Electronic Arts (EA) could be a solid addition to your portfolio given its recent upgrade to a Zacks Rank #2 (Buy). This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices.The Zacks rating relies solely on a company's changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure -- the Zacks Consensus Estimate.Individual investors ...

Core Viewpoint - Electronic Arts Inc. has shown strong performance in 2023, with shares increasing over 36% since the beginning of the year, demonstrating resilience amid market volatility [1][2]. Financial Performance - EA's Q1 gains have been maintained, and the company reported impressive earnings in May, leading to a significant upgrade to a Buy rating from Roth Capital, with a new price target of $185, indicating nearly 20% upside potential [2][4]. - Analysts project double-digit earnings growth for EA over the next three years, supported by strong forward guidance from the recent earnings report [4]. Product Pipeline and Market Sentiment - The optimism surrounding EA is largely attributed to its upcoming release calendar, particularly the anticipated reboot of the Battlefield franchise, which is expected to drive consumer spending [5][6]. - EA's annual sports franchises, such as FIFA and Madden, remain crucial, but the success of Battlefield could enhance overall market excitement and stock valuation [6][7]. Analyst Ratings and Market Dynamics - Roth Capital's upgrade marks a shift in sentiment, contrasting with a previous Neutral rating from Citigroup, indicating a growing bullish outlook among analysts [8]. - The stock's technical indicators, including a recent bullish crossover in MACD and a rising relative strength index (RSI), suggest increasing investor momentum and potential for further price appreciation [9][10]. Future Outlook - If EA's stock can surpass the resistance level near $170, the $185 target set by Roth could become attainable, positioning EA as a potential outperformer in the upcoming months [11].

Core Viewpoint - Electronic Arts (EA) has experienced a decline of approximately 4.5% in share price over the past month, underperforming the S&P 500, raising questions about its upcoming earnings release and potential for recovery [1]. Earnings Estimates - Estimates for Electronic Arts have trended downward over the past month, with a significant shift of -3084.85% in the consensus estimate [2]. VGM Scores - Electronic Arts currently holds a Growth Score of B and a Momentum Score of B, while its Value Score is graded C, placing it in the middle 20% for this investment strategy. The overall aggregate VGM Score for the stock is B, which is relevant for investors not focused on a single strategy [3]. Outlook - The downward trend in estimates indicates a negative outlook for Electronic Arts, which currently holds a Zacks Rank of 3 (Hold). The expectation is for an in-line return from the stock in the coming months [4]. Industry Performance - Electronic Arts is part of the Zacks Gaming industry, where Boyd Gaming (BYD) has seen a gain of 3.9% over the past month. Boyd reported revenues of $991.57 million for the quarter ended March 2025, reflecting a year-over-year increase of +3.2% [5]. - For the current quarter, Boyd is expected to report earnings of $1.62 per share, indicating a +2.5% change from the previous year. The Zacks Consensus Estimate for Boyd has changed by -0.2% over the last 30 days, and it also holds a Zacks Rank of 3 (Hold) with a VGM Score of A [6].

