EA sees strong first quarter – despite no big releases
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EA sees strong first quarter – despite no big releases

Electronic Arts (EA) hasn’t had the easiest of years. The world-leading video game developer and publisher ran into difficulties with the use of microtransactions in some of its biggest titles – and in recent months, its competitor Epic’s breakout hit Fortnite, which has become the most popular game in the battle royale genre, threatened EA’s revenues. The company reported fourth quarter earnings for the fiscal year last week, demonstrating that it remains robust despite the headwinds.

EA’s share price shot up on the back of earnings: +26%, year to date

EA 14058 

Source: Yahoo Finance

EA Sports (the company’s market-leading portfolio of sports titles) saw significant increases in engagement – particularly in relation to the fast-growing eSports trend. The company said that the segment topped 90 million players, helping to drive revenues through live services. Most importantly, the number of “competitive players” – that’s pro and amateur eSports players – rose by 75% form the year-ago quarter to 18 million.

EA managed to beat the Street on both revenue and earnings. It said non-GAAP revenue hit $1.25 billion (against expectations of $1.23 billion) and earnings per share came in at $1.28 (against predictions of $1.16).

Rather than suffering a hit from Fortnite, EA suggested that the game was driving more people to its genre – a positive for the entire industry. Blake Jorgensen, the company’s chief financial officer, told analysts on a conference call:

“We look forward to innovation in this industry. We welcome games like Fortnite and PUBG. We don’t think one game will capture 100 percent of the market. It just doesn’t happen that way. We think in the case of Fortnite it has grown the whole marketplace.”

He also said that the company was emphasising the number of players on its platforms rather than unit sales metrics, explaining: “Unit sales are less significant due to the power of event-driven live services. Live services is the bedrock of our business. Unit sales have become misleading to the street, and we will stay away from that.”

What’s in the company’s future? Two big titles, Battlefield and Anthem, and increased investment in mobile gaming, which makes up roughly half of the $138 billion worldwide video game market, along with platforms “where people can play whatever they want”, like game streaming.

Disclosure
Dominion holds Electronic Arts in its Global Trends Ecommerce Fund.


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