For the third quarter ending 12/31/22, Electronic Arts (NASDAQ: EA) reported net revenue increased 5% over the previous year’s quarter to $1.88 billion. Net income for the quarter was $204 million, up from $66 million for the previous year’s quarter.
However net bookings for Q3 FY 23 were down 9% from $2.58 billion the previous year to $2.34 billion for the quarter ending 12/31/22. For the trailing twelve months bookings were down 1% to $7.15 billion
Electronic Arts lowered revenue estimates for the fourth quarter to between $1.7 to $1.8 billion with full-year fiscal 2023 revenue forecasted to be $7.25 to $7.35 billion. This was down from the November forecast of $7.55 to $7.75 billion.
Analysis
The EA results were okay but somewhat of a disappointment. The issue was blamed on the lower-than-expected performance of new games and the Apex franchise performing below expectations (NHL 23 and Need for Speed Unbound were the only Q3 releases).
Electronic Arts also announced they were shutting down Apex Legends Mobile and canceling Battlefield Mobile. The release of Star Wars Jedi: Survivor was pushed from March to April 28.
Overall Electronic Arts’ miss does not seem that big a deal. Our expectations for the mobile versions of Apex Legends and Battlefield were not that high. However, they do indicate a general concern about EA’s ability both to grow its mobile business and the overall health of the Apex and Battlefield franchises.
The bigger deal is the future of Star Wars Jedi: Survivor. This is a premium title for console/PC and is an important product for EA’s Respawn Entertainment. The scheduled delay is only a month, but it will miss the current fiscal year which was a key reason forecasts were lowered. DFC is always on the side of delaying a major launch to get things right. Survivor is a follow-up to the 2019 hit Star Wars Jedi: Fallen Order and could be a top seller for 2023 even though it is not launching for the older consoles (PS4/Xbox One/Switch).
Electronic Arts is an initial stock in the DFC Intelligence Video Game Stock Portfolio. The latest news is likely to cause a short-term decline but that may best be viewed as a buying opportunity. Of course, that is assuming Star Wars meets expectations.
