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What's in the Cards for Electronic Arts' (EA) Q2 Earnings?

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Electronic ArtsEA is scheduled to report second-quarter fiscal 2019 results on Oct 30.

The company beat the Zack Consensus Estimate in all the trailing four quarters, delivering an average positive surprise of 92.27%.

In the last reported quarter, EA's earnings of 95 cents per share plunged 54% from the year-ago quarter.

Revenues declined 22% year over year to $1.14 billion but were better than the guided figure of $1.08 billion. Net bookings declined 3.4% year over year to $749 million but came in better than guided figure. Digital net bookings were $693 million.

For the second quarter, the company expects GAAP revenues of $1.27 billion. Net bookings are expected to be $1.16 billion.

Electronic Arts Inc. Price and EPS Surprise

Electronic Arts Inc. Price and EPS Surprise | Electronic Arts Inc. Quote

Let's see how things are shaping up prior to this announcement.

Digital Business, Mobile & Live Services: Key Catalyst

EA continues to derive most of its revenues from digital business as consumers are increasingly shifting toward digital versions of video games from traditional devices. Notably, digital revenues (84.2% of revenues) increased 8.9% to $957 million in fiscal first-quarter 2019.

Moreover, after the success of Star Wars: Galaxy of Heroes and Madden NFL Mobile , we believe EA's releases of The Sims Mobile in March this year and FIFA Mobile in China in first-quarter 2019 are encouraging. Notably, FIFA Mobile reached the #1 spot on the top downloads chart for iOS in China.

Further, EA launched NBA Live Mobile on Sep 5, which is expected to add to the company's growing mobile revenues (20.3% total revenues). Revenues from mobile grew 37% year over year to $231 million in the last reported quarter.

Also, with the releases of NBA LIVE 19 and NHL 19 in fiscal second-quarter 2019, we expect EA's live service net booking to benefit from the same.

Notably, in the last reported quarter, FIFA Online 4 and The Sims 4 contributed majorly to Live services net bookings, which were up 7% year over year to $450 million. Revenues from Live services (53.6%) increased 22% to $610 million.

Investors should note that EA has won many awards at the Electronic Entertainment Expo (E3) 2018 depicting its content strength.

Competition Intense

However, lack of blockbuster titles for the fiscal second-quarter 2019 is expected to hurt EA as it is expected lose revenue share to competitors like Activision ATVI and Take Two TTWO among others.

Moreover, release of Activision's Call of Duty: Black Ops 4 before EA's highly anticipated game, Battlefield V on Nov 20, might give it an edge in attracting users and thereby driving top-line growth for 2019.

Delay of Battlefield V is expected to impact EA's fiscal 2019 results, which is evident from the company's reduced net bookings expectation from $5.55 billion to $5.2 billion.

Additionally, the release of Take Two Interactive's Red Dead Redemption 2 on Oct 26 coupled with heavy investments in both content and technology from other gaming companies is expected to intensify competition further.

Further Activision's increasing popularity of its Overwatch League , which is expected to drive user base and engagement levels remains a concern for EA. Especially as all the gaming companies are heavily investing in the growing e-sports market.

Deals with the likes of Amazon, Disney and Twitter TWTR is expected to help Activision reach out to new users quickly, which is likely to hurt EA in the near-term.

EA currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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Electronic Arts Inc. (EA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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