For its fiscal year ending 3/31/23, Electronic Arts (NASDAQ: EA) reported record revenue of $7.4 billion, up 6% from fiscal 2022. For the fourth quarter FY 23 revenue was up 3% to $1.87 billion. The biggest growth area for EA has been live services which was up 10% YOY in fiscal 2023 and 8% in Q4.
Analysis
At $1.87 billion, EA’s Q4 revenue beat its estimate of between $1.7 to $1.8 billion. However, this was after EA had lowered its forecast in late January. Thus the news had limited impact on the overall perception for the company.
Nevertheless, Electronic Arts results are another sign that the video game industry remains strong despite a slow start to the new generation of console systems (due to product shortages) and limited new releases. While EA’s console game revenue was flat in fiscal 2023, PC game revenue saw 13% growth to $1.7 billion, with mobile games growing 18% to $1.2 billion.
Live services has been the key driver for EA’s growth. In October 2022, The Sims 4 went to a free base model and the player network is now 70 million units. Meanwhile, EA’s FIFA soccer franchise saw bookings grow 31% YOY in Q4, with FIFA 23 the most successful launch in franchise history.
EA remains a prime example of a company that has successfully transitioned from packaged goods to a live service model. The one notable exception is the newly launched Star Wars Jedi: Survivor title from Respawn Entertainment who created the Call of Duty franchise. This is one of the only single player titles EA is releasing.
On the downside, EA remains a predictable company and thus investors are not rushing in to buy. EA’s market value has remained steady in the $30 billion range for several years.
With a solid live services model, Electronic Arts remains a core holding in the DFC Intelligence Video Game Stock Portfolio. Transitioning to a live service model is difficult and EA has done it over a long period of time. This gives the company a leg up on the competition and could make them a go-to partner for other IP looking to do live services.
