The market expects Electronic Arts (EA) to deliver a year-over-year decline in earnings on lower revenues when it reports results for the quarter ended March 2025. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.The earnings report, which is expected to be released on May 6, 2025, might help the stock move higher if these key numbers are bett ...

Group 1 - Electronic Arts (NASDAQ: EA) has 40 years of experience in the gaming industry and remains relevant in a constantly evolving market [1] - The company is based in California and is known for managing some of the most recognizable and commercially successful gaming franchises [1] Group 2 - The article emphasizes the importance of well-researched commentary and insights into various industries and asset classes, including high-growth technology equities and undervalued blue-chip stocks [1]

Core Viewpoint - Electronic Arts (EA) reported a decline in earnings and revenues for Q3 fiscal 2025, with a notable decrease in live services and full-game revenues, raising concerns about future performance leading up to the next earnings release [2][4][10]. Financial Performance - EA's Q3 fiscal 2025 earnings were $2.83 per share, down 4.4% year over year, while revenues decreased 6.38% to $2.22 billion [2][3]. - Net bookings for the quarter were $2.22 billion, reflecting a 6.4% year-over-year decline, with full-game net bookings at $633 million, down 3% [3][4]. - Full-game revenues accounted for 31.8% of total revenues, decreasing 3.1% to $599 million, while live services revenues, making up 68.2% of total revenues, fell 3.2% to $1.28 billion [4][6]. Revenue Breakdown - Revenues from consoles decreased 1% to $1.23 billion, while revenues from PC & Other and mobile platforms declined 7% to $420 million and $296 million, respectively [5][6]. - Full-game download revenues increased 3% year over year to $431 million, contrasting with a significant 18% drop in packaged goods revenues to $187 million [4][5]. Operating Metrics - EA's GAAP gross profit rose 0.8% to $1.43 billion, with a gross margin expansion of 300 basis points to 75.8% [6][7]. - Operating income increased 3.3% year over year to $377 million, although the operating margin contracted 130 basis points to 20% [7]. Cash Flow and Shareholder Returns - As of December 31, 2024, EA had $3.16 billion in cash and short-term investments, up from $2.56 billion as of September 30, 2024 [8]. - The company repurchased 2.4 million shares for $375 million during the quarter, totaling 10.1 million shares for $1.45 billion over the trailing 12 months [8]. Future Guidance - For Q4 fiscal 2025, EA expects revenues between $1.682 billion and $1.832 billion, with earnings per share projected between 65 cents and $1.00 [10]. - For the full fiscal year 2025, EA anticipates revenues in the range of $7.25 billion to $7.40 billion and earnings per share between $3.9 and $4.25 [10][11]. Market Sentiment - There has been a downward trend in estimates, with the consensus estimate shifting down by 15.96% [12]. - EA currently holds a Zacks Rank 3 (Hold), indicating expectations for an in-line return in the coming months [14].

Core Insights - Winning a football videogame competition offers higher monetary rewards compared to traditional football aspirations, highlighting the growing financial potential in esports [1] Group 1: Prize Money - The upcoming competition features a prize of $250,000 for the winner and $150,000 for the runner-up, indicating significant financial incentives in the esports industry [1]

Group 1: Market Overview - The S&P 500 experienced a 2.7% rise in January, marking a strong start to 2025 despite some stocks underperforming [1] Group 2: Electronic Arts - Electronic Arts' stock fell by 16% in January following the announcement of preliminary quarterly results, with management now expecting a decline in live bookings instead of a previously predicted mid-single-digit percentage increase [2] Group 3: ON Semiconductor - ON Semiconductor's stock dropped by 17% in January after a 25% decline in 2024, with revenue falling 14.2% to $7.1 billion due to challenging market conditions [3] Group 4: Constellation Brands - Constellation Brands' stock price decreased by 18.2% in January, with fiscal third-quarter sales dipping 0.3% to $2.46 billion and adjusted earnings per share remaining virtually unchanged at $3.25 [4] Group 5: PG&E - PG&E shares declined by 22.5% in January amid concerns over potential liabilities related to California wildfires, following a history of bankruptcy protection filed in 2019 due to similar issues [5] Group 6: Edison International - Edison International's stock price fell by 32.4% in January, facing lawsuits related to wildfire damage, creating significant investor risk until litigation is resolved [6]

