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Electronic Arts (EA) is a global leader in digital interactive entertainment, specializing in the development, marketing, publishing, and delivery of games, content, and services for game consoles, PCs, mobile phones, and tablets . EA's offerings include a diverse portfolio of intellectual property, featuring both wholly owned brands like Apex Legends, Battlefield, and The Sims, as well as licensed brands such as EA SPORTS FC and EA SPORTS Madden NFL . The company generates significant revenue through its live services, which provide additional content, subscription offerings, and other revenue streams beyond the sale of full games .
- Live Services - Provides extra content, subscription offerings, and other revenue streams, significantly contributing to EA's overall revenue.
- Wholly Owned Brands - Develops and markets popular game franchises such as Apex Legends, Battlefield, and The Sims, engaging global online communities.
- Licensed Brands - Offers games under licensed brands like EA SPORTS FC and EA SPORTS Madden NFL, focusing on annualized sports titles.
What went well
- EA continues to grow post-COVID, outperforming the broader industry which has seen sluggish growth.
- Leveraging multiple business models (premium, free-to-play, live service) across platforms to reach a global player base of over 3 billion people, expected to drive meaningful growth for the company.
- Focusing on building massive online communities and expanding its biggest franchises (like EA Sports FC, Madden NFL, Apex Legends, Battlefield, and The Sims) to benefit disproportionately from shifts in entertainment consumption by Gen Z and Gen Alpha.
What went wrong
- The video gaming industry is experiencing sluggish growth, which could negatively impact EA's performance. Investors are frequently questioning the industry's relatively sluggish growth trends in recent years.
- EA faces challenges in deciding whether to release games on previous or current generation consoles. The lack of a clear decision-making process could affect major franchises like College Football and Madden NFL, potentially impacting sales and player adoption.
- EA's heavy reliance on AI technologies for game development may pose risks if these technologies do not deliver as expected. The development of College Football 25 depended heavily on AI and machine learning to generate 11,000 star player heads, which would have been impossible without AI, even with many years of development.
Q&A Summary
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Fiscal Guidance
Q: Why didn't strong Q1 and Q2 flow through to full-year outlook?
A: Despite strong Q1 results and a stronger-than-expected Q2 guidance, EA reiterated its full-year outlook because major releases like Madden, FC, and Dragon Age are still ahead. The company prefers to assess performance after these key titles launch before adjusting full-year expectations. -
Videogame Strike Impact
Q: How might the video game strike disrupt EA's business and release schedule?
A: EA doesn't expect any significant short-term impact from the strike. They are working closely with contractors, and since the strike affects games starting production after September 2023, current projects and live services remain unaffected. -
Madden and EA Sports FC Growth
Q: How will EA build on Madden's global momentum and what were the learnings from rebranding to EA Sports FC?
A: EA plans to grow Madden through geographic, demographic, and platform expansion, introducing new game modes and business models. The rebranding to EA Sports FC allowed for faster innovation, expanded gameplay, new commercial partnerships, and a focus on moving quickly to align with cultural shifts. -
AI and ML Efficiencies
Q: How did AI and machine learning enhance the development of the college football game?
A: AI and machine learning enabled EA to generate 11,000 new star player heads for the college football game—a task that would have been impossible without these technologies. This allowed for greater visual fidelity and accurate player representation. -
Potential Cannibalization
Q: Is there potential cannibalization between Madden Ultimate Team and college football's Ultimate Team?
A: EA believes the two games are complementary, attracting new and returning players, thus expanding the overall community without significantly cannibalizing Madden Ultimate Team engagement. Preorders for Madden are ahead of expectations, indicating positive reception. -
Apex Battle Pass Monetization
Q: How does player reception to Apex Battle Pass changes affect monetization?
A: While recent Battle Pass changes prompted player feedback, EA doesn't see this reflecting broader monetization issues. The team is responsive to community input and expects upcoming seasons to be well-received due to significant content updates. -
Sims Franchise Growth
Q: How is EA planning to grow the Sims franchise?
A: EA is committed to evolving The Sims 4 with over 15 updates in the coming year, adding new social features, marketplaces, and user-generated content. Plans include expanding social interaction, platforms, and gameplay modes to build out the global Sims community. -
Free-to-Play Monetization Strategy
Q: Has free-to-play been dilutive to industry pricing power or gamer value perception?
A: EA doesn't believe free-to-play has diluted pricing power. Instead, it has expanded the industry, especially in mobile gaming, effectively doubling the market. EA supports all business models, using free-to-play to reach more players globally and sees it driving growth for both the company and the industry. -
Console Generation Considerations
Q: What factors influence decisions to release games on previous vs. current-gen consoles?
A: EA considers where the player base is largest and where supporting a platform makes financial sense. For major franchises with geographically dispersed audiences, supporting previous generations can be worthwhile. However, new games like college football focus on current-gen to deliver advanced experiences leveraging AI and machine learning.
- Can you elaborate on the factors that influence your decision to release games on both previous and current-generation consoles, particularly for major franchises like college football and Madden NFL, where some features are only available on Gen 9?
- Considering the sluggish growth trends in the industry over the past few years, what external dynamics do you believe are impacting demand, and how might these turn into catalysts for future growth?
- With the ongoing video game actors' strike, how do you assess the potential risk of disruption to your business in the near term, and at what point could this start affecting your release schedule?
- Regarding the Sims franchise as one of your tentpole brands, what specific strategies are you implementing to drive growth, such as reducing friction to bring in more players or expanding onto other platforms?
