Core Insights - Electronic Arts (EA) reported revenue of $1.3 billion for the quarter ended June 2025, reflecting a year-over-year increase of 2.9% and a surprise of +4.65% over the Zacks Consensus Estimate of $1.24 billion [1] - The earnings per share (EPS) for the quarter was $0.25, a decrease from $0.52 in the same quarter last year, with an EPS surprise of +150% compared to the consensus estimate of $0.10 [1] Financial Performance Metrics - Net Bookings for EA were reported at $1.3 billion, exceeding the average estimate of $1.24 billion from seven analysts [4] - Net revenue from Live services and other (Non-GAAP Net Bookings) was $1.08 billion, slightly above the three-analyst average estimate of $1.03 billion, showing a year-over-year decline of -0.9% [4] - Net revenue from Full game downloads (Non-GAAP Net Bookings) was $147 million, surpassing the two-analyst average estimate of $139.3 million, with a year-over-year increase of +2.8% [4] - Net revenue from Full game packaged goods (Non-GAAP Net Bookings) was $27 million, exceeding the two-analyst average estimate of $24.02 million, representing a year-over-year increase of +8% [4] Stock Performance - EA's shares have returned -4.8% over the past month, contrasting with the Zacks S&P 500 composite's +3.6% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Core Viewpoint - Electronic Arts (EA) reported quarterly earnings of $0.25 per share, exceeding the Zacks Consensus Estimate of $0.1 per share, but down from $0.52 per share a year ago, indicating a significant earnings surprise of +150.00% [1][2] Financial Performance - EA's revenues for the quarter ended June 2025 were $1.3 billion, surpassing the Zacks Consensus Estimate by 4.65% and showing a year-over-year increase from $1.26 billion [2] - Over the last four quarters, EA has exceeded consensus EPS estimates three times and has also topped consensus revenue estimates three times [2] Stock Performance and Outlook - EA shares have increased approximately 3.9% since the beginning of the year, while the S&P 500 has gained 8.6% [3] - The future performance of EA's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [3][4] Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $2.08 on revenues of $1.99 billion, and for the current fiscal year, it is $8.22 on revenues of $7.88 billion [7] - The estimate revisions trend for EA was favorable prior to the earnings release, resulting in a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The gaming industry, to which EA belongs, is currently ranked in the top 38% of over 250 Zacks industries, suggesting a positive outlook compared to the bottom 50% [8] - The performance of EA's stock may also be influenced by the overall industry outlook, as empirical research indicates a strong correlation between near-term stock movements and earnings estimate revisions [5][8]

Financial Data and Key Metrics Changes - The company reported net bookings of $1.3 billion, up 3% year-over-year, exceeding the high end of guidance [19] - Full game net bookings were $214 million, up 27%, driven by ongoing momentum from Split Fiction and a resurgence in Star Wars Battlefront II [20] - Live services net bookings were $1.08 billion, down 1%, with growth in the low single digits when excluding Apex Legends [20][24] Business Line Data and Key Metrics Changes - The EA Sports business showed strong performance, with net bookings in global football growing mid-single digits year-over-year [21] - FC Mobile outperformed expectations with over 50 million installs and significant daily active user growth [9] - Apex Legends delivered flat sequential net bookings, with improved engagement trends particularly among new and casual players [23] Market Data and Key Metrics Changes - The company is seeing deeper engagement in its core franchises, particularly in global football and American football ecosystems [12][17] - The integration of real-world sports content into games, such as Apple's MLS season pass into FC Mobile, is enhancing player engagement [9] Company Strategy and Development Direction - The company is entering an exciting release cycle, with major titles like Battlefield 6 and continued innovation in EA Sports franchises [8][29] - A community-centric approach is being emphasized, focusing on deeper engagement and value for players over time [26][30] - The strategy