Core Viewpoint - Electronic Arts reported mixed Q3 fiscal 2025 results, with revenues missing expectations but earnings exceeding estimates, leading to a lowered full-year outlook and an accelerated share repurchase plan [1][3]. Financial Performance - Q3 revenues were $1.9 billion, down 3% year-over-year, attributed to lower contributions from EA Sports FC Ultimate Team and Apex Legends, alongside softer demand for Dragon Age [3]. - Net bookings for the quarter were $2.22 billion, below the consensus estimate of $2.32 billion, while earnings per share were $1.11, slightly above the expected $1.08 [1][3]. - The operating margin expanded by 120 basis points to 20% in Q3, and profit per share increased by 4% from $1.07 in the prior-year quarter [3]. Future Outlook - The company lowered its full-year outlook, expecting bookings between $7.0 billion and $7.15 billion and adjusted earnings per share between $6.25 and $6.65 for fiscal 2025, compared to $7.4 billion in bookings and $6.92 adjusted earnings per share in fiscal 2024 [3]. - The stock surged 8% post-announcement, driven by investor optimism regarding the $1 billion share buyback plan [4]. Stock Performance - EA stock has underperformed the S&P 500 index, with a -4% return since the beginning of 2024, while the S&P 500 is up 27% [2]. - Over the last four years, EA stock returns were -8% in 2021, -7% in 2022, 13% in 2023, and 7% in 2024, indicating a lackluster performance compared to the index [4]. Valuation - The estimated valuation for Electronic Arts is $142 per share, approximately 9% above its current market price, based on a forward expected earnings multiple of 21x for 2025 [6].

Financial Performance - Total net revenue for the fiscal quarter ended December 31, 2024, was $1,883 million, down 3% year-over-year[118] - Live services and other net revenue was $1,284 million, also down 3% year-over-year[118] - Net income was $293 million with diluted earnings per share of $1.11[118] - Net bookings for the three months ended December 31, 2024, were $2,215 million, a decrease of $151 million, or 6% year-over-year[124] - Digital full game downloads generated net revenue of $1,343 million, up from $1,262 million in 2023[116] - The gross margin increased to 75.8%, up 3 percentage points year-over-year[118] - Net revenue for the three months ended December 31, 2024 was $1,883 million, a decrease of $62 million compared to the same period in 2023[149] - Full game net revenue for the nine months ended December 31, 2024 was $1,565 million, down $117 million or 7% year-over-year[158] - Live services and other net revenue for the nine months ended December 31, 2024 was $4,003 million, a decrease of $98 million or 2% compared to the same period in 2023[159] Revenue Breakdown - Live services net revenue attributable to extra content was $4,379 million for the trailing twelve months ended December 31, 2024[114] - Full game downloads generated $446 million in revenue, an increase of 3% from $431 million in the prior year[150] - Packaged goods revenue decreased by 18%, from $187 million in 2023 to $153 million in 2024[150] - Live services and other revenue decreased by 3%, from $1,327 million in 2023 to $1,284 million in 2024[150] - The decrease in net revenue was primarily driven by a $232 million decline in extra content sales for Apex Legends and other titles[149] - A $170 million increase in revenue was noted from American football franchises, particularly from EA SPORTS College Football 25 and Dragon Age: The Veilguard[149] Expenses and Costs - Cost of revenue for the three months ended December 31, 2024 was $456 million, a decrease of $73 million compared to $529 million in the same period in 2023[161] - Research and development expenses for the three months ended December 31, 2024 were $606 million, an increase of $22 million or 4% year-over-year[168] - Marketing and sales expenses for the three months ended December 31, 2024 decreased by $25 million or 9% compared to the same period in 2023[170] - General and administrative expenses for the three months ended December 31, 2024 were $176 million, an increase of $6 million or 4% year-over-year[173] Cash Flow and Liquidity - As of December 31, 2024, cash and cash equivalents decreased by $124 million to $2,776 million, while total liquidity decreased to $3,155 million, representing 23% of total assets[178] - Net cash provided by operating activities decreased by $205 million to $1,530 million for the nine months ended December 31, 2024, primarily due to lower cash collections and higher tax payments[179] - Net cash used in investing activities increased by $19 million to $177 million, driven by an $84 million decrease in proceeds from short-term investments and a $19 million increase in capital expenditures[180] - Net cash used in financing activities increased by $188 million to $1,452 million, primarily due to a $158 million increase in common stock repurchases and excise tax payments[181] - During the nine months ended December 31, 2024, the company returned $1,276 million to stockholders, repurchasing 7.9 million shares for approximately $1,125 million[187] Strategic Initiatives - The restructuring plan approved in February 2024 aims to align the portfolio and resources with strategic priorities, expected to be completed by March 31, 2025[122] - The transition to the EA SPORTS FC brand is expected to expand global football experiences and engage more fans[119] Market Risks - The company is exposed to significant market risks, including foreign currency exchange rates, interest rates, and market prices, which have experienced notable volatility[194] - As of December 31, 2024, a hypothetical adverse foreign currency exchange rate movement of 10% could result in potential declines of $194 million in cash flow hedging and $155 million in balance sheet hedging[199] - A hypothetical 150 basis point increase in interest rates would lead to a $4 million, or 1%, decrease in the fair market value of the company's short-term investments as of December 31, 2024[203] - The company employs foreign currency forward contracts to hedge against foreign currency risks, with maturities generally of 18 months or less for sales and 3 months or less for balance sheet hedging[196][197] - The strengthening of the U.S. dollar negatively impacts reported international net revenue while positively affecting international operating expenses due to lower translation rates[195] Internal Controls and Compliance - There have been no changes in internal controls over financial reporting that materially affect the company's reporting as of the end of the fiscal quarter[206] - The company acknowledges inherent limitations in its disclosure controls and procedures, including the possibility of human error and resource constraints[207]

