EA Q3 Income Up Big Year-on-Year Thanks to Star Wars Jedi, The Sims 4, and Ultimate Team

Star Wars Jedi

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Electronic Arts (NASDAQ:EA) have delivered their financial results for the quarter ending December 31, 2019, and it seems like it was a solid holiday season for the triple-A video game publisher. Net revenue was up year-on-year and above expectations at $1.59 billion and net income was $346 million, up 32 percent from $262 million in Q3 2019. Earnings per share are $1.18, up from $0.86 a year ago, but well below the $2.51 per share financial analysts were predicting. Perhaps because of that EA’s stock has dropped around 3 percent in after-hours trading as of the posting of this article.

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Star Wars and Old Warhorses Deliver

The biggest story of Q3 2020 for EA was the release of Star Wars Jedi: Fallen Order, which sold significantly beyond EA’s expectations. Originally, they were projecting to sell 6 to 8 million copies of Fallen Order in total, but ended up selling close to 8 million in Q3 alone. EA now expects to sell around 10 million copies of the game in FY 2020. Meanwhile, Star Wars Battlefront 2 player engagement and spending was “exceptional.” This was partly driven by better-than-expected sales of the new Star Wars Battlefront 2: Celebration Edition, which includes all cosmetic DLC released within game’s first two years.

At the same time, two of EA’s bedrock money makers, FIFA and The Sims 4, continued to deliver strong results. FIFA Ultimate Team matches were up nearly 40 percent year-on-year, and ridiculously-resilient casual gaming favorite The Sims 4 surpassed 20 million players, likely due to the new Discover University and Realm of Magic DLC packs released in late 2019. Meanwhile, the free-to-play Apex Legends looks to be on track to become a new pillar for the company, with its third season of content generating more engagement than the previous two seasons.

A Solid Foundation for New Franchises

For their full fiscal year, which ends March 31, 2020, Electronic Arts has boosted their revenue outlook to $5.48 billion from $5.41 billion, with net income of $2.93 billion and a full-year earnings per share guidance of $9.90. Looking specifically at Q4, EA is expecting revenue of $1.325 billion and net income of $308 million. If those full-year net income expectation seem high, they’re party due to a juicy $1.08 billion income tax benefit EA pocketed in Q1 of FY 2020.

Needless to say, the future is looking fairly bright for Electronic Arts. For some time, Star Wars was the company’s Achilles heel, but with the success of Star Wars Jedi: Fallen Order and salvaging of Star Wars Battlefront 2, even that part of EA’s business appears strong. Going forward EA looks to solidify and expand live services like FIFA and Madden Ultimate Team and Apex Legends. The planned launch of Apex Legends in China has the potential to be particularly lucrative. Chinese gamers tend to like colorful, character-driven games, and in that respect, Apex Legends beats out other battle royale stalwarts like PUBG and Fortnite.

Beyond the continuing focus on live services, EA is also focusing on new IP creation, with several new franchises currently “incubating” behind closed doors. With a new generation of consoles on the way, the time may be right for EA to expand its portfolio in a big way. Here’s what EA CEO Andrew Wilson had to say about what the company’s developers are working on

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Our people are our greatest resource at Electronic Arts, and this year has been a demonstration of how the creativity and technical expertise of our teams, working together around the world, allows us to deliver an unmatched breadth of entertainment to players. From FIFA to Star Wars, Apex to Madden, The Sims to Need for Speed and more, we have the titles that fans around the world recognize and love to play. The addition of great new games and experiences is also vital to growth, and we’re excited to do that in the year ahead through more of our own IP, with partner and indie content, and some more surprises to come.

EA is on a roll at the moment, and it seems like players will be the beneficiaries. Will EA’s success result in some interesting new next-generation IPs? It’s hard to say for certain, but the company can afford to take some risks given the sturdy live-service foundation they’ve built.

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