includes building massive online communities and expanding the reach of franchises across geographies and platforms [17][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver against FY 2026 outlook, supported by strong momentum and a compelling slate of upcoming launches [19][29] - The company is encouraged by strong retention and positive player sentiment, particularly for upcoming titles [27][29] Other Important Information - The company returned $423 million to shareholders through buybacks and dividends during the quarter [24] - The upcoming launches are expected to deepen player engagement and expand the audience [29] Q&A Session Summary Question: Thoughts on full game pricing - Management stated no changes in pricing strategy are planned, maintaining a broad pricing scheme across products [36][37] Question: Life Services growth excluding Apex - Live services growth outside of Apex was reported as low single digits, with expectations for continued momentum [42] Question: Cohort spending and Ultimate Team - Strong pickup in cohort spending was noted, with ongoing focus on enhancing player engagement through various modes [46] Question: Competitive setup between Battlefield and Call of Duty - Management feels confident about Battlefield's competitive position and has invested significantly in its marketing [65] Question: Consumer receptivity to bundling Madden and NCAA - The dual purchase strategy has been successful, and management expects continued positive reception [75] Question: Mobile opportunity post-App Store changes - The company aims to create frictionless experiences for players while exploring new monetization opportunities [90][92]

Financial Data and Key Metrics Changes - The company reported net bookings of $1.3 billion, up 3% year-over-year, exceeding the high end of guidance [19] - Full game net bookings were $214 million, up 27%, driven by ongoing momentum from Split Fiction and a resurgence in Star Wars Battlefront II [20] - Live services net bookings were $1.08 billion, down 1%, but excluding Apex Legends, live services grew in the low single digits [20][21] - Net revenue was $1.67 billion, up 1%, with a gross margin of 83.3%, down 90 basis points [23] - Operating expenses increased by 9% to $1.12 billion, primarily due to increased personnel costs [23] Business Line Data and Key Metrics Changes - The EA Sports business showed strong performance, particularly in global football, with net bookings growing mid-single digits year-over-year [21] - FC Mobile outperformed expectations with over 50 million installs and significant daily active user growth [8] - Apex Legends maintained flat net bookings sequentially, driven by strong operational execution and content innovation [22] - The American football ecosystem demonstrated strength with sustained engagement across Madden NFL and college football, with College Football '26 receiving strong reviews [11][12] Market Data and Key Metrics Changes - The company is seeing deeper engagement in its core franchises, particularly in global football and American football, with a focus on community-centric strategies [9][10] - The integration of real-world sports content into games, such as the partnership with Apple for FC Mobile, is enhancing player engagement [8][10] Company Strategy and Development Direction - The company is entering an exciting release cycle, with anticipated launches for Battlefield 6, Madden NFL 26, and FC 26, aiming to deepen player engagement and expand audiences [7][29] - The strategy focuses on building massive online communities and enhancing player experiences through innovative gameplay and community-driven content [17][30] - The company is committed to a community-centric approach, aiming to deliver long-term value for players and adapt to their feedback [9][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver against FY 2026 outlook, citing strong momentum and a compelling slate of upcoming launches [19][29] - The company anticipates a challenging comparison for College Football '26 due to last year's strong launch but remains optimistic about retention and player sentiment [26][27] - Management highlighted the importance of competition in driving innovation and improving offerings across franchises [68] Other Important Information - The company returned $423 million to shareholders through