Electronic Arts (EA) showed strong Q3 earnings and conservative Q4 forecasts published on January 30, 2024. In Q3, ending December 31, 2023, net bookings slightly increased to $2.366 billion, a 1% year-over-year increase (2% at constant exchange rates), driven by growing live service demands which hit a record $1.712 billion, up 3% year-over-year (5% at constant exchange rates), now accounting for 73% of EA’s business on a trailing twelve-month basis. EA Sports FC net bookings increased by 7%, and EA Sports Madden NFL increased by 5%. Q3 net revenue was $1.945 billion (up 3% year-over-year), and the company saw an increase in operating cash flow to $1.264 billion (13% year-over-year). Furthermore, EA repurchased 2.5 million shares for $325 million during Q3 and declared a quarterly cash dividend of $0.19 per share (Electronic Arts, 2024b).

EA anticipates that net revenue in Q4 FY24 will range between $1.625 billion and $1.925 billion, with net income between $54 million and $183 million, while diluted earnings per share will range between $0.20 and $0.68, based on an estimated share count of 271 million. Net bookings are expected between $1.625 and $1.925 billion. For the total of FY24, EA forecasts net revenue between $7.408 billion and $7.708 billion, with net income between $1.145 billion and $1.274 billion, while diluted earnings per share will range between $4.21 and $4.68, based on an estimated share count of 272 million. Operating cash flow is expected to be between $1.950 billion and $2.100 billion (Electronic Arts, 2024b).

Overall, EA’s third-quarter earnings report indicates continued growth, especially in its live services and flagship sports franchises, alongside strong cash flow and substantial rewards for its shareholders. In addition, EA forecasts good liquidity, as well as signaling confidence and stability. However, there are also reasons for cautious worry, as we will see in the following section by looking at 5 articles from business media.

Wall Street Journal: neutral to cautiously negative
Wall Street Journal columnist Dan Gallagher’s sentiment swings between neutral and cautiously negative. Although Gallagher mentions that EA CFO Stuart Canfield stated that FY25 will be a “lighter release-slate year” he notes that EA has underperformed the S&P 500 and Nasdaq Composite. Citing FactSet’s consensus forecasts, Gallagher mentions an expected low- to mid-single-digit growth in net bookings in calendar year 2024 for EA. Nevertheless, the author points out the complexity of the industry’s overall situation, which is also supported by the comparative analysis with other competitors such as Take-Two Interactive, Microsoft, Nintendo or Epic Games. On a positive note, Gallagher quotes Canfield as saying that the growth in net bookings is likely to accelerate over the next few years, partly due to new releases of the popular EA franchises Battlefield and Sims (Gallagher, 2024).

Seeking Alpha: mixed, with negative and positive elements
Seeking Alpha News Editor Jason Aycock has mixed sentiments with both negative and positive elements. He reported a 3% drop in EA’s stock in after-hour trading and net bookings not meeting Wall Street’s $2.4 billion expectation. Yet, he mentioned that EA beat profit expectations and demonstrated strength within its flagship sports franchises. He also acknowledged the company’s record live services bookings, and the uplift in full-year earnings per share expectations. Aside from this, he referred to further investments and the strengthening of the EA portfolio mentioned by CFO Canfield (Aycock, 2024).

Zacks Equity Research: neutral to positive
Zacks Equity Research adopts a neutral tone, balancing EA’s earnings call positives and negatives. On the positive side, the article highlighted EA’s earnings per share and revenue increase, as well as strong sports franchise performances. However, it mentioned that EA slightly missed Zack Consensus estimates for net bookings, that revenue from full game and PC declined, and that mobile platforms weakened slightly. The underperformance of Apex Legends was mentioned in contrast to the otherwise solid financials, which is why Zack rated EA as a #2 Buy (Zacks Equity Research, 2024a).

GuruFocus Research: predominantly positive
GuruFocus Research predominantly viewed EA’s performance positively, emphasizing solid results with strong operating performance. The article highlighted EA Sports FC’s record net revenue from live services and significant year-over-year growth. Although the article noted modest growth in net bookings, reliance on live services, and competitive market challenges, it remained mostly bullish on EA stock and mentioned the company’s focus on key franchises and innovation (GuruFocus Research, 2024).

MarketWatch: mixed sentiment
MarketWatch’s Bill Peters mentioned the expected surge in demand for EA’s sports franchises during the holiday season, but pointed to potential growth challenges following the end of the FIFA partnership. In particular, he suggested that the World Cup may have temporarily boosted the success of EA Sports FC, leading him to expect more difficult growth. For context, the article referred to the generally difficult time the video games industry is currently going through (Peters, 2024).

Overall, it can be noted that the articles analyzed mostly take a neutral tone regarding EA’s Q3 earnings report, while expressing a mixed sentiment ranging from cautiously negative to positive. In conclusion, two quotes from financial analysts.

Mike Hickey of Benchmark Co.
Wall Street analyst Mike Hickey of Benchmark Co. highlighted potential challenges and predominantly negative sentiment for EA’s Apex Legends shooter game. Hickey noted that “EA’s second-biggest live service performance declined, due to reduced player engagement and strong market competition.” He specifically mentioned the success of Fortnite, a shooter game from EA’s competitor Epic Games, which is “potentially exacerbating Apex Legends’ growth challenges” (Peters, 2024). Despite this statement, he reiterated his buy position (TipRanks, 2024).

Dan Victor of Seeking Alpha
Dan Victor of Seeking Alpha, CFA, rated EA as a buy, emphasizing that “Earnings momentum story is good enough” and that ”EA simply has too many levers to pull, between pricing and the ability to launch new titles.” He went on to explain that he views “EA as a high-quality stock investors should stay long in.” (Victor, 2024)