Activision Blizzard Posts Big Rise in Revenue and Profit, Upgrades Outlook

By Sarah E. Needleman

Activision Blizzard Inc. reported significant increases in quarterly revenue and profit and raised its full-year outlook, as videogame players snapped up digital content designed to keep them hooked between bigger new releases.

Revenue in the third quarter rose 58% to $1.57 billion from a year ago, exceeding the company's own forecast last quarter of $1.49 billion.

Activision Blizzard, the biggest videogame company in the U.S. by market value, released few major franchise games during the quarter. Still, customers more than doubled their spending on digitally delivered content, including full games and add-ons for existing games, it said.

A new "World of Warcraft" expansion sold 3.3 million copies on its first day, prompting more players who had abandoned the aging franchise to come back than expected, the company said. It credited shortening the period in between expansion releases by about five months in part for the surge in sales. The company stopped disclosing subscriber figures last year.

"Overwatch," a team-based shooter game released in May, now has more than 20 million registered players, putting it among the company's most popular series such as "Call of Duty," analysts say.

The company hit some bumps during the quarter. King Digital Entertainment, the "Candy Crush Saga" developer it acquired in February, contributed 29% of Activision Blizzard's total revenue, down 5% from the second quarter. Monthly active users for King fell 4% to 394 million.

Activision Blizzard's net income climbed 56% to $199 million, or 26 cents a share.

The videogame company boosted its sales outlook for the current holiday quarter, which will include a new "Call of Duty" installment. The company expects revenue of $1.86 billion, up from last quarter's projection of $1.49 billion. It lowered its per-share earnings forecast to 5 cents from 6 cents, blaming a shift in timing on costs related to debt.

The company also raised its full-year outlook, optimistic about its slate of games for consoles, computers and mobile devices, Chief Financial Officer Dennis Durkin said in an interview. "It's based on the strong fundamentals of what we have inside the portfolio," he added.

Activision Blizzard now expects to close out 2016 with $6.45 billion in revenue, up from $6.4 billion. It expects profit of 98 cents a share, up from 87 cents.

Still, investors sent shares down as much as 4% in after-hours trading, having expected a more robust outlook, analysts said. The stock recently was down 0.9% to $43.

Under U.S. generally accepted accounting principles, companies must defer some revenue from online-enabled games for as long as they expect to provide services for those titles, generally six to nine months. Activision Blizzard said it deferred a net $62 million in revenue in the third quarter, up from $50 million a year ago.

Like its peers, Activision Blizzard has scaled back reporting so-called non-GAAP results. Many analysts and investors, though, continue to evaluate game companies based on measures adjusted to account for deferred revenue. Activision Blizzard's results show adjusted per-share quarterly profit of 52 cents, exceeding Wall Street's forecast of 42 cents, according to Thomson Reuters.

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

(END) Dow Jones Newswires

November 03, 2016 17:59 ET (21:59 GMT)

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