buybacks and dividends during the quarter [23] - The upcoming Battlefield 6 reveal is expected to generate significant excitement and engagement from the community [15][56] Q&A Session Summary Question: Thoughts on full game pricing strategy - Management indicated no immediate changes to pricing strategy, emphasizing a broad pricing scheme to capture the full spectrum of player value [36][37] Question: Life Services growth excluding Apex - Life Services growth outside of Apex was reported as low single digits, with expectations for continued momentum [41][43] Question: Marketing strategy for Battlefield - The company is investing heavily in marketing Battlefield 6, aiming to build it as a platform rather than just a product [56][57] Question: Competitive landscape between Battlefield and Call of Duty - Management feels confident about Battlefield's competitive positioning and the expectations of fans [63][66] Question: Consumer receptivity to bundling Madden and NCAA - The dual purchase strategy for Madden and NCAA is expected to continue being well received, with a vision for deeper connections between the two experiences [72][74] Question: Mobile opportunity post-App Store changes - The company is focused on creating frictionless experiences for players on mobile platforms, adapting to new economic opportunities [88][90]

Financial Performance Highlights - TTM net bookings reached $7.4 billion[8] - Live Services accounted for 72% of total TTM net bookings[9] - TTM Return on Capital was $2.7 billion through stock repurchase program and cash dividends[7] - TTM Free Cash Flow was $1.8 billion[9] Q1 FY26 Results - Net bookings increased by 3% year-over-year to $1.298 billion[11] - Full game net bookings increased by 27% year-over-year[11] - Console net bookings increased by 2% year-over-year to $690 million[16] - PC & Other net bookings increased by 8% year-over-year to $320 million[16] FY26 Guidance - The company expects net revenue between $7.1 billion and $7.5 billion[23] - GAAP EPS is projected to be between $3.09 and $3.79[23] - The company anticipates operating cash flow between $2.2 billion and $2.4 billion[23]

Core Insights - Electronic Arts reported first-quarter net bookings of $1.298 billion, exceeding the consensus estimate of $1.25 billion, driven by strong performance across its game portfolio [2][3] - The company achieved net revenue of $1.671 billion and earnings per share of 79 cents for the quarter [3] - CEO Andrew Wilson expressed confidence in the company's performance, highlighting an exciting launch slate for FY26 [4] Financial Performance - First-quarter net bookings: $1.298 billion, surpassing expectations [2] - First-quarter net revenue: $1.671 billion [3] - Earnings per share for the quarter: 79 cents [3] Future Guidance - Full-year 2026 guidance for net bookings is projected between $7.60 billion and $8.00 billion, with net revenue expected between $7.10 billion and $7.50 billion [5] - Diluted earnings per share for the full year are anticipated to be in the range of $3.09 to $3.79 [5] - For the second quarter, net bookings are expected to be between $1.80 billion and $1.90 billion, with net revenue projected between $1.75 billion and $1.85 billion [6] Upcoming Titles and Strategy - The company is focusing on upcoming titles such as Madden NFL 26, Battlefield, and Skate, which are expected to drive future growth [6][7] - CFO Stuart Canfield emphasized the strong fundamentals and robust pipeline, reinforcing confidence in the full-year guidance and long-term margin framework [7]

[Q1 FY26 Earnings Release Overview](index=1&type=section&id=Q1%20FY26%20Earnings%20Release%20Overview) [Management Commentary](index=1&type=section&id=CEO%20and%20CFO%20Commentary) Management reported a strong Q1 FY26, exceeding expectations with resilient live services and player engagement, while reaffirming full-year guidance - CEO Andrew Wilson noted a strong start to FY26, exceeding expectations, with deepening player engagement in EA SPORTS and anticipation for Battlefield 6 and skate. launches[3](index=3&type=chunk) - CFO Stuart Canfield confirmed Q1 performance surpassed the high end of guidance, attributing success to resilient live services and a broad portfolio, maintaining confidence in full-year guidance and long-term margin framework[3](index=3&type=chunk) [Selected Operating and