Mattel (NASDAQ:MAT) executives emphasized improving demand trends and major strategic moves while acknowledging that weaker-than-expected U.S. performance in December weighed on full-year results and profitability, during the company’s fourth quarter and full-year 2025 earnings call.
Fourth-quarter growth, but a U.S. December shortfall
Chairman and CEO Ynon Kreiz said Mattel delivered 6% growth in fourth-quarter gross billings (7% in North America and 4% internationally, in constant currency), but noted the company’s U.S. growth was less than anticipated and affected full-year results relative to expectations. CFO Paul Ruh attributed the outcome to trade-related uncertainty that drove U.S. retailers to shift orders from the second and third quarters into the fourth quarter and adopt a more “just-in-time” approach.
Management said the dynamic was largely specific to the U.S., while international performance was in line with expectations and grew in every region in the fourth quarter. Global POS increased by approximately 3% for both the quarter and the full year, according to the company.
Category performance: vehicles and action figures led; ITPS declined
In the fourth quarter, the company highlighted strength in vehicles and challenger categories, while infant, toddler, and preschool (ITPS) declined. Ruh said fourth-quarter gross billings in constant currency increased 6%, with vehicles up 16% and challenger categories up 14%. Management called out Hot Wheels’ double-digit growth, along with solid results for Matchbox and Disney and Pixar’s Cars.
ITPS gross billings fell 10% in the quarter, which Ruh attributed to continuing strategic exits in Baby Gear and Power Wheels and exits in preschool entertainment, with Fisher-Price declining modestly. Ruh said action figures performed particularly well, driven by Jurassic, Minecraft, and WWE. He also said building sets grew, supported by what management called a very successful launch of Mattel Brick Shop, and games grew primarily due to UNO, which achieved its tenth consecutive quarter of growth.
For the full year, total company gross billings were comparable, according to Ruh. He said dolls declined 7% (driven by Barbie and Polly Pocket, partially offset by Wicked), vehicles grew 10%, ITPS declined 18%, and challenger categories grew 13%.
Margins and profitability pressured by discounting and U.S. actions
Ruh said fourth-quarter adjusted gross margin was 46%, down 480 basis points, due to higher discounting, inflation and foreign exchange impacts, and the timing lag between pricing actions and tariff costs. He added that the company’s actions to manage inventory amid December trends—particularly increased promotions—also pressured margins. For the full year, adjusted gross margin was 48.9%, down 200 basis points.
On the bottom line, adjusted operating income in the fourth quarter was essentially flat at $160 million, while full-year adjusted operating income was $620 million, down 16% primarily due to lower gross profit. Adjusted EBITDA was $234 million in the quarter (down from $249 million) and $927 million for the year (down from $1.06 billion). Adjusted EPS increased in the fourth quarter to $0.39 from $0.35, which Ruh said primarily reflected share buybacks and certain one-time discrete tax items, while full-year adjusted EPS declined to $1.41 from $1.62.
Mattel163 acquisition and evolving strategy toward digital and IP
Mattel announced an agreement with NetEase to acquire full ownership of Mattel163, its mobile games joint venture. Kreiz said Mattel163 has released four games based on Mattel IP since 2018, with approximately 20 million monthly active users and more than 550 million downloads worldwide. The acquisition values Mattel163 at $380 million, with a $159 million purchase price for NetEase’s 50% stake. Management said more than half of the purchase cost is expected to be funded from Mattel’s share of the JV’s cash (not consolidated on Mattel’s balance sheet), and the transaction is expected to close by the end of the first quarter, subject to customary conditions.
Kreiz described the deal as Mattel’s first acquisition since the company’s turnaround efforts began and said it would be immediately accretive both strategically and financially. He said full ownership will add development, publishing, and user-acquisition expertise, increase mobile-game output, and improve alignment with Mattel’s broader product roadmap through cross-promotion and performance marketing scale benefits.
Management also outlined an evolution to a more brand-centric strategy that emphasizes capturing IP value across toys and entertainment. Kreiz framed toys as foundational but said the company expects a “virtuous cycle” where success in toys supports entertainment expansion and vice versa.
2026 outlook, investments, and capital return
For 2026, Ruh guided to constant-currency net sales growth of 3% to 6%, including a partial-year contribution from Mattel163. At current spot rates, foreign exchange was expected to be a tailwind of approximately 1.5 percentage points to reported net sales. The company expects a low single-digit decline in first-quarter revenue, reflecting continued shifts from direct import to domestic orders in the U.S. and the timing of new product line launches.
Additional 2026 guidance included:
- Adjusted gross margin: approximately 50%
- Adjusted operating income: $550 million to $600 million
- Adjusted tax rate: approximately 24%
- Adjusted EPS: $1.18 to $1.30
Management said it expects to continue to see a promotional environment in 2026 and has factored that into guidance. Ruh also said ITPS is expected to decline and create a 2% to 3% headwind to total gross billings, while the company assesses its ITPS strategy.
Mattel plans approximately $110 million of targeted strategic investments in 2026, including digital games (the largest area), first-party data, D2C, toy innovation, AI, and infrastructure. In addition, the company plans to invest about $40 million primarily in digital performance marketing and user acquisition tied to two self-published mobile game launches, which management said is measurable and adjustable based on ROI performance. Executives said the investments will weigh on 2026 profitability but are expected to be self-funding and accretive beginning in 2027.
Looking further out, Kreiz said the company expects in 2027 to achieve mid- to high-single-digit revenue growth in constant currency and double-digit growth in adjusted operating income, driven by the brand-centric strategy, partnerships, and 2026 investments.
On capital allocation, management said year-end cash was $1.24 billion after $600 million of share repurchases in 2025. The company ended the year with $2.33 billion of long-term debt and a leverage ratio of 2.5x (within its stated 2x to 2.5x target range), with the next debt maturity in December 2027. Mattel’s board authorized a new $1.5 billion share repurchase program expected to be completed by the end of 2028, and the company said it intends to repurchase $400 million of shares in 2026, subject to market conditions and other cash uses.
In addition to Mattel163, management highlighted new licensing momentum, including being awarded global multi-year rights to develop and market Teenage Mutant Ninja Turtles products beginning in 2027. Executives also discussed a 2026 entertainment slate featuring Masters of the Universe (June 5) and Matchbox (October 9), as well as new product launches tied to partners such as Netflix and Disney and Pixar’s Toy Story 5.
About Mattel (NASDAQ:MAT)
Mattel, Inc is a leading global toy company headquartered in El Segundo, California. Founded in 1945 by Harold “Matt” Matson and Elliot and Ruth Handler, the company has grown into a major player in the toy and family products industry. Mattel designs, manufactures, and markets a broad range of toys, games and entertainment products under well-known brands, including Barbie, Hot Wheels, Fisher-Price, American Girl, Thomas & Friends, UNO and Matchbox. In addition to its proprietary labels, Mattel holds licenses with global entertainment franchises, partnering with Disney, Warner Bros., WWE and other studios to create character-driven play experiences.
