Electronic Arts Posts Record Growth in Fiscal 2015
Electronic Arts Records Strong 4Q15 and Fiscal 2015 Earnings
Newer gaming consoles benefited EA
On May 6, 2015, Electronic Arts’ (EA) peer Activision Blizzard (ATVI)—maker of the Destiny and Call of Duty video games—raised its revenue and EPS (earnings per share) guidance for fiscal 2015. Now, it expects fiscal 2015 revenue and EPS of $4.43 billion and $1.20, respectively—compared to the earlier guidance of $4.40 billion and $1.15, respectively.
The main reason behind the increased guidance was the growth in digital revenue. Now, it accounts for 45% of Activision Blizzard’s overall revenue. As we discussed previously in this series, growth in the digital segment provided a boost to Electronic Arts’ growth in 4Q15 and fiscal 2015.
This growth was further complemented by the latest generation of video game consoles released in 2013—Sony’s (SNE) PlayStation 4 and Microsoft’s (MSFT) Xbox One. VGChartz stated that EA’s Battlefield Hardline sold ~1.43 million units within the first four to five days of its launch. As of March 21, 2015, it was the top selling title globally, as the above chart shows.
In its earnings release, Blake Jorgensen, EA’s CFO, stated that “approximately four out of every five copies of Battlefield Hardline sold for consoles were for Xbox One or PlayStation 4.” He also stated that the transition to the newer generation of consoles is seeing “much faster growth than in previous generations.” VGchartz stated that out of the hardware—Japanese (EWJ) Nintendo Wii, Microsoft’s (MSFT) Xbox One, Sony’s PlayStation 4, and Nintendo 3DS console—Sony’s PlayStation 4 and Nintendo’s 3DS sold the maximum units as of March 28, 2015. They sold 21.4 and 52.2 million units, respectively.
Game releases impact EA’s revenue and profitability
As a video game publisher, EA’s business is tied to the popularity and uptake of its games and new releases. As a result, a title that’s popular among users can generate most of the revenue in a single quarter. However, a title’s poor adoption could lead to decreased earnings.
As we saw earlier in this series, the strong results in 4Q15 and fiscal 2015 are due to the success of its major releases. In its earnings release, EA’s management stated that in fiscal 2016, Need for Speed will make a comeback as well as Mirror’s Edge.
If you are bullish about EA, you can consider investing in the PowerShares QQQ Trust, Series 1 (QQQ). It invests about 0.35% in EA.
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