Embracer plans to split off Fellowship Entertainment after weak year-end results

Embracer Group says it plans to spin off Fellowship Entertainment as a separate publicly listed company, while the remaining Embracer business shrinks down around tighter cost controls and a simpler structure. The new company will house a big chunk of Embracer’s better-known game and entertainment properties, including Kingdom Come: Deliverance, Tomb Raider, The Lord of the Rings, Dead Island, Darksiders, and Remnant.

According to Embracer’s open letter to shareholders, Fellowship Entertainment is expected to release at least two major games a year starting in fiscal year 2027/28. Embracer also said it will begin segment reporting in Q1 FY 2026/27 to prepare for the split, and CFO Müge Bouillon has been named deputy CEO.

The move comes alongside another rough financial report. Embracer’s net sales for the quarter ended March 31, 2026 fell 24 percent year-over-year to SEK 3.9 billion, with PC and console revenue down 46 percent. For the full year, net sales were SEK 15.9 billion, down 25 percent.

The company also booked a non-cash impairment of SEK 7.2 billion. Most of that was tied to goodwill and acquisition-related intangibles, but SEK 1.2 billion was linked to an unannounced AAA project that’s still in development.

On the games side, Embracer said recent quarter sales were hurt by a weaker lineup of new releases after Kingdom Come: Deliverance 2 had a strong prior quarter. It did point to solid back-catalog performance, with Kingdom Come: Deliverance 2, Dead Island 2, and Echoes of the End helping lift older title sales. Reanimal, from Tarsier Studios and THQ Nordic, also passed 1 million copies sold after launching in February 2026.

Embracer has been cutting back for a while now, and the latest report shows that trend hasn’t changed. Its total game development projects dropped from 94 to 79 over the year, while headcount fell from 6,875 to 6,090. Of those employees, 4,485 are game developers.