8-K: Electronic Arts Revises FY25 Outlook Due to Underperforming Titles

Electronic Arts pre-announces preliminary Q3 FY25 results and revises its fiscal year outlook due to underperformance in Global Football and Dragon Age.

Summary

• Electronic Arts (EA) has announced preliminary results for its third fiscal quarter and revised its business outlook for the fiscal year ending March 31, 2025.
• The company now projects a mid-single-digit decline in live services net bookings, a shift from its initial guidance of mid-single-digit growth.
• This revision is primarily attributed to underperformance in Global Football, which had previously experienced two consecutive years of double-digit net bookings growth but slowed down in the third quarter.
• Dragon Age also underperformed, engaging approximately 1.5 million players during the quarter, nearly 50% below expectations.
• EA now expects net bookings of approximately $2.215 billion for the third fiscal quarter and an updated range of $7.000 billion to $7.150 billion for fiscal year 2025.
• For the third fiscal quarter, EA expects GAAP net revenue to be approximately $1.883 billion and approximately $1.11 in GAAP diluted earnings per share.
• EA anticipates a return to growth in FY26 as they execute against their pipeline and launch more iconic franchises.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the revised outlook and underperformance of key titles, although management expresses confidence in future growth.

Positives

• EA anticipates a return to growth in FY26 as they launch more iconic franchises.
• Positive player feedback and early results are encouraging after a comprehensive gameplay refresh and the annual Team of the Year update in FC 25.

Negatives

• EA is revising its FY25 outlook downwards due to underperformance in Global Football and Dragon Age.
• The company now projects a mid-single-digit decline in live services net bookings, a significant shift from its initial guidance of mid-single-digit growth.
• Dragon Age engaged approximately 1.5 million players during the quarter, nearly 50% below expectations.

Risks

• The forward-looking statements are subject to change and actual results could differ materially.
• Factors that might cause differences include those discussed in EA's filings with the SEC, including its Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
• The preliminary results are estimates based on information currently available and could differ from the actual amounts reported in the Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2024.

Future Outlook

EA expects a return to growth in FY26 as they launch more of their iconic franchises. They continue to balance investment for future growth with operational discipline and remain committed to EA's long-term financial framework.

Management Comments

• During Q3, we continued to deliver high-quality games and experiences across our portfolio; however, Dragon Age and EA SPORTS FC 25 underperformed our net bookings expectations, said Andrew Wilson, CEO of EA.
• We remain confident in our long-term strategy and expect a return to growth in FY26, as we execute against our pipeline, said Andrew Wilson, CEO of EA.
• We continue to balance investment for future growth with operational discipline, and remain committed to EAs long-term financial framework said Stuart Canfield, CFO of EA.

Industry Context

The gaming industry is highly competitive, and the success of individual titles can significantly impact a company's financial performance. EA's revised outlook reflects the challenges of maintaining consistent growth in live services and the importance of delivering successful new releases.

Comparison to Industry Standards

• It's difficult to make a direct comparison without knowing the specific performance of competitors' titles in the same genres during the same period.
• Activision Blizzard, for example, relies heavily on the Call of Duty franchise, and any underperformance there would have a similar impact.
• Similarly, Take-Two Interactive depends on the Grand Theft Auto series.
• The performance of EA's Global Football franchise can be compared to the performance of similar sports games from competitors like Konami's eFootball.

Stakeholder Impact

• Shareholders may react negatively to the revised outlook and underperformance of key titles.
• Employees may be affected by potential cost-cutting measures or shifts in project priorities.
• Customers may be impacted by changes in game development or live service support.

Next Steps

• EA will announce its results for the third fiscal quarter ending December 31, 2024 on February 4th, 2025.
• EA will host a conference call at 2:00 pm PT (5:00 pm ET) on February 4th, 2025 to discuss its quarterly results and financial outlook.

Key Dates