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Video Game Earnings Roundup: EA vs. ATVI vs. NVDA

From the rise of esports to the widespread implementation of virtual reality, it’s an exciting time to be a gamer. Not that they ever weren’t, but video games are cool right now, and companies with exposure in the video game industry are benefitting from its current popularity.

And as investors know, the stock market is never too far behind on the latest “cool” trends. Investors are paying attention to video game stocks, and that’s resulted in some impressive returns from some of the industry’s biggest names.

As the current earnings season comes to a close, it’s about time to look back on the best reports from the leaders in gaming. We saw great results from several companies, but let’s dig a bit deeper to see if there’s a clear winner.

It should be noted that video game publishing companies have changed the way they report their non-GAAP fiscal results to meet stricter guidelines imposed by the SEC.

Activision Blizzard

Activision Blizzard ATVI, the publisher of franchises like Call of Duty, Overwatch, and Starcraft, reported better-than-expected results on the top and bottom lines last week. The company posted adjusted earnings of 31 cents per share, beating Street estimates of 22 cents. Adjusted revenue of $1.196 also beat Street estimates of $1.103 billion.

Activision Blizzard's net revenues presented in accordance with GAAP were up 19% to a Q1 record of $1.73 billion. The company’s GAAP net revenues from digital channels were up 50% to $1.39 billion. Activision Blizzard now expects adjusted Q2 net revenues of $1.2 billion and earnings per share of $0.27.

“Among the drivers of our results was Overwatch, which now has over 30 million players globally. The Overwatch League is gaining momentum and we're excited to offer our community of players the best professional league experience,” said Activision Blizzard CEO Bobby Kotick.

Investors should note that Activision Blizzard’s impressive results this quarter came despite a lack of a blockbuster release, and the company is still set to debut Destiny 2 and Call of Duty: WWII later this year. Also, it was interesting that Kotick specifically mentioned the company’s new Overwatch League, as it underscores how seriously these companies are taking esports (also read: Esports is The Next Billion Dollar Industry: 3 Stocks to Watch).

Shares of ATVI are up just over 4% since the release of this report.

Electronic Arts

Electronic Arts EA publishes marquee games like Battlefield, Star Wars: Battlefront, and Fifa. The company posted its fourth-quarter fiscal 2017 results on Tuesday afternoon.

On a GAAP basis, revenues were up 16.7% to $1.527 billion. GAAP digital revenues grew 30.6% to $934 million. Full game downloads revenues were up 70% to $259 million; mobile games increased 9% year over year to $165 million; and subscriptions, advertising and others increased 20% to $113 million.

GAAP earnings came in at $1.81 per share, beating GAAP analyst estimates of $1.63. GAAP revenues also beat analyst expectations of $1.49 billion.

Adjusted for deferrals, revenue came in at $1.092 billion, slightly lower than the Zacks Consensus Estimate of $1.093 billion (also read: Electronic Arts Q4 Earnings Decrease Y/Y, Revenues Rise).

EA said that it expects the “live services components” of franchises like Battlefield, Fifa, and Star Wars to emerge as significant growth catalysts. The company guided for GAAP revenues of $1.425 billion and earnings of $1.93 next quarter.

Shares of EA are up more than 14% following the release of its report.

NVIDIA Corporation

Although Nvidia NVDA is not a games publisher—and therefore not a direct competitor of Activision and EA—the company specifically designs high-end graphics processing units (GPUs) for the PC gaming market.

Nvidia posted adjusted earnings (including stock-based compensation but excluding other one-time items) on a proportionate tax basis of 82 cents per share, beating the Zacks Consensus Estimate of 66 cents. This figure also represented EPS growth of more than 110% (also read: NVIDIA Q1 Earnings & Revenues Top, Outlook Strong).

Revenues of $1.937 billion were up 48.4% and beat the Zacks Consensus Estimate of $1.910 billion. Revenues from its GPU business were up 45% to $1.56 billion, driven by growth in the GeForce GPUs Gaming division. The Gaming GPU segment was up 49% on a year-over-year basis.

Shares of NVDA soared more than 14% after the earnings release.

Bottom Line

The video game industry isn’t perfect, and some are still considered about the demand for traditional outlets, but this season’s results highlighted the strength throughout the industry.

Despite all of the changes throughout the industry, we can still judge video game stocks by the strength of their sales and the company's ability to effectively cash in on the latest gaming trends.

For more on these trends, check out an exclusive interview with the Zacks Friday Finish Line team and  Andrew Chanin, the CEO of PureFunds: 

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Activision Blizzard, Inc (ATVI): Free Stock Analysis Report
 
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NVIDIA Corporation (NVDA): Free Stock Analysis Report
 
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