Financial Highlights](index=1&type=section&id=Selected%20Operating%20and%20Financial%20Highlights) EA achieved strong Q1 FY26 performance with **$1.298 billion** in net bookings, driven by EA SPORTS and Apex Legends, alongside a declared dividend and share repurchases Q1 FY26 Selected Financial Highlights | Metric | Value | | :----- | :---- | | Net bookings | $1.298 billion | | Net revenue | $1.671 billion | | Net cash provided by operating activities (Q1) | $17 million | | Net cash provided by operating activities (TTM) | $1.976 billion | | Shares repurchased (Q1) | 3.0 million | | Value of shares repurchased (Q1) | $375 million | | Shares repurchased (TTM) | 17.8 million | | Value of shares repurchased (TTM) | $2.500 billion | - Q1 performance saw better-than-expected contributions from many areas in our portfolio, including EA SPORTS, Apex Legends, and catalog[6](index=6&type=chunk) - Global Football delivered year-over-year growth in net bookings, highlighted by a record quarter in FC Mobile net bookings[6](index=6&type=chunk) - EA declared a quarterly cash dividend of **$0.19 per share**, payable on September 17, 2025, to stockholders of record as of August 27, 2025[5](index=5&type=chunk) [Business Outlook](index=2&type=section&id=Business%20Outlook%20as%20of%20July%2029%2C%202025) [Fiscal Year 2026 Expectations](index=2&type=section&id=Fiscal%20Year%202026%20Expectations) EA's FY26 outlook remains unchanged, projecting **$7.6 billion to $8.0 billion** in net bookings and a commitment to return at least **80% of free cash flow** to shareholders - The outlook for fiscal year 2026 provided on May 6, 2025, remains unchanged[7](index=7&type=chunk) FY26 Financial Expectations | Metric | Range (in $ millions, except EPS) | | :----- | :-------------------------------- | | Net bookings | $7,600 - $8,000 | | Net revenue | $7,100 - $7,500 | | GAAP operating expenses | $4,470 - $4,570 | | Net income | $795 - $974 | | Diluted earnings per share | $3.09 - $3.79 | | Operating cash flow | $2,200 - $2,400 | - The Company intends to return at least **80% of free cash flow** with stock repurchases and dividends through fiscal year 2027[9](index=9&type=chunk) [Q2 Fiscal Year 2026 Expectations](index=2&type=section&id=Q2%20Fiscal%20Year%202026%20Expectations%20%E2%80%93%20Ending%20September%2030%2C%202025) Q2 FY26 guidance projects net bookings of **$1.8 billion to $1.9 billion**, factoring in Madden NFL 26 launch, Apex Legends momentum, and a content phasing headwind Q2 FY26 Financial Expectations | Metric | Range (in $ millions, except EPS) | | :----- | :-------------------------------- | | Net bookings | $1,800 - $1,900 | | Net revenue | $1,750 - $1,850 | | GAAP operating expenses | $1,215 - $1,235 | | Net income | $73 - $117 | | Diluted earnings per share | $0.29 - $0.46 | - The Company expects a more normalized curve for College Football full game sales, partially offset by the launch of Madden NFL 26, with early momentum in Apex Legends and catalog continuing[9](index=9&type=chunk) - This guidance includes a **four-point year-over-year headwind** related to phasing of the EA SPORTS FC 26 Ultimate Edition content, which will largely be recognized in Q3[9](index=9&type=chunk) - Year-over-year growth in expenses is largely driven by marketing related to upcoming launches, notably Battlefield 6[9](index=9&type=chunk) [Financial Performance Highlights](index=3&type=section&id=Quarterly%20and%20Trailing%20Twelve%20Months%20Financial%20Highlights) [Quarterly Financial Highlights (Q1 FY26 vs Q1 FY25)](index=3&type=section&id=Quarterly%20Financial%20Highlights) Q1 FY26 saw a slight **0.7% increase in total net revenue** to **$1.671 billion**, but net income decreased by **28.2%** to **$201 million**, with diluted EPS falling by **24.0%** Q1 FY26 vs Q1 FY25 Financial Highlights | Metric (in $ millions, except per share) | Q1 FY26 (June 30, 2025) | Q1 FY25 (June 30, 2024) | YoY Change | | :--------------------------------------- | :---------------------- | :---------------------- | :--------- | | Full game net revenue | $289 | $250 | +15.6% | | Live services and other net revenue | $1,382 | $1,410 | -2.0% | | Total net revenue | $1,671 | $1,660 | +0.7% | | Net income | $201 | $280 | -28.2% | | Diluted earnings per share | $0.79 | $1.04 | -24.0% | | Operating cash flow | $17 | $120 | -85.8% | | Value of shares