Electronic Arts (NASDAQ:EA) Posts Q1 Sales In Line With Estimates But Full-Year Sales Guidance Misses Expectations
Video game publisher Electronic Arts (NASDAQ:EA) reported results in line with analysts' expectations in Q1 CY2024, with revenue down 5.1% year on year to $1.78 billion. On the other hand, the company's full-year revenue guidance of $7.3 billion at the midpoint came in 6% below analysts' estimates. It made a GAAP profit of $0.67 per share, improving from its loss of $0.04 per share in the same quarter last year.
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Electronic Arts (EA) Q1 CY2024 Highlights:
- Revenue: $1.78 billion vs analyst estimates of $1.77 billion (small beat)
- EPS: $0.67 vs analyst estimates of $0.59 (14.4% beat)
- Management's revenue guidance for the upcoming financial year 2025 is $7.3 billion at the midpoint, missing analyst estimates by 6% and implying -3.5% growth (vs 1.9% in FY2024)
- Gross Margin (GAAP): 79.9%, up from 76.1% in the same quarter last year
- Free Cash Flow of $529 million, down 56.4% from the previous quarter
- Market Capitalization: $34.91 billion
“This year, EA delivered bigger, bolder world class entertainment that engaged and connected hundreds of millions of players and fans,” said Andrew Wilson, CEO of EA.
Best known for its Madden NFL and FIFA sports franchises, Electronic Arts (NASDAQ:EA) is one of the world’s largest video game publishers.
Video Gaming
Since videogames were invented in the 1970s, they have gradually taken more share of entertainment time. Ubiquitous mobile devices have powered a surge in “snackable” games that can be played on the go. Over time, games have developed more social engagement features where friends can play games together over the internet. The business models of games publishers have become less volatile due to digitization of distribution, in game monetization, and like Hollywood, an increasing dependence on surefire hit franchises. Covid driven lockdowns accelerated adoption and usage of videogames – a trend that has not slowed.
Sales Growth
Electronic Arts's revenue growth over the last three years has been unremarkable, averaging 11.8% annually. This quarter, Electronic Arts reported a year on year revenue decline of 5.1%, in line with analysts' estimates.
For the upcoming financial year, management expects revenue to be $7.3 billion at the midpoint, representing a 3.5% drop compared to the 1.9% growth in FY2024.
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Key Takeaways from Electronic Arts's Q1 Results
We struggled to find many strong positives in these results. Although this quarter's revenue and EPS beat, its full-year revenue and EPS guidance missed analysts' expectations. Forward projections move stocks more than current results, so this was a bad quarter for Electronic Arts because of its worse-than-expected outlook. The company is down 3.8% on the results and trades at $125.25 per share.
Electronic Arts may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