Core Insights - Electronic Arts (EA) reported a decline in earnings and revenues for the third quarter of fiscal 2025, with earnings per share at $2.83, down 4.4% year over year, and revenues at $2.22 billion, down 6.38% year over year due to decreased Live services and full-game revenues [1][2]. Financial Performance - The Zacks Consensus Estimate for earnings was $2.99 per share, while the revenue consensus was $2.29 billion [2]. - Net bookings for the fiscal third quarter were $2.22 billion, reflecting a 6.4% year-over-year decline, with minimal impact from foreign exchange [2]. - Full-game net bookings were $633 million, down 3% year over year, while Live services net bookings were $1.58 billion, down 8% year over year [3]. - Full-game revenues accounted for 31.8% of total revenues, decreasing 3.1% year over year to $599 million, with full-game download revenues increasing 3% to $431 million, and revenues from packaged goods plunging 18% to $187 million [4]. - Live services and other revenues, making up 68.2% of total revenues, decreased 3.2% year over year to $1.28 billion [4]. - Revenues from consoles decreased 1% year over year to $1.23 billion, while revenues from PC & Other and mobile platforms declined 7% year over year to $420 million and $296 million, respectively [5]. Operating Metrics - EA's GAAP gross profit increased 0.8% year over year to $1.43 billion, with a gross margin expansion of 300 basis points to 75.8% [6]. - Operating expenses decreased 0.1% year over year to $1.05 billion, but as a percentage of revenues, they expanded 170 basis points to 55.8% [6]. - Operating income on a GAAP basis increased 3.3% year over year to $377 million, although the operating margin contracted 130 basis points to 20% [7]. Balance Sheet and Cash Flow - As of December 31, 2024, EA had $3.16 billion in cash and short-term investments, up from $2.56 billion as of September 30, 2024 [8]. - Net cash provided by operating activities was $1.176 billion for the quarter and $2.110 billion for the trailing 12 months [8]. - EA repurchased 2.4 million shares for $375 million during the quarter, totaling 10.1 million shares for $1.45 billion over the trailing 12 months [8]. Dividend and Guidance - The company declared a quarterly cash dividend of 19 cents per share, payable on March 19, 2025, to stockholders of record as of February 26, 2025 [9]. - For the fourth quarter of fiscal 2025, EA expects GAAP revenues between $1.682 billion and $1.832 billion, with earnings per share in the range of 65 cents to $1.00 [11]. - For fiscal 2025, EA anticipates revenues between $7.25 billion and $7.40 billion, with earnings per share between $3.9 and $4.25 [11].

分组1 - Electronic Arts (EA) reported quarterly earnings of $2.83 per share, missing the Zacks Consensus Estimate of $2.99 per share, and down from $2.96 per share a year ago, representing an earnings surprise of -5.35% [1] - The company posted revenues of $2.22 billion for the quarter ended December 2024, missing the Zacks Consensus Estimate by 1.68%, and down from $2.37 billion year-over-year [2] - Electronic Arts shares have lost about 16% since the beginning of the year, while the S&P 500 has gained 1.9% [3] 分组2 - The current consensus EPS estimate for the coming quarter is $1.31 on revenues of $1.61 billion, and for the current fiscal year, it is $6.99 on revenues of $7.24 billion [7] - The Zacks Industry Rank indicates that the Gaming industry is currently in the top 19% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8]

Financial Reporting and Filing - Electronic Arts Inc. provided preliminary results for its third fiscal quarter ended December 31, 2024 [5] - The company updated its business outlook for the fiscal year ending March 31, 2025 [5] - A press release detailing the preliminary results and outlook was issued on January 22, 2025 [5] - The press release is attached as Exhibit 99.1 in the Form 8-K filing [7] - The information in Item 2.02 is not deemed "filed" under the Exchange Act unless specified otherwise [6] - The filing includes an Interactive Data File (Inline XBRL) as Exhibit 104 [7] - Stuart Canfield, Chief Financial Officer, signed the report on behalf of Electronic Arts Inc. [11] - The report was filed pursuant to the Securities Exchange Act of 1934 [9] Company Information - Electronic Arts Inc. is incorporated in Delaware with the IRS Employer Identification No. 94-2838567 [2] - The company's common stock is traded on the NASDAQ Global Select Market under the symbol "EA" [3]