repurchased | $375 | $375 | 0.0% | | Number of shares repurchased | 3.0 | 2.8 | +7.1% | | Cash dividend paid | $48 | $50 | -4.0% | [Trailing Twelve Months Financial Highlights (TTM FY26 vs TTM FY25)](index=3&type=section&id=Trailing%20Twelve%20Months%20Financial%20Highlights) TTM FY26 total net revenue increased by **2.4%** to **$7.474 billion**, while net income decreased by **9.5%** to **$1.042 billion**, and share repurchases significantly increased TTM FY26 vs TTM FY25 Financial Highlights | Metric (in $ millions) | TTM FY26 (June 30, 2025) | TTM FY25 (June 30, 2024) | YoY Change | | :--------------------- | :----------------------- | :----------------------- | :--------- | | Full game net revenue | $2,041 | $1,822 | +12.0% | | Live services and other net revenue | $5,433 | $5,476 | -0.8% | | Total net revenue | $7,474 | $7,298 | +2.4% | | Net income | $1,042 | $1,151 | -9.5% | | Operating cash flow | $1,976 | $2,076 | -4.8% | | Value of shares repurchased | $2,500 | $1,350 | +85.2% | | Number of shares repurchased | 17.8 | 10.2 | +74.5% | [Operating Metric: Total Net Bookings](index=4&type=section&id=Operating%20Metric%3A%20Total%20Net%20Bookings) Total net bookings for Q1 FY26 increased by **2.9%** to **$1.298 billion**, with TTM net bookings growing by **3.9%** to **$7.391 billion**, reflecting adjustments for deferred net revenue Total Net Bookings (in $ millions) (Q1 & TTM) | Metric (in $ millions) | Q1 FY26 | Q1 FY25 | TTM FY26 | TTM FY25 | | :--------------------- | :------ | :------ | :------- | :------- | | Total net revenue | $1,671 | $1,660 | $7,474 | $7,298 | | Change in deferred net revenue (online-enabled games) | ($373) | ($398) | ($83) | ($184) | | Total net bookings | $1,298 | $1,262 | $7,391 | $7,114 | - Net bookings is defined as the net amount of products and services sold digitally or sold-in physically in the period, calculated by adding total net revenue to the change in deferred net revenue for online-enabled games[21](index=21&type=chunk) [Corporate Information](index=5&type=section&id=Corporate%20Information) [Conference Call and Supporting Documents](index=5&type=section&id=Conference%20Call%20and%20Supporting%20Documents) Electronic Arts will host a conference call on July 29, 2025, to discuss Q1 FY26 results and future outlook, with supporting documents available on its Investor Relations website - Electronic Arts will host a conference call on July 29, 2025, at 2:00 pm PT (5:00 pm ET) to review its results for the first fiscal quarter ended June 30, 2025, and its outlook for the future[13](index=13&type=chunk) - EA has posted a slide presentation with a financial model of EA's historical results and guidance on EA's IR Website, and will also post the prepared remarks and a transcript from the conference call[14](index=14&type=chunk) [Forward-Looking Statements](index=6&type=section&id=Forward-Looking%20Statements) This section clarifies that certain statements are forward-looking and subject to material changes due to various factors, with EA assuming no obligation to update these preliminary estimates - Some statements in this release, including the information relating to EA's expectations under the heading 'Business Outlook as of July 29, 2025' and other information regarding EA's expectations, contain forward-looking statements that are subject to change[15](index=15&type=chunk) - Factors which could cause the Company's results to differ materially from its expectations include sales of products/services, ability to develop digital products, managing expenses, competition, governmental regulations, timely product releases, and economic conditions[16](index=16&type=chunk) - The preliminary financial results set forth in this release are estimates based on information currently available to Electronic Arts and could differ from the actual amounts that Electronic Arts ultimately reports in its Form 10-Q[18](index=18&type=chunk) [About Electronic Arts](index=6&type=section&id=About%20Electronic%20Arts) Electronic Arts is a global leader in digital interactive entertainment, developing games and online services, reporting approximately **$7.5 billion** in GAAP net revenue in FY25, and known for critically acclaimed brands - Electronic Arts (NASDAQ: EA) is a global leader in digital interactive entertainment, developing and delivering games, content and online