GameStop Corp. (GME) shares skyrocketed 19.81% on Wednesday, as the video game retailer's surprise third-quarter profit and additional cash raised through an equity offering fueled investor optimism about its turnaround efforts.

The company reported an adjusted net income of $17.4 million, or 6 cents per share, for the fiscal third quarter ended November 2, 2024. This marked a significant improvement from the net loss of $3.1 million recorded in the same period last year. GameStop's adjusted earnings also surpassed Wall Street's expectations of a 3-cent loss per share.

Despite the unexpected profitability, GameStop's net sales declined 20.2% year-over-year to $860.3 million, missing analysts' estimates of $900 million. The sales drop was attributed to lower revenues across all product categories, including hardware, software, and collectibles.

GameStop's ability to swing to a profit amid declining sales can be credited to the company's cost-cutting initiatives and a strategic shift toward higher-margin products, such as collectibles and pre-owned hardware and accessories. Additionally, the retailer's efforts to enhance inventory management contributed to the gross margin expansion of 380 basis points to 29.9%.

In a further boost to its financial position, GameStop disclosed that it had completed an "at-the-market" equity offering program during the third quarter, raising approximately $400 million through the sale of 20 million common shares. The company stated that it does not anticipate any further stock offerings during the current fiscal year.