Electronic Arts (EA, $96.72) revenue climbs on 'digital' strength

Video game maker Electronic Arts’ fiscal second quarter 2020 earnings declined from the year-ago quarter, and also missed some analysts’ expectations.  Revenue, however, increased year-over-year.

The company’s revenues climbed +4.8% from the prior-year quarter to $1.35 billion. While Product revenues (42.1% of total revenues) fell - 8.8%, Service and other revenues (57.9% of total revenues) surged +17.6%.

Adjusted earnings came in at 78 cents per share (which excluded tax benefits worth $2.11). The company had reported earnings of 83 cents per share in the year-ago quarter. The Zacks Consensus Estimate for earnings was 85 cents.

EA’s digital revenues (68.4% of total revenues) increased +18.2% year over year. Packaged goods and other segment revenues (31.6% of total revenues) declined -15.8%.

Digital net bookings were +24% higher from the year-ago quarter.

Gross margin in the quarter expanded +250 basis points on a year-over-year basis to 70%.

For the third quarter of fiscal 2020, EA expects GAAP revenues of $1.510 billion, and net bookings of $1.940 billion.

Looking farther ahead, the company projects fiscal full-year 2020 GAAP revenues to be $5.410 billion and net bookings to be $5.125 billion. It expects digital net revenues of $4.230 billion. Packaged goods & other net revenues are anticipated to be $1.180 billion.

Management continues to expect The Sims 4 and Apex Legends to deliver net bookings of $300-$400 million each.

EA has forecasted earnings to be $9.57 per share for the year, including $5.74 of income tax benefits.

For the rest of 2019, the company has two major titles slated for release - Need for Speed Heat, which is scheduled to release on Nov. 8, and Star Wars Jedi: Fallen Order, which is expected to come out on Nov. 15.

Contributor

Sergey Savastiouk|Expert

Sergey Savastiouk, Ph.D. has a degree in Applied Mathematics from Moscow University and has extensive experience as an entrepreneur, investor, manager, and mathematician. His professional expertise is in applied mathematics, mathematical modeling, system and pattern analysis, and software and hardware system integration. He has served as the CEO of several hi-tech start-up companies and nonprofit organizations, which has given him proven capabilities in business strategy for high-tech start-up companies, market assessment, company formation, team building, product development, marketing, and sales. He has published numerous articles in journals and magazines on related fields. As a retail investor, he spent 15 years developing his proprietary trading and quantitative algorithms (now Tickeron’s A.I.), which brought him significant returns in trading the stock market. His current work and goal in founding Tickeron is to bring professional, sophisticated stock market analysis capabilities to retail investors via an easy-to-use interface.