services for Internet-connected consoles, mobile devices and personal computers[19](index=19&type=chunk) - In fiscal year 2025, EA posted GAAP net revenue of approximately **$7.5 billion**[20](index=20&type=chunk) - EA is recognized for a portfolio of critically acclaimed, high-quality brands such as EA SPORTS FC™, Battlefield™, Apex Legends™, The Sims™, EA SPORTS™ Madden NFL, EA SPORTS™ College Football, Need for Speed™, Dragon Age™, Titanfall™, Plants vs. Zombies™ and EA SPORTS F1®[20](index=20&type=chunk) [Detailed GAAP Financial Statements](index=8&type=section&id=Detailed%20Financial%20Statements) [Unaudited Condensed Consolidated Statements of Operations](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Q1 FY26 net revenue slightly increased to **$1,671 million**, but rising operating expenses led to a **25.6% decrease in operating income** and a **28.2% decrease in net income** Condensed Consolidated Statements of Operations (in $ millions, except per share) (Q1 FY26 vs Q1 FY25) | Metric (in $ millions, except per share) | Q1 FY26 (June 30, 2025) | Q1 FY25 (June 30, 2024) | YoY Change | | :--------------------------------------- | :---------------------- | :---------------------- | :--------- | | Net revenue | $1,671 | $1,660 | +0.7% | | Cost of revenue | $279 | $263 | +6.1% | | Gross profit | $1,392 | $1,397 | -0.4% | | Total operating expenses | $1,121 | $1,033 | +8.5% | | Operating income | $271 | $364 | -25.6% | | Income before provision for income taxes | $273 | $394 | -30.7% | | Net income | $201 | $280 | -28.2% | | Diluted earnings per share | $0.79 | $1.04 | -24.0% | [Q1 FY26 Performance vs. Guidance and Prior Year](index=9&type=section&id=Results%20(in%20%24%20millions%2C%20except%20per%20share%20data)) EA's Q1 FY26 net revenue of **$1,671 million** exceeded guidance by **$71 million**, with income before tax outperforming by **$62 million** and diluted EPS by **$0.21** Q1 FY26 Actuals vs. Guidance (Mid-Point) and Q1 FY25 Actuals | Metric (in $ millions, except per share) | Q1 FY26 Guidance (Mid-Point) | Variance to Guidance | Q1 FY26 Actuals | Q1 FY25 Actuals | | :--------------------------------------- | :--------------------------- | :------------------- | :-------------- | :-------------- | | Net revenue | $1,600 | $71 | $1,671 | $1,660 | | Cost of revenue | $275 | $4 | $279 | $263 | | Operating expenses | $1,115 | $6 | $1,121 | $1,033 | | Income before tax | $211 | $62 | $273 | $394 | | Diluted earnings per share | $0.58 | $0.21 | $0.79 | $1.04 | [Unaudited Condensed Consolidated Balance Sheets](index=10&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$11,699 million** as of June 30, 2025, primarily due to lower cash and deferred net revenue, leading to a reduced total stockholders' equity Condensed Consolidated Balance Sheets (in $ millions) (June 30, 2025 vs March 31, 2025) | Metric (in $ millions) | June 30, 2025 | March 31, 2025 | QoQ Change | | :--------------------- | :------------ | :------------- | :--------- | | Cash and cash equivalents | $1,518 | $2,136 | -$618 | | Total current assets | $2,545 | $3,276 | -$731 | | Total assets | $11,699 | $12,368 | -$669 | | Deferred net revenue (online-enabled games) | $1,334 | $1,700 | -$366 | | Total current liabilities | $3,040 | $3,459 | -$419 | | Total liabilities | $5,617 | $5,982 | -$365 | | Total stockholders' equity | $6,082 | $6,386 | -$304 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 FY26 net cash from operating activities significantly decreased to **$17 million**, driven by deferred net revenue changes, while cash used in investing and financing activities also rose Condensed Consolidated Statements of Cash Flows (in $ millions) (Q1 FY26 vs Q1 FY25) | Metric (in $ millions) | Q1 FY26 (June 30, 2025) | Q1 FY25 (June 30, 2024) | YoY Change | | :--------------------- | :---------------------- | :---------------------- | :--------- | | Net cash provided by operating activities | $17 | $120 | -$103 | | Net cash used in investing activities | ($89) | ($69) | -$20 | | Net cash used in financing activities | ($568) | ($546) | -$22 | | Change in cash and cash equivalents | ($618) | ($500) | -$118 | | Ending cash and cash equivalents | $1,518 | $2,400 | -$882 | [Supplemental Financial Information and Business Metrics](index=12&type=section&id=Unaudited%20Supplemental%20Financial%20Information%20and%20Business%20Metrics) This