There was a lot of uncertainty going into Activision Blizzard 's (NASDAQ: ATVI) second-quarter financial report. Although the company delivered a record quarter three months ago , Activision's conservative guidance and the uncertainty resulting from the growing popularity of the battle royale genre -- led by Epic Games' Fortnite -- had investors leaving the game. It turns out that those fears were unfounded, as the company delivered another quarter that topped expectations.
For the just completed second quarter, Activision reported net revenue of $1.64 billion, an increase of 1% year over year and beating the company's forecast of $1.35 billion. It also easily exceeded analysts' consensus estimates of $1.4 billion. The company's profitability was even better, with adjusted earnings per share of $0.62, soaring past analysts' expectations for $0.36.
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The raw numbers
Earnings per share
Data source: Activision Blizzard's Second-Quarter Financial Report .
In the first half, Activision produced record revenue, net bookings (which is net revenue less deferrals), and earnings per share. The company said it also generated record mobile revenue and mobile net bookings during the second quarter.
One of the most impressive aspects of the results was the spending discipline that resulted in lower costs, both on an absolute basis, and as a percentage of revenue. Expenses declined by 6.6% year over year, providing a considerable boost to profitability.
The company did report some minor impact to player engagement from the growing popularity of the battle royale genre, but didn't see any significant financial impact thus far.
Players gonna play
Players continue to spend, as Activision Blizzard delivered $1 billion in in-game net bookings during the quarter and produced a record $2 billion so far this year. Each operating segment contributed to these milestones. King boasted two of the top 10 highest-grossing titles in the U.S. from mobile app stores for the 19th consecutive quarter, as Candy Crus h regained the top spot. The Activision unit also had record second-quarter in-game net bookings, with contributions from Call of Duty: WWII , Call of Duty: Black Ops 3 , and Destiny 2.
Activision continue to report impressive audience reach across its portfolio of games during the quarter, with 352 million monthly active users (MAUs). The King division boasted 270 million MAUs, with players of the Candy Crush Saga up year over year, and daily time spend coming in at 36 minutes. The Blizzard unit reported 37 million MAUs, with its flagship World of Warcraft due for an upcoming expansion -- Battle for Azeroth -- which the company said is seeing strong pre-orders. The company is also planning additional esports events around Overwatch , as well as a continuous stream of content in the back half of the year. Finally, the Activision segment had 45 million MAUs. Call of Duty: World War II also impressed, having more MAUs than its predecessor.
Early success in esports
The Overwatch League , the company's entry into the esports arena, recently completed its inaugural season, and Activision penned an exclusive multi-year deal with Disney and ESPN to televise both the Overwatch League playoffs and Grand Finals on a variety of the company's television and cable networks. The Grand Finals played to a sellout crowd, with millions of global viewers joining in via television networks and streaming platforms.
The company also revealed the addition of two new Overwatch franchises "at record prices," adding Atlanta, Georgia and Guangzhou, China to the league. This is a testament to the smashing success of the debut season, and Activision said it plans to announce other franchise additions in the coming months.
The Call of Duty World League also showed increasing popularity, with year-to-date minutes watched up 50% year over year ahead of the championships that will take place in Columbus, Ohio later this month.
"This was another strong quarter for Activision Blizzard. Our portfolio of global franchises enabled us to deliver record first-half revenues and earnings per share," said Bobby Kotick, chief executive officer of Activision Blizzard.
For the upcoming third quarter, Activision expects net revenue of $1.49 billion, a decline of 7.9% year over year. The company is anticipating earnings per share of $0.16, down 36% compared to the prior-year quarter. For the full year, Activision is forecasting revenue of $7.355 billion and adjusted earnings per share of $2.46.
For their part, analysts' consensus estimates for the quarter are currently calling for revenue of $1.87 billion and earnings per share of $0.66. For the full year, analysts are expecting revenue of $7.52 billion and adjusted earnings per share of $2.60. The disparity between what the market was expecting and Activision's forecast is probably part of the reason the stock declined following the report.
Last quarter, investors were concerned about the guidance that was lower than analysts were expecting. Looking back, those fears were unfounded, as Activision delivered results that even outpaced the $1.49 billion and adjusted earnings of $0.47 per share that analysts were looking for at the time.
With esports in its infancy and a number of major launches scheduled for later this year -- on top of a record first half -- Activision and its shareholders have a lot to look forward to.
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Danny Vena owns shares of Activision Blizzard and Walt Disney and has the following options: long January 2019 $85 calls on Walt Disney. The Motley Fool owns shares of and recommends Activision Blizzard and Walt Disney. The Motley Fool has a disclosure policy .