Electronic Arts Beats Earnings Expectations But Misses Revenue Targets

Electronic Arts missed revenue forecasts but beat earnings expectations for the second quarter of its 2021 fiscal year, a sign that the video game boom during the pandemic could be waning.

The company reported revenues of $1.15 billion in the quarter compared to $1.3 billion last year, a decline of 16.6%. EA also reported a drop in profit to $185 million from $854 million last year.

With the dearth in live sports and people staying indoors, spending on gaming software skyrocketed. However as entertainment options returned, that demand softened, according to Neil Barbour, Associate Research Analyst at S&P Global Market Intelligence. 

“People tend to hunker down and play games when the economy is down,” Barbour said.

The popularity of gaming franchises like “The Sims 4” and “Apex Legends” has helped boost EA’s quarter. Along with that, the launch of “The Sims 4 Star Wars: Journey to Batuu” game pack and “EA Sports’ UFC 4” has generated active user engagement, according to Zacks Equity Research.

“Apex Legends is on track to become our latest billion-dollar franchise by the end of the fiscal year. All of our studios continue to execute amazingly well and have enabled us to launch an industry-leading eight games since the beginning of the fiscal year, while continuing to deliver live services content and expand onto new platforms,” Electronic Arts CEO Andrew Wilson said in a release.

NHL and UFC recently renewed its multi year deals with the video game maker to continue producing video games for the respective leagues. 

The company’s later recent release of “FIFA 21” on Oct. 6 impacted on the company’s quarter results, as it usually releases in EA’s third quarter.. Its predecessor, “FIFA 20,” has reached nearly 35 million players on console and PC, as reported in the earnings report.

EA took advantage of the popularity of its Madden and FIFA franchises during the lockdown phase of the pandemic to host live events and engage more players across more platforms.

With the upcoming launch of the next generation consoles by Xbox and Sony, the company is looking at revenue growth with more people turning to the holiday season to buy video games. 

Shares of Electronic Arts slumped as much as 9.6% after results came out. The stock has been up 19% for the year.