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Electronic Arts today reported earnings for the third quarter which ended on December 31. The company launched two triple-A titles, Need for Speed Unbound and NHL 23, and reported high player engagement. However, its net bookings for the quarter were down 9% compared with last year. It also delayed its upcoming Star Wars title, Jedi: Survivor and shut down the mobile versions of Apex Legends and Battlefield.
EA reported GAAP-based net income of $204 million and total net revenue of $1.881 billion for the three-month period ended December 31. Its net income and revenue for the same quarter in the previous year was $66 million and $1.789 billion, respectively.
Total net bookings for the quarter were $2.342 billion, which is 9% lower than its $2.577 billion in fiscal year 2022. This falls short of the estimates last quarter, which expected net bookings of $2.425 billion to $2.525 billion. In response to these earnings, EA’s stock price fell by 10% during after-hours trading (at the time of this writing).
Andrew Wilson, EA’s CEO, said in a statement, “In Q3, EA delivered high-quality experiences, driving record engagement across some of our biggest franchises and growing our player network. While our teams delivered for our players, the current macro environment impacted Q3 results. As we navigate the short-term, we’re focused on building for the long-term and remain confident about our future.”
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Electronic Arts is not the only company that claims to be feeling the pressure of the macro environment. Ubisoft also cited “worsening macroeconomic conditions” as the reason for adjusting its sales targets in 2023.
Wilson noted the high player engagement numbers, saying that EA now has a 650 million-player network. He also cited the recent success of the new Dead Space game and the recent release of FIFA 23. He added that The Sims welcomed over 10 million new players in its third quarter, after the publisher made the game free-to-play.
Net bookings for the trailing twelve months were $7.146 billion, which was down 1% year-over-year. The company noted that this quarter usually sees an ebb in Apex Legends performance. It also hit the anniversary of Battlefield 2042, which it cited as a reason for lower marketing spend.
“The key takeaway is that they pushed Star Wars out of the March quarter and to April 28, 2023, so they decided to ‘kitchen sink’ this year and push as much revenue into next year as they can,” said Michael Pachter, an analyst at Wedbush Securities, in an email to GamesBeat. “Mobile continues to lag, down year-over-year and at a $1.2 billion run rate, when they were at $700 million before Gluu and Golf Clash. Those two should have added $800 million ($1.5 billion run rate), so mobile is tracking down about 20% vs. where it should be.”
By Pachter’s calculation, EA reported adjusted non-GAAP earnings of $2.80 a share, compared with Wedbush’s estimate of $3.15 a share, consensus estimates from analysts of $3.05 a share, and guidance from EA of of $2.90 to $3.10 a share.
End of the fiscal year
EA said it expects the fiscal year, which ends on March 31, 2023, to have a net revenue of $7.252 billion to $7.352 billion, which is below its previous expectation of $7.55 billion to $7.75 billion. The change in deferred net revenue (online-enabled games) is expected to reach approximately $182 million.
It also expects a net income of $828 million to $869 million, with diluted earnings per share of $2.97 to $3.11. Operating cash flow is expected to be approximately $1.400 billion to $1.450 billion.
Net bookings for the fiscal year are expected to be $7.070 billion to $7.170 billion. This would hit far below the net bookings of the previous fiscal year, which were $7.515 billion.
Fourth quarter expectations
EA has adjusted its predictions for Q4 FY23 following the announced delay of Star Wars Jedi: Survivor. The company expects net revenue of $1.700 billion to $1.800 billion and a change in deferred net revenue (online-enabled games) expected to be approximately $25 million.
It also expects a net income of $14 million to $55 million and diluted earnings per share of approximately five cents to 20 cents.
Net bookings are expected to be approximately $1.675 billion to $1.775 billion. The company’s games for the upcoming quarter include the Dead Space remake, Wild Hearts and EA Sports PGA Tour.
EA’s CFO, Chris Suh, mentioned during the earnings call that the company plans to reduce operating costs: “The actions we’ve taken during Q3 will reduce our total H2 operating expenses by approximately $140 million. In addition, we will continue to work to prioritize spend broadly, evaluate our real estate footprint, and focus our investments on our best long-term growth opportunities.”
Suh added in a statement, “As market uncertainty mounted during the quarter, we took measures to protect underlying profitability. We are prioritizing the player experience, directing investment to where it can have the most positive impact for our players and on growth.”
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