Earnings grabbed the spotlight this week. We had a plethora of reports coming in including Electronic Arts (EA Quick QuoteEA - Free Report) , Activision Blizzard , Take two Interactive, (TTWO Quick QuoteTTWO - Free Report) , Glu Mobile and Zynga . In separate developments, a judge dismissed a tattoo lawsuit against Take Two while GameStop (GME Quick QuoteGME - Free Report) bought all of AT&T’s authorized dealers.

1. Earnings:

Electronic Arts: EA reported first-quarter fiscal 2017 results wherein adjusted loss per share of 8 cents was narrower than the Zacks Consensus Estimate of a loss of 14 cents. Non-GAAP revenues of $682 million also easily topped the consensus mark of $651.3 million.

Continued increases in digital revenues and strength in titles like FIFA Ultimate Team, and mobile games like Star Wars: Galaxy of Heroes and NBA Live were the driving factors. However, the guidance for the second quarter was below market expectations. The company also reiterated guidance for fiscal 2017.

Activision Blizzard: Activision also posted impressive second-quarter 2016 results driven by the overwhelming success of Overwatch (over 15 million users since release on May 24, 2016), the buyout of King Digital Entertainment, increasing digital revenues and continued strength in the Call of Duty title.

The company also raised its guidance for the year. Adjusted earnings (including stock based compensation) of 40 cents per share and non GAAP revenues of $1.609 billion easily beat the Zacks Consensus Estimate of 37 cents and $1.496 billion, respectively. On a year-over-year basis, revenues improved 54.1%.

Sony Corp : Sony reported first quarter of fiscal 2016 results wherein both earnings per share of ¥16.44 (16 cents) and sales and operating revenues of ¥1,613.2 billion ($15.7 billion), were down 76.6% and 10.8%, respectively from the year-ago tally. Sony’s unimpressive top-line performance resulted from weak performance of six of its nine segments. Forex fluctuations as well as the aftermath of Kumamoto earthquakes also marred revenues. 

Glu Mobile Inc: Glu Mobile reported second-quarter 2016 adjusted loss per share of 6 cents that compared favorably with the Zacks Consensus Estimate of a loss of 8 cents but widened considerably from the prior year quarter loss of 2 cents per share.

Revenues of $48.4 million surpassed the Estimate of $47.1 million but declined 14% year over year. Also, the company downgraded its earnings outlook for the year. The company projected loss per share of 15 cents to 17 cents compared with loss of 11 cents to 16 cents projected earlier.

Zynga Inc: Zynga reported second quarter 2016 loss per share of 3 cents that was in line with the Zacks Consensus Estimate but compared favourably with loss per share of 4 cents reported in the year-ago period. Revenues of $174.7 million easily topped the consensus mark of $169.5 million but fell 12.6% year over year. Zynga also saw an 11% year over year decline in mobile daily active users (DAU) to 15 million DAUs.

Changyou.com : Changyou reported adjusted first-quarter 2016 earnings of 61 cents per share that topped the Zacks Consensus Estimate of 55 cents but were lower than 91 cents reported year over year. The company reported revenues of $130 million, down 38% year over year. Online game revenues came in at $103 million, down 45% year-over-year. Online advertising revenues also declined 18% year over year to $8 million.

Take Two Interactive: Take-Two Interactive posted first quarter fiscal 2017 results wherein adjusted loss of 38 cents per share compared favourably with the Zacks Consensus Estimate of loss of 49 cents. Non GAAP revenues of $311.6 million also surpassed the Zacks Consensus Estimate of $259.4 million and grew 13% year over year driven by key offerings like Grand Theft Auto V and Grand Theft Auto Online  as well as Battleborn and NBA 2K16.

The company provided guidance for the second quarter of fiscal 2017. For the second quarter, Take Two expects non-GAAP revenues of $375 million to $425 million. Non-GAAP earnings are expected to be in a range of 35 to 45 cents per share.

2. Also, Take Two Interactive was also relieved of a lawsuit, which accused it of copying tattoos belonging to baseball stars in its NBA 2K16 game. As per Investopedia report, the tattoo company wanted compensation of $150,000 per infringement that could have resulted into billions of dollars in damages. However, the Manhattan court ruled that since the tattoo company Solid Oak “didn’t file a lawsuit when the tattoos showed up in the earlier game, it couldn’t be awarded statutory damages this time around”.
 

3. In an effort to diversify its operations, video game retailer, GameStop completed the acquisition of AT&T, Inc.’s authorized retailers -- Cellular World Corp., Midwest Cellular and Red Skye Wireless. However, the financial terms of the deal weren’t divulged. With these acquisitions, the company has added 507 more stores to its Technology Brand portfolio. 

Performance

The following table shows the price movement of the major video game companies over both the past five trading days as well as the last six months:

Over the last five trading sessions, Glu Mobile was down 14.45% while Zynga was up 3.85%.

Over the last 6-month period, Electronic Arts surged the most — nearly 33.2%. Increasing digital revenues and continued strength in Star Wars Battlefront sales were the primary catalysts. Going ahead, we believe that a strong pipeline of new releases, which include a brand new Battlefield and Titanfall game along with Mirror’s Edge Catalyst will fuel top-line growth.

However, Glu Mobile was down 17.98% over the same time frame due to underperformance of most of its releases. Also, the company downgraded its outlook for 2016. But strong share repurchase authorization and the much anticipated Taylor Swift game keep hopes alive.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>