By Eva Mathews

(Reuters) -GameStop Corp on Wednesday reported a smaller-than-expected quarterly loss and a partnership with FTX US to increase its presence in the cryptocurrency space, sending the video game retailer's shares up 10% in extended trading.

The company will start selling FTX gift cards at some of its stores as part of the partnership, financial terms of which were not disclosed.

GameStop launched a digital wallet earlier this year that it said would enable transactions in a marketplace it is building for gamers and others to buy, sell and trade non-fungible tokens, or NFTs.

"The FTX partnership is unlikely to yield meaningful revenue or profit, but it sounds good, so that's a positive," Wedbush analyst Michael Pachter said.

Last year, GameStop was at the center of a social media-fueled trading frenzy that sent its shares soaring.

The company has since overhauled its management in an effort to reverse years of languishing sales and has been bolstering its e-commerce capabilities as online shopping accelerated during the pandemic.

On an adjusted basis, GameStop lost 35 cents per share in the second quarter, compared with estimates of a loss of 38 cents, according to Refinitiv IBES data.

During the reported quarter, the company removed Chief Financial Officer Michael Recupero and announced a four-for-one stock split in an attempt to revive some of the retail interest for its shares.

However, GameStop's results come at a time when gaming companies are facing a slowdown in demand for video games from pandemic highs, raising doubts about their ability to weather an economic downturn.

The company's shares were trading higher at $26.56 after the bell.

Some investors worried that GameStop Chairman Ryan Cohen would sell shares, but since he did not the stock rally reflects investor relief, Pachter said.

(Reporting by Eva Mathews in Bengaluru; Editing by Shounak Dasgupta)