Home Art sale Electronic Arts sales disappoint but profit forecasts rise

Electronic Arts sales disappoint but profit forecasts rise


Electronic Arts Inc. missed sales expectations in a quarterly report on Tuesday, as executives cut their full-year revenue and bookings guidance but raised their profit forecast.

Known for its sports franchises like “Madden NFL” as well as action titles like “Apex Legends” and “Battlefield 2042”, EA EA,
reported second-quarter net income of $299 million, or $1.07 per share, from $1.02 per share a year ago. EA did not provide adjusted earnings information, although analysts tend to estimate and judge the company on those results.

Revenue reached $1.9 billion from $1.83 billion in the prior year quarter. Reservations, which represent deferred revenue, reached $7.38 billion over the past 12 months, the company said. Net bookings for the quarter were $1.75 billion, compared to $1.85 billion in the prior year quarter.

Analysts polled by FactSet had forecast earnings of $1.37 per share on revenue of $1.94 billion and net bookings of $1.81 billion. EA shares initially fell around 2% in after-hours trading following the earnings release, but ended extended trading slightly higher after gaining 0.3% to $126.27 during the regular session.

Video game companies have struggled this year as the pandemic-era gaming boom slows and software companies face comparisons with huge growth in previous years. EA has held up better than most, however, as its sports-themed games tend to attract regular customers every year – including a “record” launch for the football game “FIFA 23” which started on the last day of the quarter – and the company’s mobile division didn’t show a huge drop like some others.

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“Despite one of the worst quarterly performance in the mobile games industry that we can remember (global consumer spending = -13% y/y), we expect EA’s business to grow by +8%,” wrote Stifel analysts ahead of the report, while maintaining a “Buy” rating but reducing their price target to $144 from $152. “And at just 17% of net bookings in fiscal 2Q23, the company’s exposure to this struggling category is lower than other publishers in our coverage universe.”

For the third fiscal quarter — which will include most of the proceeds from the launch of “FIFA” — EA executives have forecast earnings of 43 cents to 59 cents per share on revenue of $1.825 billion to $1.925 billion. dollars and reservations of $2.425 billion to $2.525 billion. Analysts had estimated earnings of $3.01 per share on revenue of $2.07 billion and bookings of $2.56 billion for the fiscal third quarter, according to FactSet.

For the full year, executives raised their profit target but cut their forecast for revenue and bookings, citing the strengthening dollar. Executives now expect full-year earnings of $3.11 to $3.34 per share, from $2.79 to $2.84 per share previously, attributing a decline in the cost of revenue seen throughout the year. year due to a change in the composition of income; total revenue is now expected to be between $7.55 billion and $7.75 billion, a reduction of $50 million from the previous range; and bookings are now forecast between $7.65 billion and $7.85 billion, down from $7.9 billion to $8.1 billion. Analysts on average had expected adjusted earnings of $7.14 per share on revenue of $7.72 billion and bookings of $7.95 billion for the year.

Chief Financial Officer Chris Suh said the reduction in sales estimates was due to the strengthening dollar, which he said had led to a $200 million reduction in annual net bookings expectations since the forecast was originally released.

“Beyond [foreign exchange]our business fundamentals remain sound with strong player engagement trends across our platforms and franchises,” he said.

Wedbush analysts Michael Pachter and Nick McKay predicted last week that EA executives would cut their full-year guidance “due to multiple factors, including unfavorable foreign currency translation, macroeconomic pressure, a difficult market for mobile games, the competitive landscape and the release schedule”.

Analysts, however, maintained their “outperform” rating on the stock and the $170 12-month price target.

“These potential headwinds are largely transitory in our view, and we remain confident of the company’s long-term growth potential anchored by its core sports brands, premier non-sports franchises and broad mobile opportunity.” , they wrote.

EA shares are down about 5% year-to-date, versus a 19% drop in the S&P 500 SPX index,