Key Takeaways From Activision Blizzard’s Earnings

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ATVI: Activision Blizzard logo
ATVI
Activision Blizzard

Gaming giant Activision Blizzard (NYSE:ATVI) posted record fourth quarter and full year earnings. The company reported revenues of $2.01 billion, significantly higher than its own guidance and almost 52% higher than its prior year quarter results. On an adjusted basis, the company reported sales of $2.45 billion, comfortably ahead of market expectations of $2.35 billion. The company attributed its success in the last quarter to Overwatch and World of Warcraft, two of its flagship offerings. Kings Digital, the acquisition made last year, also augmented the company’s top line growth by $436 million. In terms of income for the quarter, the company reported adjusted EPS of $0.65 per share, 25 cents higher than its guidance.

For the full year, Activision reported revenues of $6.61 billion, 42% higher over the prior year, and EPS of $1.28, a 7% increase over 2015.

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Traditionally, Activision has posted strong results in the fourth quarter due to the holiday season. The trend continued this year as well, with the company witnessing strong growth in its digital content. The in-game purchases continued to perform well in the quarter. However, Call of Duty: Infinite Warfare – which was launched in the last quarter and expected to drive growth – did not perform up to expectations, and that was reflected in the company’s product sales, which declined marginally on year-over-year (y-o-y) basis.

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Though much of the company’s growth for the year was attributed to the acquisition of King Digital, which helped the company strengthen its footprint in Asia-Pacific and grow its mobile audience, the strength of the content launched during the year cannot be ignored. Activision should be lauded for the fact that it managed to keep excitement around the launch and new expansion of its successful franchises running. This was particularly evident with Overwatch, which had successful seasonal events – Halloween Terror and Winter Wonderland – that continued to engage users. Per the company, it kept its gamers engaged for 43 billion hours in the last year, which was almost on par with the engagement levels of Netflix.

Outlook for the Year

Coming off a stellar performance in 2016, Activision released strong guidance for the next quarter and full fiscal year 2017. In the current quarter, the company expects to generate $1.55 billion in revenues and $0.25 in EPS. With fewer new releases in the current year, the company expects digital content to drive its revenues going forward.

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