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Why Is Electronic Arts (EA) Down 1.1% Since Last Earnings Report?
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It has been about a month since the last earnings report for Electronic Arts (EA - Free Report) . Shares have lost about 1.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Electronic Arts due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Electronic Arts Q1 Earnings and Revenues Decline Y/Y
Electronic Arts reported first-quarter fiscal 2025 earnings of 52 cents per share, which declined 54.4% year over year. Revenues decreased 13.7% year over year to $1.26 billion due to weakness in Live services and full-game revenues.
The Zacks Consensus Estimate for earnings was pegged at 43 cents per share. The consensus mark for revenues was pinned at $1.215 billion.
Net bookings for the fiscal first quarter were $1.262 billion, down 20% year over year in both actual and constant currency.
Full-game net bookings for the quarter were $168 million, driven by slate timing. Live services net bookings were $1.09 billion.
Quarter Details
EA’s full-game revenues (15.1% of total revenues) decreased 43.6% year over year to $250 million. Full-game download revenues declined 37% year over year to $190 million. Revenues from packaged goods plunged 58% year over year to $60 million.
Live services and other revenues (84.9% of total revenues) decreased 4.8% year over year to $1.41 billion.
Based on platforms, revenues from consoles fell 14% year over year to $1.005 billion in the reported quarter. Revenues from PC & Other declined 19% year over year to $365 million. Revenues from the mobile platform decreased 5% year over year to $290 million.
Gaming Metrics
EA SPORTS Madden NFL delivered a strong quarter, as exciting new in-game innovations continued to drive growth across player acquisition and engagement.
EA SPORTS FC franchise results were better than expected but down for the quarter compared with double-digit growth in the prior-year period, which benefited from tailwinds relating to the World Cup. EA SPORTS FC Mobile delivered a record first-quarter net bookings result, benefiting from double-digit growth in spender acquisition as a result of gameplay improvements and real-life events.
The release of EA SPORTS College Football registered record week one engagement for the sports franchises in North America and positive Ultimate Team momentum. It contributed to further expanding the aggregate fandom and strength of the EA SPORTS community, creating additional value-added services in one of the largest sports brands and platforms in the world.
Apex Legends was in line with the company’s expectations, as the teams continued to learn and iterate with each new season and event. During the quarter, the company continued to introduce changes to this multibillion-dollar franchise as it tests and iterates in the lead-up to Seasons 22, 23, and beyond, where it will deliver even more content and bigger advancements, spread across geographies and new modes of play.
Operating Details
EA’s GAAP gross profit declined 10.2% from the year-ago quarter’s levels to $1.39 billion. Gross margin expanded 330 basis points (bps) on a year-over-year basis to 84.2%.
Operating expenses increased 1.9% year over year to $1.03 billion. As a percentage of revenues, operating expenses expanded 950 bps on a year-over-year basis to 62.2%.
Operating income on a GAAP basis decreased 32.8% year over year to $364 million. The operating margin contracted 620 bps year over year to 21.9% in the reported quarter.
Balance Sheet and Cash Flow
As of Jun 30, 2024, EA had $2.76 billion in cash and short-term investments compared with $3.2 billion as of Mar 31, 2024.
For the trailing 12 months, net cash provided by operating activities was $2.076 billion, up 4.5% year over year.
EA repurchased 2.8 million shares for $375 million during the quarter under the new stock repurchase program, bringing the total for the trailing 12 months to 10.2 million shares for $1.350 billion.
The company has declared a quarterly cash dividend of 19 cents per share of its common stock. The dividend is payable on Sep 18, 2024, to stockholders of record as of the close of business on Aug 28, 2024.
Guidance
For second-quarter fiscal 2025, EA expects GAAP revenues between $1.9 billion and $2 billion and earnings per share (EPS) in the range of 76-93 cents. Net bookings are expected between $1.95 billion and $2.05 billion.
For fiscal 2025, EA expects revenues in the range of $7.1-$7.5 billion and earnings in the band of $3.34-$4 per share.
The company expects net bookings for the fiscal year between $7.3 billion and $7.7 billion.