- How has your thinking evolved on free-to-play as a monetization strategy in the HD gaming market versus the multimodal monetization success you've experienced with EA Sports, and do you feel free-to-play has been dilutive to industry pricing power or gamers' perception of value?
Q2 2025 Earnings Call
- Issued Period: Q2 2025
- Guided Period: Q2 2025
- Guidance:
- Net Bookings: $1.95 billion to $2.05 billion, up 7% to 13% year-over-year, or 8% to 13% in constant currency .
- GAAP Net Revenue: $1.9 billion to $2 billion .
- Cost of Revenue: $420 million to $450 million .
- GAAP Operating Expenses: $1.19 billion to $1.2 billion, up 10% to 11% year-over-year .
- Earnings Per Share (EPS): $0.76 to $0.93 .
Q1 2025 Earnings Call
- Issued Period: Q1 2025
- Guided Period: Q2 2025 and FY 2025
- Guidance for Q2 2025:
- Net Bookings: $1.95 billion to $2.05 billion, up 7% to 13% year-over-year, or 8% to 13% in constant currency .
- GAAP Net Revenue: $1.9 billion to $2 billion .
- Cost of Revenue: $420 million to $450 million .
- GAAP Operating Expenses: $1.19 billion to $1.2 billion, up 10% to 11% year-over-year .
- Earnings Per Share (EPS): $0.76 to $0.93 .
- Guidance for FY 2025:
- Net Bookings: $7.3 billion to $7.7 billion, down 2% to up 4% year-over-year .
Q4 2024 Earnings Call
- Issued Period: Q4 2024
- Guided Period: Q1 FY 2025 and FY 2025
- Guidance for Q1 FY 2025:
- Net Bookings: $1.15 billion to $1.25 billion, down 27% to down 21% year-over-year .
- Net Revenue: $1.575 billion to $1.675 billion .
- Cost of Revenue: $240 million to $250 million .
- Operating Expenses: $1.065 billion to $1.085 billion .
- Earnings Per Share (EPS): $0.73 to $0.90 .
- Guidance for FY 2025:
- Net Bookings: $7.3 billion to $7.7 billion, down 2% to up 4% year-over-year .
- Net Revenue: $7.1 billion to $7.5 billion .
- GAAP Operating Expenses: $4.35 billion to $4.44 billion, flat to up 2% year-over-year .
- GAAP Operating Margin: 18% to 20.6% .
- Non-GAAP Operating Margin: 29.6% to 31.7% .
- Impact from Change in Deferred Net Revenue: Approximately 200 to 170 basis points .
- GAAP EPS: $3.34 to $4 .
- Operating Cash Flow: $2.05 billion to $2.25 billion .
- Capital Expenditures: Around $200 million .
- Free Cash Flow: About $1.85 billion to $2.05 billion .
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: Q4 2024 and FY 2025
- Guidance for Q4 2024:
- Net Bookings: $1.625 billion to $1.925 billion, down 16% to 1% year-over-year .
- GAAP Net Revenue: $1.625 billion to $1.925 billion .
- Cost of Revenue: $360 million to $410 million .
- Operating Expenses: $1.125 billion to $1.205 billion .
- GAAP EPS: $0.20 to $0.68 .
- Guidance for FY 2025:
- EA SPORTS FC Net Bookings Growth: Mid- to high single digits, excluding FX .
- Net Bookings Growth: Low single-digit growth .
- Underlying Profitability Growth: Mid- to high single-digit growth, excluding share repurchases .
Competitors mentioned in the company's latest 10K filing.
- Established interactive entertainment companies - Compete with EA in developing games and services for consoles, PCs, and mobile devices .
- Emerging start-ups - New entrants in the interactive entertainment industry .
- Large, diversified technology companies - Compete with EA in the converging gaming, technology/internet, and entertainment industries .
- Providers of different sources of entertainment - Such as movies, television, online casual entertainment, and music .
Recent developments and announcements about EA.
Financial Reporting
- Net Bookings: Approximately $2.215 billion.
- GAAP Net Revenue: Approximately $1.883 billion.
- GAAP Diluted Earnings Per Share: Approximately $1.11.
- Net Bookings: Updated to a range of $7.000 billion to $7.150 billion for the fiscal year ending March 31, 2025.
- Global Football Performance: The franchise, which had seen double-digit growth in prior years, is now expected to decline by mid-single digits due to a slowdown in momentum during Q3.
- Dragon Age Engagement: Approximately 1.5 million players engaged during the quarter, which is nearly 50% below expectations.
- Andrew Wilson, CEO: Highlighted underperformance in key titles like Dragon Age and EA SPORTS FC 25 but expressed confidence in the company’s long-term strategy and a return to growth in FY26.
- Stuart Canfield, CFO: Emphasized balancing future growth investments with operational discipline and reiterated confidence in EA’s financial framework.
- EA will release its full Q3 FY25 results on February 4, 2025, followed by a conference call at 2:00 PM PT (5:00 PM ET). The call will be accessible via dial-in or webcast (source link).
- Decline in Live Services Net Bookings: Initially projected to grow by mid-single digits, now expected to decline by the same margin.
- Positive Player Feedback: Recent updates to EA SPORTS FC 25, including a gameplay refresh and Team of the Year update, have shown encouraging early results.
Earnings Report
Electronic Arts (EA) has released preliminary earnings results for its third fiscal quarter of 2025, ending December 31, 2024. Below are the key highlights:
Preliminary Q3 FY25 Results
Revised FY25 Outlook
CEO and CFO Statements
Upcoming Events
Key Trends
For further details, EA’s financial results will be available on their investor relations website after the market closes on February 4, 2025.