EA Fiscal Q1 Reaction: Doubling Down on Deep Engagement

EA Q1 illustration
Cheyne Gateley/VIP+

Amid a spring and summer calendar sparse with major game releases and a wider supply chain crisis impacting production of new gaming consoles, the efficacy of live services matters more than ever.

For Electronic Arts, its first-quarter earnings that kicked off the company’s fiscal 2023 Tuesday proved just how vital the live-service model is — especially without one single release during the period.

EA earned $1.77 billion in net revenue for the three months ended June 30, a 14% year-over-year increase that outperformed company expectations and saw the category housing live services account for 81% of sales.

Per its earnings release, net bookings for the trailing 12 months at EA were up 22% year over year, with nearly three quarters of bookings owed to the live-services category, which itself increased 20%.

Citing a player network of nearly 600 million “active accounts” by the end of the quarter, EA’s commitment to live services that generate lasting in-game spend has made the company one of the more stable gaming stocks, compared to its peers Activision Blizzard and Take-Two Interactive.

EA shares were up 1.2% in after-hours trading following the earnings release. The stock started the week slightly down, with shares falling 0.27% at market close on Monday and another 1.5% at the end of Tuesday, roughly on track with similar declines seen in the S&P 500.

With Microsoft’s $69 billion acquisition of Activision Blizzard still pending, EA is set to become the largest independent entity that is purely embedded in the global games market when the deal closes, a fact that CEO Andrew Wilson acknowledged on the investor call. EA’s own reported M&A prospects were brought into question, with Wilson invoking “rumors and speculation” to dodge the question before asserting that EA is “[couldn’t] be in a stronger position as a standalone company.”

Publishing group Take-Two has been on the opposite end of M&A in 2022, closing its purchase of mobile games company Zynga in June. However, disappointing reception to remasters of older “Grand Theft Auto” games and the delay of the franchise’s launch on next-gen consoles contributed to the company’s stock trending downward in early 2022 before lifting up amid a confirmed focus on “Grand Theft Auto VI,” which is expected to release within the next few years.

Since “Grand Theft Auto” and its online mode comprise the company’s cash cow, the mobile revenue generated from Zynga should help take some of the pressure off before the next title arrives. By contrast, EA’s live-service revenue is spread across a multitude of popular titles, though the EA Sports brand remains the breadwinner.

As content spend for games trends downward amid expectations of a looming recession and busy summer travel, EA’s current quarter ending September 30 covers “F1 22,” which released July 1, as well as “Madden NFL 23” and “FIFA 23” in August and September, respectively. Both “F1” and “FIFA” were cited by EA as the principal drivers of bookings in the latest quarter.

Acquired by EA for $1.2 billion in 2021, Codemasters has been the developer and publisher of “F1” games for years, with “F1 22’s” senior creative director having expressed surprise at the increased interest for “F1” after last year’s “F1 2021” release, the first published by EA Sports under the new ownership.

As for “FIFA,” its upcoming new title will be the franchise’s “most expansive ever,” per EA COO Laura Miele on the earnings call, but it will also be its last. After two decades, the company’s partnership with FIFA expires this year, but EA is already rebuilding its status in worldwide soccer, announcing Tuesday that it will become the title sponsor of Spain’s LaLiga beginning with the 2023-24 season.

Beyond sports, “Apex Legends” remains a strong shooter title for the company that has now been available on iOS and Android for two months and generated $5 million worth of in-game spend in its first week. Looking to 2023, single-player games like the “Dead Space” remake in January and “Star Wars Jedi: Survivor” are highlights on EA’s calendar that should bring up full-game sales as well.