Playside Studios Ltd (ASX: PLY) shares are having a day to forget on Wednesday.

In morning trade, the ASX All Ords stock is down 40% to 22.5 cents.

Why is this ASX All Ords stock crashing 40%?

Investors have been rushing to the exits today after Australia's largest video game developer and publisher released a first-half trading update.

According to the release, Playside Studios reported a 21% decline in revenue to $28.5 million.

This was driven by lower Original IP revenue, which was down 44% to $9.9 million. Management notes the prior period included the receipt of fees relating to the signing of a major Dumb Ways to Die licensing agreement. Work for Hire revenue was largely flat year on year at $18.6 million.

Things were much worse for the ASX All Ords stock's earnings, with Playside Studios reporting an EBITDA loss of $2.8 million for the six months. This compares to positive EBITDA of $12.2 million a year ago.

Management notes that this reflects a higher average headcount and a lower revenue base. In addition, marketing initiatives of ~$3.5 million (up from $0.1 million) were expensed relating to major Original IP projects which are currently in development and slated to launch in the near future.

In light of this loss, the ASX All Ords stock ended the period with a cash balance of $28.5 million. This is down from $37.1 million at the end of June.

Guidance downgrade

This first half performance was softer than management was expecting. As a result, it has downgraded its guidance for FY 2025.

Revenue in FY 2025 is now expected to be $50 million to $54 million (previously $62 million to $68 million) and EBITDA is expected to be a loss of $6 million to $10 million (previously a profit of $0 million to $5 million).

This is expected to lead to its cash balance closing the year at $10 million to $15 million (previously $15 million to $20 million).

Commenting on its outlook, management said:

Given the Company's strong focus on development and investment in FY25 as it builds towards a number of significant game launches from FY26 onward, management anticipated a flat revenue year. However, opportunities in Work for Hire have been slower to materialise than expected. PlaySide entered FY25 with a strong cash balance and has made appropriate adjustments to its cost base to continue to support a year focused on development, while retaining flexibility in anticipation of new Work for Hire contracts as the year progresses.