Revenue and Financial Performance - Total net revenue for fiscal year 2025 was $7,463 million, down 1 percent year-over-year[126]. - Live services and other net revenue was $5,461 million, down 2 percent year-over-year[126]. - Net revenue from digital full game downloads was $1,478 million, an increase of 10 percent compared to $1,343 million in fiscal year 2024[126]. - Net bookings for fiscal year 2025 were $7,355 million, a decrease of $75 million or 1 percent compared to fiscal year 2024[132]. - Live services and other net bookings were $5,338 million for fiscal year 2025, down $87 million or 2 percent year-over-year[132]. - Gross margin improved to 79.3 percent, up 2 percentage points year-over-year[126]. - Operating expenses increased to $4,400 million, up 2 percent year-over-year[126]. - Net income for fiscal year 2025 was $1,121 million, with diluted earnings per share of $4.25[126]. - Digital sales accounted for 78 percent of total units sold in fiscal year 2025, up from 73 percent in fiscal year 2024[127]. - The company paid aggregate cash dividends of $199 million during the fiscal year ended March 31, 2025, with a quarterly cash dividend of $0.19 per share[112]. - A new stock repurchase program was authorized to repurchase up to $5.0 billion of common stock, expiring on May 9, 2027[113]. - The company repurchased a total of 9,752,621 shares in the fourth quarter of the fiscal year ended March 31, 2025, at an average price of $135.05[115]. Market and Competitive Landscape - Digital live services and other net revenue accounted for 73% of total net revenue during fiscal year 2025[18]. - Revenue from the EA SPORTS FC franchise and American football franchise is material to the business and will continue to be so[19]. - Direct sales to Sony and Microsoft represented approximately 39% and 17% of total net revenue, respectively, in fiscal year 2025[22]. - The company faces intense competition in the interactive entertainment market, requiring anticipation of market changes years in advance[26]. - The competitive landscape is evolving rapidly, with advancements in artificial intelligence technology expected to impact market dynamics, requiring the company to adapt quickly to maintain competitiveness[54]. - The company faces intense competition for licenses to use intellectual property, which is critical for developing successful products; failure to secure these licenses could significantly impact revenue[67]. Research and Development - The company is investing in research and development to incorporate artificial intelligence into its products and services[30]. - Research and development expenses for fiscal year 2025 were $2,569 million, an increase of $149 million or 6% compared to fiscal year 2024[169]. - The company focuses on building games and experiences that enhance player engagement and grow online communities around key franchises[123]. - Electronic Arts is focusing on enhancing player engagement through live services and innovative game experiences, aiming to grow global online communities around key franchises[214]. Operational Risks and Challenges - The company has experienced development delays in the past, which have led to postponed release dates, potentially resulting in significant revenue shortfalls and increased expenses[53]. - The company may face operational disruptions due to catastrophic events, including natural disasters and cyber threats, which could materially affect its business operations and financial condition[69][70]. - The company has experienced past cyber-attacks and expects future incidents, which could lead to significant costs and reputational damage[72]. - Cybersecurity risks are integrated into the overall enterprise-risk assessment, with dedicated teams managing and monitoring these risks[106]. - The reliability of the company's products and services is dependent on the performance of its IT systems and those of external service providers[74]. - The company may face claims of intellectual property infringement, which could divert resources and incur significant costs[86]. Financial Position and Cash Flow - As of March 31, 2025, cash and cash equivalents decreased by $764 million to $2,136 million compared to $2,900 million in 2024, representing a decline of 26.3%[180]. - Net cash provided by operating activities decreased by $236 million to $2,079 million in fiscal year 2025, primarily due to lower cash collections from sales and higher cash payments for income taxes[181]. - Net cash provided by investing activities increased by $244 million to $37 million in fiscal year 2025, driven by a $203 million decrease in the purchase of short-term investments[182]. - Net cash used in financing activities increased by $1,239 million to $2,863 million in fiscal year 2025, primarily due to a $1,208 million increase in common stock repurchases[183]. - The company has senior unsecured notes and an unsecured revolving credit facility, which could impact financial condition and results[92]. - The revolving credit facility requires compliance with a debt to EBITDA ratio, and breaches could lead to immediate repayment of indebtedness[93]. Taxation and Compliance - The effective tax rate for fiscal year 2025 was 30.2%, an increase from 19.9% in fiscal year 2024[175]. - A $51 million tax charge was recognized to increase the valuation allowance on