section details quarterly and TTM trends for financial metrics, showing a slight Q1 FY26 total net revenue increase driven by full game downloads, despite a minor live services revenue decline [Quarterly Performance Trends](index=12&type=section&id=Quarterly%20Performance%20Trends) Q1 FY26 net revenue increased by **1%** to **$1,671 million**, but operating income decreased by **26%** and net income by **28%**, with diluted EPS down by **24%** Quarterly Financial Performance Trends (in $ millions, except per share) (Q1 FY25 - Q1 FY26) | Metric | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | Q1 FY26 | YoY % Change (Q1) | | :----- | :------ | :------ | :------ | :------ | :------ | :---------------- | | Net revenue | $1,660 | $2,025 | $1,883 | $1,895 | $1,671 | 1 % | | Gross profit | $1,397 | $1,569 | $1,427 | $1,527 | $1,392 | — | | Gross profit (as a % of net revenue) | 84 % | 78 % | 76 % | 81 % | 83 % | | | Operating income | $364 | $384 | $377 | $395 | $271 | (26 %) | | Operating income (as a % of net revenue) | 22 % | 19 % | 20 % | 21 % | 16 % | | | Net income | $280 | $294 | $293 | $254 | $201 | (28 %) | | Net income (as a % of net revenue) | 17 % | 15 % | 16 % | 13 % | 12 % | | | Diluted earnings per share | 1.04 | 1.11 | 1.11 | 0.98 | 0.79 | (24 %) | [Quarterly Net Revenue by Composition and Platform](index=13&type=section&id=Quarterly%20Net%20Revenue%20Presentations) Q1 FY26 full game net revenue rose **16%** to **$289 million** due to downloads, while live services slightly declined, and console remained the largest platform with stable revenue Quarterly Net Revenue by Composition (in $ millions) (Q1 FY25 - Q1 FY26) | Metric | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | Q1 FY26 | YoY % Change (Q1) | | :----- | :------ | :------ | :------ | :------ | :------ | :---------------- | | Full game downloads | $190 | $475 | $446 | $367 | $233 | 23 % | | Packaged goods | $60 | $241 | $153 | $70 | $56 | (7 %) | | Full game | $250 | $716 | $599 | $437 | $289 | 16 % | | Live services and other | $1,410 | $1,309 | $1,284 | $1,458 | $1,382 | (2 %) | | Total net revenue | $1,660 | $2,025 | $1,883 | $1,895 | $1,671 | 1 % | Quarterly Net Revenue by Platform (in $ millions) (Q1 FY25 - Q1 FY26) | Metric | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | Q1 FY26 | YoY % Change (Q1) | | :----- | :------ | :------ | :------ | :------ | :------ | :---------------- | | Console | $1,005 | $1,374 | $1,215 | $1,182 | $1,007 | — | | PC & Other | $365 | $364 | $392 | $426 | $374 | 2 % | | Mobile | $290 | $287 | $276 | $287 | $290 | — | | Total net revenue | $1,660 | $2,025 | $1,883 | $1,895 | $1,671 | 1 % | [Cash Flow and Balance Sheet Data](index=14&type=section&id=CASH%20FLOW%20DATA) Q1 FY26 operating cash flow significantly decreased to **$17 million**, with TTM operating cash flow down **5%** to **$1,976 million**, and total cash and short-term investments declining **41%** Cash Flow Data (in $ millions) (Q1 FY25 - Q1 FY26) | Metric (in $ millions) | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | Q1 FY26 | YoY % Change (Q1) | | :--------------------- | :------ | :------ | :------ | :------ | :------ | :---------------- | | Operating cash flow | $120 | $234 | $1,176 | $549 | $17 | | | Operating cash flow - TTM | $2,076 | $2,198 | $2,110 | $2,079 | $1,976 | (5 %) | | Capital expenditures | $67 | $50 | $50 | $54 | $72 | | | Free cash flow | $53 | $184 | $1,126 | $495 | ($55) | | | Free cash flow - TTM | $1,855 | $1,978 | $1,892 | $1,858 | $1,750 | (6 %) | | Common stock repurchases and excise taxes paid | $375 | $375 | $383 | $1,375 | $375 | — | | Cash dividends paid | $50 | $51 | $50 | $48 | $48 | (4 %) | Balance Sheet Data (in $ millions) (Q1 FY25 - Q1 FY26) | Metric (in $ millions) | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | Q1 FY26 | YoY % Change (Q1) | | :--------------------- | :------ | :------ | :------ | :------ | :------ | :---------------- | | Cash and cash equivalents | $2,400 | $2,197 | $2,776 | $2,136 | $1,518 | | | Short-term investments | $366 | $366 | $379 | $112 | $112 | | | Cash and cash equivalents, and short-term investments | $2,766 | $2,563 | $3,155 | $2,248 | $1,630 | (41 %) | | Receivables, net | $433 | $1,012 | $742 | $679 | $533 | 23 % | [Non-GAAP Financial Measures and Reconciliations](index=15&type=section&id=Non-GAAP%20Financial%20Measures) [Reconciliation