HAS — Q3 2026 Financial Report Analysis

Magic: The Gathering passed $600 million in a quarter, and tariff refunds lifted the toy business

Hasbro's revenue rose 15.0% to $1,595.3 million in the third quarter of 2026 (the three months to September 27). Most of the growth again came from Magic: The Gathering, the trading-card game. Magic revenue rose 34.1% to $616.1 million, the first time it has passed $600 million in a quarter. The earnings release credits The Hobbit and Reality Fracture card sets. Diluted earnings per share (profit divided by the share count, counting stock options) rose 68.9% to $2.77.

Not all of that profit gain came from selling more. The quarter includes about $55 million of refunds of tariffs Hasbro had already paid. Of that, $48 million went to the toy business and $7 million to Wizards of the Coast. Hasbro does not strip the refunds out of its "adjusted" figures, so they inflate both the reported and the adjusted results. Without them, adjusted operating profit would still have risen about 37%, not the reported 52%.

This report is written from the earnings release (8-K Exhibit 99.1, filed October 20, 2026). The full 10-Q, with management's line-by-line explanations and more segment detail, had not been filed yet when we wrote it.

Key figures

Operating margin is the share of revenue left after the costs of running the business, before interest and tax. Adjusted EBITDA is Hasbro's own measure of earnings before interest, tax, depreciation and amortization, also excluding stock pay and one-off items.

Segment results

Wizards of the Coast & Digital Gaming. Tabletop gaming, which is mostly Magic, rose 38.8% to $613.1 million. Digital and licensed gaming grew only 3.0% to $134.1 million. Within it, the mobile game Monopoly Go! brought in $41 million, down from $44.2 million in Q2. The segment's margin rose to 49.2% from 44.0%. Excluding the $7 million refund, it would have been about 48.2%. Both the revenue growth and the profit now depend on the Magic release calendar. Digital, which Hasbro once pitched as a second growth engine, barely grew.

Consumer Products (toys and games sold in stores). Revenue rose 4% to $827.9 million. The release credits Marvel, KPop Demon Hunters and Transformers, plus toys for the film Spider-Man: Brand New Day. North America grew 4.5% to $504.9 million and Europe was flat at $181.1 million. Operating profit more than doubled to $173.8 million from $80.1 million. But $48 million of it was tariff refunds and $4.7 million was a gain from selling a facility (see below). Hasbro credits the rest of the improvement to "productivity initiatives", meaning cost cuts.

Entertainment. Revenue of $20.2 million is small enough that its high margin barely moves the group. Family Brands grew 10%.

What the headline numbers hide

• Tariff refunds are a one-off, and they are inside "adjusted" profit. In February 2026 the US Supreme Court ruled against the IEEPA tariffs (tariffs imposed under emergency-powers law). Hasbro has since applied to US Customs for refunds and booked about $55 million in this quarter. Its adjustments exclude restructuring, acquired-intangible amortization and cyberattack costs, but not the refunds. Taking the $55 million out, adjusted operating profit is about $486 million (+37%) and the adjusted margin about 30.5%, against the 33.9% Hasbro reports. Before tax, the refund is worth about $0.39 per diluted share. At this quarter's 19.2% tax rate it is roughly $0.31 after tax, which is our estimate because the release gives no after-tax figure. On that basis adjusted EPS would be about $2.59: still up more than 50%, but not the 73% reported.
• The toy profit jump is mostly the refund. Excluding the $48 million refund, Consumer Products' adjusted operating profit is about $130 million against $88.9 million a year ago, a margin of roughly 15.7% against 11.2%. That is still a real improvement on 4% sales growth, but more than half of the headline increase disappears.
• A lower tax rate added about $0.14 per share. Income tax was 19.2% of pre-tax profit, down from 23.4% a year ago. At last year's rate, diluted EPS would have been about $2.63, not $2.77. The release does not explain the change.
• Buybacks did not drive EPS. Diluted shares were 142.5 million, about the same as 142.2 million a year ago. Hasbro spent about $107 million on its own shares in the quarter ($206 million returned, less $99 million of dividends), but that is too little to have changed the per-share figures yet.
• Interest income helped a little. Interest income rose to $14.6 million from $6.3 million, earned on US Treasuries bought to repay bonds that mature in 2026 and 2027.
• GAAP vs adjusted gap is small this quarter. The adjustments total $23.9 million before tax. The largest items are $16.3 million of restructuring and severance and $9.9 million of acquired-intangible amortization, partly offset by the $4.7 million facility gain, which Hasbro removed from adjusted profit.
• Cash conversion is healthy. Operating cash flow for the nine months was $907.3 million, against net earnings of $755.8 million, and up from $490.0 million last year. After $148.5 million of spending on equipment and software, free cash flow (cash left after investment) was about $759 million. In Q3 alone, operating cash flow was about $303 million against $395 million of profit (using the $604.4 million first-half figure from the Q2 10-Q). That is normal for the third quarter, when retailers stock up for the holidays and receivables build.
• No inventory or receivables warning. Receivables rose 11.6% from a year ago, slower than the 15% revenue growth, and inventory fell 9.5% to $358.9 million.
• Less obvious cost moves. Royalties, the fees Hasbro pays the owners of brands it licenses, rose 24% to $142.1 million, faster than revenue. The release does not break this out. Our reading is that it fits growth led by licensed products such as The Hobbit Magic set and Marvel toys, which earn Hasbro less per dollar than its own brands. Advertising fell 11% to $96.2 million.

