GameStop Revenue Is Down. Should Investors Consider Buying the Famous Meme Stock on the Dip?

GameStop (NYSE: GME) posted its results for the fiscal 2025 fourth quarter (ended Jan. 31) after the market closed on March 24. The company posted non-GAAP (adjusted) profit of $0.49 per share, representing an impressive step up from the adjusted per-share profit of $0.30 it posted in the prior-year period.

Meanwhile, GameStop's revenue came in at $1.1 billion for the quarter -- down 14.1% year over year. While the retailer's stock closed out the day after its earnings report up roughly 1% thanks in large part to bullish momentum for the broader market, its stock is down roughly 11% from its 2026 peak. Should investors treat the discount as a buying opportunity amid the recent sales decline?

Should investors buy GameStop stock even though sales are sinking?

Given recent trends affecting the video game industry, GameStop's double-digit sales revenue in the fourth quarter wasn't particularly shocking. Relatively underwhelming sales performance for gaming consoles from Sony, Microsoft, and Nintendo has tamped down overall industry revenue, and last year's fourth quarter wasn't particularly heavy on big software releases.

Adding to pressures for GameStop, players have continued to shift their purchasing habits toward digital downloads rather than physical copies of games bought in stores. PCs and handheld platforms, including Valve's Steam Deck, have also been increasing in popularity, and this trend has had the effect of weakening demand for the console hardware and software that are GameStop's lifeblood.

Despite the substantial sales decline, the company's efficiency initiatives and investments allowed it to post substantial earnings growth in the period. Adjusted earnings per share were up 63% year over year. In light of the big sales decline, the company's Q4 profit actually looks very encouraging. It also underscores a major change in how investors should think of GameStop as a company and as a stock.

GameStop closed out last year's fiscal fourth quarter with $9 billion in cash and equivalents -- up from $4.8 billion at the end of the previous year. While the sales decline certainly isn't a bullish development, the story surrounding GameStop stock has become largely divorced from the performance of its video game retail business. Barring an unforeseen and dramatic turnaround, continued gains for digital distribution over physical retail suggest that the company will continue to see its gaming retail revenue decline over the long term.

With GameStop valued at approximately $10.3 billion, the real question surrounding the stock is what exactly the company will do with its $9 billion cash position. During the the height of the meme stock mania surrounding GameStop, the company smartly moved to sell new shares to improve its financial position. The stock sales allowed the company to wipe out debt and build a war chest that CEO Ryan Cohen and his team can use for acquisitions, investments, and other initiatives to transform the business.

It now makes more sense to think of GameStop as a holding company than as a video game retailer when assessing potential valuation moves for the stock. Whether to invest in GameStop stock should come down to the level of faith you have in Cohen and his ability to further his transformation strategy, not to recent sales trends for the gaming retail business.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends Nintendo. The Motley Fool has a disclosure policy.