ATVI Activision Blizzard Inc

By Sarah E. Needleman 

Electronic Arts Inc.'s latest Star Wars game helped the company deliver robust holiday-quarter results, though the publisher will have a thin release slate this year as next-generation gaming consoles are primed to hit the market.

EA said it earned $1.18 a share in its fiscal third quarter, up from 86 cents a share a year earlier. Revenue rose 24% to $1.59 billion.

On an adjusted basis EA's profit rose to $2.52 a share while net bookings climbed 23% to about $2 billion, with both figures coming in slightly ahead of analysts' expectations.

EA's "Star Wars Jedi: Fallen Order" made its debut in November and sold around eight million units during the quarter. The company previously forecast selling between six million and eight million units of the single-player game by March 31. It now projects sales of around 10 million units by that date.

Analysts are also expecting strong quarterly results for Take-Two Interactive Software Inc. and Activision Blizzard Inc. based on viewership statistics from Amazon.com Inc.'s Twitch streaming service, critics' reviews and company statements about holiday-season releases. Both companies are scheduled to release their quarterly reports on Feb. 6. Take-Two faces a somewhat tougher comparison, though, because its 2018 holiday release, "Red Dead Redemption II," was a smash hit that generated opening-weekend sales of about $725 million.

Wavering interest in Epic Games Inc.'s megahit "Fortnite" also likely helped the big publishers' performance during the holiday season, analysts have said. In the fourth quarter, digital revenue for "Fortnite" across platforms, including consoles, was down 70% from the year-earlier period, according to estimates from Nielsen Holdings PLC's SuperData.

Wall Street's earnings forecasts for later this year, though, are more muted. And EA's shares fell in after-hours trading, as the company's guidance for net bookings in the current quarter fell short of analysts' forecasts.

EA doesn't have plans to release any games in this quarter or next. The company has also said it would wait to release the next installment of its "Battlefield" franchise until the 2021 holiday season, when more people are likely to own new gaming consoles coming to the market later this year from Microsoft Corp. and Sony Corp. Usually the war series, one of the company's best-selling properties, comes out every two years, so it had been expected to be on tap for the 2020 holiday season instead.

"The publishers don't want to rush out their biggest hits before people have had time to buy the new consoles," said Jefferies analyst Alex Giaimo.

For now, EA has indicated that it plans to grow its business this year by focusing on live services, which consists of revenue from in-game purchases and subscriptions. The strategy reflects a broader industry trend where game companies work to generate revenue from hits long after their release.

Other game publishers also are likely to keep their release slates light until after the new consoles hit store shelves. Analysts expect companies to lean on annualized franchises like "Call of Duty" and Take-Two's "NBA 2K" to drive results.

EA, Activision and Take-Two historically have dominated game-industry sales with their blockbuster console games. But these days such titles account for a shrinking slice of the overall market as more people opt to play games on smartphones and tablets -- platforms where the three publishers have a smaller presence.

Global revenue from console games rose 7.3% last year to reach $45.3 billion, according to gaming and esports research firm Newzoo BV. Yet mobile games took in the largest chunk of the industry's $148.8 billion world-wide revenue, accounting for $68.2 billion, or 46% of the total, Newzoo says. Console games accounted for just under a third of that total.

Activision also hasn't announced any major games for 2020 aside from "Call of Duty" and introducing new content within its "World of Warcraft" game, though it has said a sequel to "Overwatch" and a new "Diablo" action game are under development. Meanwhile, Take-Two hasn't said whether it will release a marquee title for the 2020 holiday season.

Mr. Giaimo of Jefferies cautioned that it is possible the companies will release a surprise hit akin to last year's "Apex Legends," a popular, free combat game from EA that generates revenue from in-game purchases. The company didn't promote the free combat game ahead of its release, and its swift success caught investors off guard.

Over the past 12 months through Thursday, shares in all three companies are up between 24% and 31%, compared with a 23% rise in the S&P 500 and a 29% gain in the tech-heavy Nasdaq Composite Index.

Alex Perez, 44 years old, is waiting until publishers start releasing games made for the new machines before adding any more titles to his library. He doesn't care that Microsoft and Sony have said their new consoles will be capable of playing older games.

"I want the full immersive experience," said Mr. Perez, an elementary school principal in Long Beach, Calif., who intends to buy the PlayStation 5 on launch day. "I'll hang tight."

Write to Sarah E. Needleman at sarah.needleman@wsj.com

(END) Dow Jones Newswires

January 30, 2020 17:48 ET (22:48 GMT)

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