes"), including the exercise in full of the initial purchaser's option to purchase up to an additional $200 million aggregate principal amount of the Convertible 2030 Notes. The Convertible 2030 Notes are general unsecured obligations of the Company. The Convertible 2030 Notes were issued pursuant to an Indenture, dated April 1, 2025, between the Company and U.S. Bank Trust Company, National Association (the "Trustee"), as trustee.
On June 17, 2025, we completed a private offering of $2,250 million aggregate principal of 0.00% Convertible Senior Notes due 2032 (the "Convertible 2032 Notes" and, collectively with the Convertible 2030 Notes, the "Convertible Notes"). Pursuant to the purchase agreement between the Company and the initial purchaser of the Notes, the Company granted the initial purchaser an option to purchase, for settlement within a period of 13 days from, and including, the date the Notes are first issued, up to an additional $450 million aggregate principal amount of Notes. The Convertible 2032 Notes are general unsecured obligations of the Company. The Convertible 2032 Notes were issued pursuant to an Indenture, dated June 17, 2025, between the Company and the Trustee, as trustee.
See " Note 5 "Debt", for additional information related to the Convertible 2030 Notes and the Convertible 2032 Notes.
Warrants
On October 7, 2025, the Company, announced that the Board declared a distribution (the "Warrant Distribution") to the holders of record of the Common Stock and holders of the Convertible Notes, in the form of warrants to purchase shares of Common Stock (the "Warrants"). The Warrants were issued on the terms and conditions described in the Warrant Agreement (as defined below) and were distributed on October 7, 2025, to the record holders of the Common Stock and the Convertible Notes as of the close of business on October 3, 2025 (the "Record Date").
Pursuant to the terms of the Warrant Agreement between the Company, Computershare Inc., a Delaware corporation, and its affiliate, Computershare Trust Company, N.A., as Warrant Agent (the "Warrant Agreement"), each holder of record of Common Stock as of the Record Date received one Warrant for every ten shares of Common Stock (rounded down to the nearest whole number for any fractional Warrant). Holders of the Convertible Notes also received Warrants on an "as converted" basis in lieu of an adjustment to the conversion rate of the Convertible Notes pursuant to the applicable indenture governing the Convertible Notes. The distribution of the Warrants to the Convertible Noteholders was at the same time and on the same terms as holders of Common Stock. Holders of the Convertible Notes will not need to convert the Convertible Notes into Common Stock in order to receive the Warrants.
Each Warrant entitles the holder to purchase, at the holder's sole and exclusive election, at a cash exercise price of $32.00 per Warrant (the "Exercise Price"), one share of Common Stock, subject to adjustment pursuant to the provisions of the Warrant Agreement. Payment for shares of Common Stock upon exercise of Warrants must be in cash. The Warrants will expire and cease to be exercisable at 5:00 p.m. New York City time on October 30, 2026 (the "Expiration Date").
The number of shares of Common Stock issuable upon exercise of the Warrants is subject to certain anti-dilution adjustments, including for stock dividends, share splits, share combinations, rights issuances, other distributions, spinoffs, cash dividends and tender or exchange offers.
The Warrants commenced trading on the New York Stock Exchange under the ticker "GME WS" on October 8, 2025.
In connection with the Warrant Distribution, the Company filed a prospectus supplement, dated October 7, 2025, pursuant to the Company's existing shelf registration statement on Form S-3 ASR, effective as of October 3, 2025, registering up to 59,153,963 shares of Common Stock to be issued upon exercise of the Warrants.
During the three months ended May 2, 2026, holders exercised 1,950 Warrants, resulting in the issuance of 1,950 shares of common stock and cash proceeds of $62,400.

Cash Flows
Three Months Ended
May 2,
2026 		May 3,
2025 		Change
Cash provided by operating activities $ 337.4 $ 192.5 $ 144.9
Cash provided by investing activities 742.9 7.3 735.6
Cash provided by financing activities
1.5 1,478.0 (1,476.5)
Exchange rate effect on cash, cash equivalents and restricted cash 1.9 5.9 (4.0)
Net change in cash balance classified as assets held for sale
- (49.4) 49.4
Increase in cash, cash equivalents and restricted cash $ 1,083.7 $ 1,634.3 $ (550.6)

Operating Activities
Cash provided by operating activities was $337.4 million during the three months ended May 2, 2026, compared to $192.5 million during the three months ended May 3, 2025. The increase was primarily driven by higher operating income and increased interest income during the current year period.
Investing Activities
Cash provided by investing activities was $742.9 million during the three months ended May 2, 2026 compared to $7.3 million during the three months ended May 3, 2025.
Cash provided by investing activities during the three months ended May 2, 2026 was primarily due to the proceeds from the sales and maturities of Marketable securities, partially offset by cash pledged as collateral in connection with the Derivative asset.
Cash provided by investing activities during the three months ended May 3, 2025 was primarily due to proceeds from the maturity of Marketable securities, partially offset by purchases of Marketable securities and routine Capital expenditures.
Financing Activities
Cash provided by financing activities was $1.5 million during the three months ended May 2, 2026 compared to $1,478.0 million during the three months ended May 3, 2025. The decrease primarily reflects gross proceeds of $1.5 billion received from the issuance of the 2030 Convertible Notes in the prior year period, with no comparable financing activity in the current year period.

 CRITICAL ACCOUNTING ESTIMATES
Valuation of Derivative Asset
During the first quarter of fiscal 2026, the Company recognized a Derivative asset that provides economic exposure to 22,176,000 shares of eBay Inc. ("eBay") common stock, par value $0.001 per share. This exposure results from a series of paired put and call option transactions (the "Put/Call Pairs") entered into during the quarter. Each Put/Call Pair is structured as a combination of non-transferable embedded purchased call option and non-transferable embedded written put option entered into contemporaneously with the same counterparty scheduled to expire on February 23, 2028.
The Company considers the valuation of the derivative asset to be a critical accounting estimate due to the significant judgment involved and its material impact on the Company's financial position and results of operations. The fair value of these options is determined in accordance with ASC 820 using widely accepted option-pricing models that incorporate observable market inputs, including the underlying stock price, implied volatility, and time to expiration. Accordingly, the options are classified as Level 2 within the fair value hierarchy.
These valuation techniques incorporate the contractual terms of the instruments, including the embedded rights and obligations, as well as relevant market conditions and observable inputs as of each reporting date. Key inputs used in the valuation include the strike price, the market price of eBay Common Stock, the number of contracts, and the resulting intrinsic value per share.
As of May 2, 2026, the Company's condensed consolidated balance sheets reflect a Derivative asset of $285.3 million. During three months ended May 2, 2026, the Company recognized an Unrealized gain on derivative asset, net of $268.4 million, net of certain transaction-related costs, in its condensed consolidated statements of operations.
Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and exclude certain disclosures required under GAAP for complete consolidated financial statements. Preparation of these statements requires us to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in these condensed consolidated financial statements. For a summary of significant accounting policies and the means by which we develop estimates thereon, see "Part II-Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2025 Annual Report on Form 10-K. There have been no material changes to our critical accounting policies from those included in our 2025 Annual Report on Form 10-K, other than the valuation of Derivative asset described above.
OFF-BALANCE SHEET ARRANGEMENTS
We had no material off-balance sheet arrangements as of May 2, 2026 other than those disclosed in Part I, Item 1 "Notes to the Condensed Consolidated Financial Statements," Note 5 "Debt" and Note 6 "Commitments and Contingencies" of our condensed consolidated financial statements for additional information.
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