Activision Blizzard, the largest independent game publisher and maker of blockbusters such as Call of Duty, reported its third quarter earnings for the period ending Sept. 30, beating expectations. It also raised expectations based on a brighter outlook.
Activision Blizzard’s results are a bellwether for the traditional video game industry, which has been in a slump as retail games slow down and social, mobile, and online games take off.
In the third quarter, Activision reported non-GAAP revenues of $751 million, up from $690 million a year ago. Earnings per share were 15 cents, compared to 7 cents a share in the prior year. Analysts had predicted non-GAAP revenue of $708 million and non-GAAP earnings per share of 8 cents.
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Bobby Kotick, the chief executive of Activision Blizzard, said, “Our unyielding commitment to excellence, the strength of our employees around the globe, and our focus on creating great entertainment experiences have enabled us to once again deliver better-than-expected financial results. We have, for the third straight year, generated over $1 billion of operating cash flow for the trailing twelve month period ending September 30.”
Revenues in the quarter came from World of Warcraft: Mists of Pandaria and continued sales of its top-selling PC game, Diablo III, as well as Activision Publishing’s new entertainment property, Skylanders Spyro’s Adventure, and sales of titles in the Call of Duty franchise.
Kotick added, “Based on our strong third-quarter performance and increased visibility into the remainder of the year, we are raising our full-year financial outlook and expect to deliver record non-GAAP operating margins and the highest non-GAAP earnings per share in our company’s history. We now expect non-GAAP earnings per share will increase more than 18 percent year over year.”
He said Skylanders Giants is off to a great start and next week the company will release Call of Duty: Black Ops II “will be one of the most successful launches of any form of entertainment in history.”
Activision’s biggest game of the year, Call of Duty: Black Ops II, launches on Nov. 13. Previous games in the series have been the fastest-growing games of all time. Meanwhile, World of Warcraft closed the quarter with more than 10 million subscribers, up from 9 million in the previous quarter.
Atul Bagga, an analyst at Lazard Capital, said in a note issued before the earnings that he was concerned about a drop in activity in World of Warcraft, the largest money-making fantasy online role-playing game, after it launched the Mists of Pandaria expansion. But he also believes the upcoming fourth quarter will benefit from strong sales of Call of Duty: Black Ops II and Skylanders Giants.
Michael Pachter, an analyst at Wedbush Securities, said in a note issued before the earnings that Mists of Pandaria had a strong debut and that Call of Duty is still the king of the first-person shooters, particularly after EA’s weak launch of Medal of Honor Warfighter.
Activision Blizzard’s stock is flat in early after-hours trading at $11.13 a share. Activision Blizzard previously beat Wall Street’s expectations in the second quarter, but analysts were worried about WoW subscriber losses. Activision Blizzard said it sold 2.7 million copies of Mists of Pandaria.