Swiss deferred tax assets during fiscal year 2025[176]. - Changes in international tax laws, such as the global minimum taxes proposed by the OECD, could affect the company's effective tax rates and cash taxes[95]. - Compliance with evolving global data privacy laws is costly and could result in penalties or harm to the company's reputation[84]. International Operations - International net revenue accounted for 59% of total net revenue for the fiscal year ended March 31, 2025[91]. - The company is exposed to fluctuations in foreign currency exchange rates due to international sales and foreign investments[91]. - A hypothetical adverse foreign currency exchange rate movement of 10% could result in potential declines of $241 million in the fair value of foreign currency forward contracts used in cash flow hedging[200]. - A hypothetical 150 basis point increase in interest rates would result in a $1 million, or 1% decrease in the fair market value of the company's short-term investments[203].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of $184.60 [6][13]. Core Insights - The company's performance has rebounded, particularly due to the updates to the "FC" series and the release of new titles like "Split Fiction" [1][2]. - The company is expected to benefit from a strong product pipeline, including the anticipated release of "Battlefield 6" and the upcoming 2026 Summer World Cup, which is expected to positively impact the "FC" series [3][4]. Financial Performance - For FY25Q4, the company reported net revenue of $1.895 billion, exceeding consensus estimates by 7.6% and showing a year-over-year increase of 6.5% [1]. - Net bookings for the same quarter reached $1.799 billion, surpassing expectations by 14.9% and reflecting an 8% year-over-year growth [1][2]. - The net profit for FY25Q4 was $254 million, exceeding expectations by 12.2%, driven by an increase in digital game sales and operational leverage [1]. Future Guidance - The company has provided guidance for FY26 net bookings to be between $7.6 billion and $8.0 billion, primarily driven by new releases and the continued recovery of the "FC" series [2]. - The expected release of "Battlefield 6" is projected for the end of FY26, with management noting significant engagement from early testing [3]. Earnings Forecast and Valuation - The report adjusts FY26 and FY27 net revenue estimates down by 9.1% and 4.3% to $7.262 billion and $8.176 billion, respectively, while introducing a FY28 forecast of $8.43 billion [4][11]. - Net profit estimates for FY26 and FY27 have been reduced by 37.7% and 13.5% to $956 million and $1.417 billion, respectively, due to increased R&D and marketing costs associated with new game releases [4][11]. - The valuation multiple has been increased to 50x PE, aligning with industry averages, reflecting a robust product pipeline and potential profit recovery post new releases [4][13].

Core Insights - Electronic Arts (EA) reported fourth-quarter fiscal 2025 earnings of $1.54 per share, a 12.4% year-over-year increase, with revenues rising 6.5% to $1.89 billion driven by growth in Live services and full-game revenues [1][2] Financial Performance - Net bookings for the fiscal fourth quarter reached $1.8 billion, an 8% year-over-year increase [2] - Full-game net bookings surged 48% year over year to $384 million, while Live services net bookings increased by 1% to $1.42 billion [2] - Full-game revenues accounted for 23.1% of total revenues, increasing 31.2% year over year to $437 million, with full-game download revenues rising 38% to $367 million [3] - Live services and other revenues, making up 76.9% of total revenues, grew 0.8% year over year to $1.46 billion [3] Revenue Breakdown - Revenues from consoles increased 13% year over year to $1.18 billion, while revenues from PC & Other rose 1% to $426 million; however, mobile platform revenues decreased 7% to $287 million [4] Operating Metrics - GAAP gross profit increased 7.4% year over year to $1.53 billion, with gross margin expanding by 60 basis points to 80.6% [5] - Operating expenses decreased 4.7% year over year to $1.13 billion, reducing the percentage of revenues from 66.8% to 59.7% [5] - GAAP operating income rose 68.8% year over year to $395 million, with operating margin expanding from 13.2% to 20.8% [6] Balance Sheet and Cash Flow - As of March 31, 2025, EA had $2.25 billion in cash and short-term investments, down from $3.16 billion as of December 31, 2024 [7] - Net cash provided by operating activities was $549 million for the quarter and $2.079 billion for the trailing 12 months [7] - EA repurchased 9.8 million shares for $1.375 billion during the quarter, totaling 17.6 million shares for $2.5 billion over the trailing 12 months [7] Dividend and Guidance - The company declared a quarterly cash dividend of 19 cents per share, payable on June 18, 2025 [8] - For Q1 fiscal 2026, EA expects GAAP revenues between $1.55 billion and $1.65 billion, with earnings per share ranging from 49 cents to 66 cents [9] - For fiscal 2026, EA anticipates revenues between $7.1 billion and $7.5 billion, with earnings per share projected between $3.09 and $3.79 [10]