Operating cash flow is estimated in the band of $2.05-$2.25 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Electronic Arts has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Electronic Arts has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Electronic Arts (EA) Down 1.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Electronic Arts (EA - Free Report) . Shares have lost about 1.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Electronic Arts due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Electronic Arts Q1 Earnings and Revenues Decline Y/Y
Electronic Arts reported first-quarter fiscal 2025 earnings of 52 cents per share, which declined 54.4% year over year. Revenues decreased 13.7% year over year to $1.26 billion due to weakness in Live services and full-game revenues.
The Zacks Consensus Estimate for earnings was pegged at 43 cents per share. The consensus mark for revenues was pinned at $1.215 billion.
Net bookings for the fiscal first quarter were $1.262 billion, down 20% year over year in both actual and constant currency.
Full-game net bookings for the quarter were $168 million, driven by slate timing. Live services net bookings were $1.09 billion.
Quarter Details
EA’s full-game revenues (15.1% of total revenues) decreased 43.6% year over year to $250 million. Full-game download revenues declined 37% year over year to $190 million. Revenues from packaged goods plunged 58% year over year to $60 million.
Live services and other revenues (84.9% of total revenues) decreased 4.8% year over year to $1.41 billion.
Based on platforms, revenues from consoles fell 14% year over year to $1.005 billion in the reported quarter. Revenues from PC & Other declined 19% year over year to $365 million. Revenues from the mobile platform decreased 5% year over year to $290 million.
Gaming Metrics
EA SPORTS Madden NFL delivered a strong quarter, as exciting new in-game innovations continued to drive growth across player acquisition and engagement.
EA SPORTS FC franchise results were better than expected but down for the quarter compared with double-digit growth in the prior-year period, which benefited from tailwinds relating to the World Cup. EA SPORTS FC Mobile delivered a record first-quarter net bookings result, benefiting from double-digit growth in spender acquisition as a result of gameplay improvements and real-life events.
The release of EA SPORTS College Football registered record week one engagement for the sports franchises in North America and positive Ultimate Team momentum. It contributed to further expanding the aggregate fandom and strength of the EA SPORTS community, creating additional value-added services in one of the largest sports brands and platforms in the world.
Apex Legends was in line with the company’s expectations, as the teams continued to learn and iterate with each new season and event. During the quarter, the company continued to introduce changes to this multibillion-dollar franchise as it tests and iterates in the lead-up to Seasons 22, 23, and beyond, where it will deliver even more content and bigger advancements, spread across geographies and new modes of play.
Operating Details
EA’s GAAP gross profit declined 10.2% from the year-ago quarter’s levels to $1.39 billion. Gross margin expanded 330 basis points (bps) on a year-over-year basis to 84.2%.
Operating expenses increased 1.9% year over year to $1.03 billion. As a percentage of revenues, operating expenses expanded 950 bps on a year-over-year basis to 62.2%.
Operating income on a GAAP basis decreased 32.8% year over year to $364 million. The operating margin contracted 620 bps year over year to 21.9% in the reported quarter.
Balance Sheet and Cash Flow
As of Jun 30, 2024, EA had $2.76 billion in cash and short-term investments compared with $3.2 billion as of Mar 31, 2024.
For the trailing 12 months, net cash provided by operating activities was $2.076 billion, up 4.5% year over year.
EA repurchased 2.8 million shares for $375 million during the quarter under the new stock
repurchase program, bringing the total for the trailing 12 months to 10.2 million shares for
$1.350 billion.
The company has declared a quarterly cash dividend of 19 cents per share of its common stock. The dividend is payable on Sep 18, 2024, to stockholders of record as of the close of business on Aug 28, 2024.
Guidance
For second-quarter fiscal 2025, EA expects GAAP revenues between $1.9 billion and $2 billion and earnings per share (EPS) in the range of 76-93 cents. Net bookings are expected between $1.95 billion and $2.05 billion.
For fiscal 2025, EA expects revenues in the range of $7.1-$7.5 billion and earnings in the band of $3.34-$4 per share.
The company expects net bookings for the fiscal year between $7.3 billion and $7.7 billion.
Operating cash flow is estimated in the band of $2.05-$2.25 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Electronic Arts has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Electronic Arts has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.