According to Konvoy’s analysis, the global gaming market is projected to reach $186 billion by 2026, representing a 4.7% year-over-year increase. This moderate yet consistent growth reflects ongoing consumer engagement, expansion of digital distribution platforms, and the sustained relevance of gaming as a mainstream form of entertainment. Despite a dynamic macroeconomic environment, the industry continues to demonstrate resilience and stable forward momentum.

Konvoy Gaming Industry Report Summary Q1 2025

Investment Trends

In the first quarter of 2025, the gaming sector received $373 million in venture capital funding. This figure marks a 35% increase compared to the previous quarter, signaling a rebound in investor interest after several subdued quarters. However, when compared year-over-year, this amount reflects a 41% decline, suggesting a more cautious investment climate relative to the heightened funding activity of 2024. The number of completed deals reached 77 in the quarter, down 6% from the prior quarter and 51% from the same period last year. This suggests that while deal size may be recovering, overall deal volume remains lower than previous periods, potentially due to more selective investment strategies.

Public Market Performance

Gaming-focused exchange-traded funds performed positively in the first quarter of 2025, outpacing broader market benchmarks. The ESPO ETF recorded a 4.8% gain, while the HERO ETF saw a 6.2% increase. In contrast, the S&P 500 experienced a decline of 5.4% year-to-date. This divergence highlights the relative strength of publicly traded gaming companies and suggests continued investor confidence in the sector despite broader market volatility.

Largest Game Content VC Deals

Regional Comparison: United States and China

The United States and China continue to represent key markets in the global gaming industry, though their contributions vary significantly in terms of user base and revenue. In 2024, the US accounted for 6.4% of global gamers but generated 26% of global gaming revenue. Conversely, China represented 20.5% of global gamers and contributed an equivalent 26% share of revenue.

This disparity in user monetization is further emphasized by the finding that the average gamer in the US spends approximately 3.1 times more annually than the average gamer in China. Additionally, US-based gaming startups receive 7.6 times more venture capital funding than their counterparts in China, and there are five times more VC-funded gaming startups in the US than in China, indicating a stronger ecosystem for early-stage companies in the American market.

US vs China Regional Comparison 

Industry Consolidation and Strategic Restructuring

Several notable mergers and acquisitions occurred during Q1 2025. Scopely acquired Niantic, and Modern Times Group (MTG) completed the acquisition of Plarium. These transactions are indicative of a broader movement among large gaming firms to consolidate operations and realign focus on core areas of expertise. Konvoy notes that the divestiture of assets such as Niantic and Plarium, as well as reports surrounding a potential acquisition of AppLovin’s gaming division, suggest that companies are actively restructuring to enhance operational efficiency and sharpen their strategic direction.

Geopolitical Influence on the Gaming Industry

Geopolitical developments continue to influence the global gaming landscape, particularly with regard to the United States' regulatory actions against China-owned entities. The situation surrounding TikTok is ongoing, having extended compliance deadlines for ByteDance. Konvoy believes that a full ban is unlikely, especially given that the platform resumed service for U.S. users following a temporary ban in January.

A group including Oracle, a16z, and Silver Lake is currently viewed as the most likely acquirer of TikTok’s U.S. operations. Broader scrutiny of Chinese gaming companies remains significant, with Tencent-owned entities such as Riot Games and partially Tencent-owned Epic Games among those potentially affected by further regulatory measures. Lilith Games, a Chinese firm, is also considered at risk under the evolving policy landscape.

Ubisoft’s Strategic Positioning

Ubisoft continues to face business challenges, with its stock price down approximately 87% from its peak in January 2021. While the company is not actively pursuing full privatization or merger opportunities, Tencent has increased its influence over Ubisoft’s intellectual property. This move provides Tencent with a degree of strategic access and underscores the importance of IP control in the current gaming environment. Konvoy notes that Ubisoft’s difficulties have been consistent across several quarters and remain a key point of concern.

Ubisoft Looks to Tencent

Developments in AI and Gaming Technology

Artificial intelligence continues to play an expanding role in game development. Microsoft recently introduced MUSE, a model intended to enhance the early stages of game design through faster iteration and learning. Although practical use cases for MUSE are still developing, the release signals Microsoft's ongoing interest in AI-driven tools for the gaming sector. Similarly, NVIDIA launched ACE, a platform designed to support autonomous agents in games. The company has secured partnerships with NetEase, KRAFTON, and Wemade, though its longer-term commitment beyond initial partnerships is not yet fully established. These developments highlight the increasing convergence of AI technology and interactive entertainment.

Upcoming Hardware Releases

Two notable handheld gaming devices are expected to launch in 2025: the Switch 2 and the Atari Gestation Go. The Switch 2 follows Nintendo’s highly successful original Switch, but Konvoy projects that its hardware sales may underperform by 25 to 40 percent relative to its predecessor. The Atari Gestation Go is a retro-style device that appeals to a niche audience, similar to previous nostalgia-driven products like the Atari Flashback Portable. While this product is unlikely to significantly affect the broader console market, it reflects ongoing consumer interest in vintage gaming experiences.

Konvoy’s Q1 2025 report offers a detailed snapshot of the gaming industry’s current state. Despite ongoing geopolitical and economic challenges, the sector continues to evolve through strategic investments, technology integration, and shifts in global market dynamics.