Core Insights - Electronic Arts (EA) reported a 6.52% year-over-year increase in net revenue for Q4 FY2025, reaching $1.895 billion, surpassing analyst expectations of $1.55 billion, with a net profit of $254 million, up 39.56% [1] - The company's total net revenue for FY2025 was $7.463 billion, a slight decline of 1.31% from $7.562 billion in the previous year, with game business revenue at $2.002 billion and live services and others at $5.461 billion [1] - EA's new game "Split Fiction" sold over 1 million copies within 48 hours of its release and has surpassed 4 million copies globally [1] Financial Performance - For Q4 FY2025, EA's revenue growth was primarily driven by its gaming business, particularly the EA SPORTS series, which saw its American Football game surpass $1 billion in net bookings for the first time [1] - The latest installment of "The Sims" maintained double-digit growth in its 25th anniversary quarter, contributing to the overall revenue increase [1] Future Outlook - EA anticipates total bookings for FY2026 to be between $7.6 billion and $8 billion, with growth expected from EA SPORTS, "The Sims," and new titles from "Battlefield" and "Skate" [4] - The company projects operating cash flow of $2.2 billion to $2.4 billion and net revenue between $7.1 billion and $7.5 billion for FY2026, with Q1 estimates at $1.55 billion to $1.65 billion [4] Strategic Changes - EA plans to release a new "Battlefield" game before April 2026, with a full reveal expected this summer, which is seen as a key step in creating the next generation of entertainment [2] - The company is undergoing layoffs of 300-400 positions, including around 100 from Respawn Entertainment, and has canceled two projects, including a new "Titanfall" title, to focus resources on the next "Jedi" game and updates for "Apex Legends" [4]

Core Insights - Electronic Arts (EA) reported quarterly earnings of $1.54 per share, exceeding the Zacks Consensus Estimate of $1.11 per share, and up from $1.37 per share a year ago, representing an earnings surprise of 38.74% [1] - The company generated revenues of $1.8 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 15.09%, compared to $1.67 billion in the same quarter last year [2] - EA has outperformed the S&P 500, with shares increasing about 5.8% since the beginning of the year, while the S&P 500 has declined by 3.9% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.50 on revenues of $1.27 billion, and for the current fiscal year, it is $7.53 on revenues of $7.59 billion [7] - The estimate revisions trend for EA is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Gaming industry, to which EA belongs, is currently ranked in the bottom 45% of over 250 Zacks industries, which may impact stock performance [8] - Another company in the same industry, Super League Enterprise, is expected to report a quarterly loss of $0.37 per share, reflecting a year-over-year change of +63%, with revenues projected at $4.5 million, up 6.9% from the previous year [9]

Financial Data and Key Metrics Changes - For FY 2025, the company reported net bookings of $7.36 billion, a decrease of 1% year-over-year [24] - Full game net bookings were $2.02 billion, up 1%, driven by strong performance in EA Sports College Football '25 and new releases [25] - Live services net bookings were $5.34 billion, down 2%, impacted by a decline in Apex Legends and softness in FC Ultimate Team [25] - The company achieved a gross margin of 79.3%, an improvement of nearly 200 basis points, due to lower licensing fees [26] - Operating expenses increased by 2% to $4.4 billion, while earnings per share rose to $4.25 [26] Business Line Data and Key Metrics Changes - EA SPORTS FC saw a significant rebound in engagement and monetization following a major gameplay update in January, leading to double-digit growth in player engagement [5][8] - The American football ecosystem generated over $1 billion in net bookings, up over 70% year-over-year, with a 68% increase in hours played [9][10] - The Sims franchise delivered over 30% net bookings growth in Q4, driven by the 25th anniversary celebrations and new content releases [12][29] - The successful launch of the new IP, Split Fiction, resulted in nearly 4 million units sold, exceeding expectations [13] Market Data and Key Metrics Changes - FC Mobile engagement and acquisition were up over 20% year-over-year, with significant growth in key mobile markets [9] - The company noted that its largest mobile markets differ from its largest HD markets, indicating a successful expansion strategy [9] - The American football ecosystem's engagement trends remained strong, with Q4 average weekly active users higher than the fiscal year average [28] Company Strategy and Development Direction - The company aims to broaden its reach into additional markets and enhance app experiences through strategic partnerships [11] - Future growth is expected to be driven by live services, new game launches, and building global fandom [15][18] - The company plans to transform The Sims into a unified ecosystem across games, marketplaces, and social spaces [18] - The acquisition of TRACECAP is expected to enhance gameplay authenticity and immersion [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate near-term economic uncertainty, emphasizing the resilience of its franchises [39][78] - The company anticipates continued growth in its American football and global football franchises, leveraging the increasing popularity of these sports [20][70] - Management highlighted the importance