Did last time's read hold up?

Our Q2 2026 report named three things to watch.

• Whether Consumer Products would make a profit in its strongest season while tariff costs continued. It did: $173.8 million. But about $48 million of that was tariff refunds.
• Whether the IEEPA refund would be booked. Yes, about $55 million in this quarter.
• Whether the roughly $25 million of revenue lost to the March cyberattack would come back. The release does not say for the quarter. It says only that, for the nine months, brand sales "more than offset" the disruption.

We also read the July guidance (5–7% growth) as implying a sharp second-half slowdown. Q3 instead grew 15%, and management raised the range again.

Takeaway: Hasbro's earnings now rise and fall with Magic: The Gathering. Magic brought in 38.6% of revenue this quarter, and Wizards earned about two-thirds of segment profit. The profit beat was also helped by about $55 million of tariff refunds that will not repeat. Without the refunds and the lower tax rate, underlying growth was still strong, but it was smaller than the headline 73% rise in adjusted EPS.

Outlook

Hasbro raised its full-year 2026 guidance for the second quarter running:

• Revenue up 7–9% in constant currency, meaning with exchange-rate swings stripped out (previously 5–7%)
• Adjusted operating margin of 27–28% (previously 25–26%)
• Adjusted EBITDA of $1.575–1.625 billion (previously $1.45–1.50 billion)

It also said it is doubling its 2026 share-repurchase target, but the release does not give the dollar amount. The quarterly dividend stays at $0.70, payable December 2.

What the guidance implies for Q4. Hasbro's revenue for fiscal 2025 was $4,701.3 million (from its 10-K), so Q4 2025 was $1,445.9 million. Growth of 7–9% would mean 2026 revenue of about $5,030–5,124 million. With $3,735.1 million already booked after nine months, that leaves roughly $1,295–1,389 million for Q4, which is 4–10% below last year. This is our calculation, and it is approximate because the guidance is in constant currency. Adjusted EBITDA guidance implies Q4 of about $301–351 million, against $604.5 million in this Q3.

The CEO's quote promises "a strong finish to 2026", but the numbers point to a weaker fourth quarter. The release does not explain the gap. Possible reasons include a tougher comparison with Magic sets released in Q4 2025, caution about holiday toy demand, or tariff refunds that are not built into the guidance. The 10-Q and the earnings call should say which.

Our view. The business is clearly stronger than a year ago: Magic is growing above 30%, toy margins are up even without the refunds, and cash flow covers the dividend and buybacks with room left over. The risk is concentration. Magic's growth depends on a release schedule that leans on licensed sets such as The Hobbit and Marvel, and digital gaming (+3%) is not adding a second engine. Things to watch next quarter:

• Whether Magic grows against its own Q4 2025 releases.
• Whether Consumer Products holds a margin above about 15% without refund help.
• How much of the $893.9 million of debt due within a year Hasbro repays from its $576.2 million of short-term investments and $850.7 million of cash.