of community engagement and feedback in shaping future game developments [61] Other Important Information - The company returned over $2.7 billion to stockholders through stock repurchases and dividends in FY 2025 [26] - The upcoming fiscal year is expected to see net bookings of $7.6 billion to $8 billion, reflecting a growth of 3% to 9% year-over-year [30][31] Q&A Session Summary Question: What were the main issues during the temporary slowdown in FC and how were they fixed? - Management noted that temporary slowdowns are not unusual for large franchises and attributed the slowdown to a lack of migration from the previous title and feedback from competitive players regarding gameplay tuning [44][49][54] Question: How does the company view the long-term growth profile and live services? - Management reiterated confidence in the long-term growth framework, emphasizing the importance of live services and new titles in driving growth [55][56] Question: What are the key learnings from the Battlefield beta testing? - Management highlighted the importance of community feedback in shaping the game and ensuring alignment with player expectations, which has been a significant focus for the development team [60][62] Question: How does the company view the competitive landscape for American football? - Management expressed optimism about the growth of American football, citing the increasing engagement and fandom in the sport, and plans to deepen connections between college and NFL products [70][72] Question: How does the company plan to navigate potential macroeconomic challenges? - Management believes that the entertainment industry, particularly its franchises, has shown resilience during economic downturns and expects to continue delivering value to players [78][80]

Financial Data and Key Metrics Changes - For FY 2025, the company reported net bookings of $7.36 billion, a decrease of 1% year-over-year [23] - Net revenue was $7.46 billion, also down 1% [25] - The company generated free cash flow of $1.86 billion, returning 145% of this amount, or $2.7 billion, to shareholders through stock repurchases and dividends [26][34] Business Line Data and Key Metrics Changes - EA SPORTS FC saw a significant rebound in engagement and monetization, with player engagement up double digits following a major gameplay update [6][22] - The American football ecosystem surpassed $1 billion in net bookings, up over 70% year-over-year, driven by strong postseason engagement [9][24] - The Sims franchise delivered over 30% net bookings growth in Q4, marking its best fourth-quarter performance ever [12][29] Market Data and Key Metrics Changes - FC Mobile continues to exceed expectations with over 20% growth in new player acquisition and daily active users year-over-year [7][8] - The company noted that its four largest mobile markets differ from its largest HD markets, indicating successful global reach [8] Company Strategy and Development Direction - The company plans to broaden its reach into additional markets with new strategic partners and enhance app experiences [11] - Upcoming launches include iconic franchises like Skate and Battlefield, with a focus on community engagement and innovative gameplay [14][15] - The company aims to transform The Sims into a unified ecosystem across games, marketplaces, and social spaces [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate potential economic uncertainties, emphasizing the resilience of the gaming industry [39][78] - The company anticipates continued growth driven by its core franchises and the upcoming World Cup in 2026, which presents a significant opportunity [19][34] Other Important Information - The company is investing in AI to enhance game development and player experiences, viewing it as a powerful accelerator of creativity [20] - The company has a strong return of capital program, aiming to return at least 80% of free cash flow to shareholders through stock repurchases and dividends [34] Q&A Session Summary Question: What were the main issues during the temporary slowdown in EA SPORTS FC and how were they addressed? - Management noted that temporary slowdowns are not unusual for large franchises and attributed the slowdown to a lack of migration from the previous title and feedback from competitive players regarding gameplay tuning [44][54] Question: How does the company view continued growth in live services and new titles? - Management reiterated confidence in the growth framework shared during Investor Day, emphasizing the potential for margin expansion and cash flow growth [55] Question: What key learnings have emerged from the Battlefield beta testing? - The company highlighted the importance of community feedback in shaping the game, noting that this approach has led to overwhelming positive responses and deeper engagement [60][62] Question: How does the company plan to navigate potential macroeconomic challenges? - Management expressed optimism about the resilience of the gaming industry, emphasizing the fundamental human need for entertainment and the value provided by gaming experiences [78] Question: How does the company view pricing power for its IP? - Management indicated that the business model has evolved, allowing for a range of pricing strategies, and emphasized the importance of delivering quality and value to players [80]