of GAAP to Non-GAAP Operating Income (Q1 FY26 vs Q1 FY25)](index=15&type=section&id=Unaudited%20Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) Q1 FY26 non-GAAP operating income decreased by **17%** to **$450 million**, with the non-GAAP operating margin falling to **26.9%**, after adjusting for acquisition-related expenses and stock-based compensation GAAP to Non-GAAP Operating Income Reconciliation (in $ millions, except percentages) (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (June 30, 2025) | Q1 FY25 (June 30, 2024) | YoY % Change | | :----- | :---------------------- | :---------------------- | :----------- | | Net revenue | $1,671 | $1,660 | 1% | | GAAP operating income | $271 | $364 | (26%) | | Acquisition-related expenses | $27 | $27 | | | Restructuring and related charges | — | $6 | | | Stock-based compensation | $152 | $143 | | | Non-GAAP operating income | $450 | $540 | (17%) | | GAAP operating margin | 16.2% | 21.9% | | | Non-GAAP operating margin | 26.9% | 32.5% | | [GAAP to Non-GAAP Guidance Reconciliation (FY26)](index=16&type=section&id=GAAP%20Guidance%20to%20Non-GAAP%20Guidance) FY26 non-GAAP net revenue is projected between **$7.1 billion and $7.5 billion**, with an operating margin of **27.2% to 29.2%**, after adjusting for acquisition-related expenses and deferred net revenue FY26 GAAP to Non-GAAP Guidance Reconciliation | Metric (in $ millions) | GAAP Guidance Range | Non-GAAP Guidance Range | | :--------------------- | :------------------ | :---------------------- | | Net revenue | $7,100 to $7,500 | $7,100 to $7,500 | | Cost of revenue | $1,475 to $1,515 | $1,420 to $1,460 | | Operating expense | $4,470 to $4,570 | $3,750 to $3,850 | | Operating margin | 16.3% to 18.9% | 27.2% to 29.2% | | Income before provision for income taxes | $1,136 to $1,391 | $1,911 to $2,166 | - Non-GAAP adjustments for FY26 guidance include acquisition-related expenses, stock-based compensation, and the change in deferred net revenue (online-enabled games)[38](index=38&type=chunk) [GAAP-Based Financial Data for Q2 FY26 Guidance](index=17&type=section&id=GAAP-Based%20Financial%20Data%20for%20Guidance) Q2 FY26 GAAP net revenue is projected between **$1.75 billion and $1.85 billion**, with net income of **$73 million to $117 million**, including adjustments for acquisition-related expenses and deferred net revenue Q2 FY26 GAAP Guidance with Adjustments | Metric (in $ millions) | GAAP Guidance Range | Acquisition-related expenses | Stock-based compensation | Change in deferred net revenue (online enabled games) | | :--------------------- | :------------------ | :--------------------------- | :----------------------- | :---------------------------------------------------- | | Net revenue | $1,750 to $1,850 | — | — | $50 | | Cost of revenue | $430 to $450 | ($10) | ($5) | — | | Operating expense | $1,215 to $1,235 | ($20) | ($170) | — | | Income before provision for income taxes | $104 to $167 | $30 | $175 | $50 | | Net income | $73 to $117 | | | | [Explanation of Non-GAAP Financial Measures](index=19&type=section&id=Non-GAAP%20Financial%20Measures) EA utilizes non-GAAP financial measures, including non-GAAP operating margin and free cash flow, to supplement GAAP, offering investors additional insights into core business performance by excluding non-recurring or non-operational items - Non-GAAP financial measures are presented as a supplement to GAAP to provide investors with additional useful information to better understand and evaluate the Company's operating results and future prospects[42](index=42&type=chunk) - These non-GAAP financial measures exclude acquisition-related expenses, stock-based compensation, restructuring and related charges, and capital expenditures, as applicable, which management believes may not be indicative of the Company's core business[43](index=43&type=chunk) - The Company uses a tax rate of **19%** internally to evaluate its operating performance and to forecast, plan, and analyze future periods[44](index=44&type=chunk)

Group 1 - The article discusses the significant challenges faced by Electronic Arts Inc. (EA) and the gaming industry, highlighting that risk-aversion is leading to the company's underperformance [1] - The investing approach focuses on identifying companies with strong leadership economics linked to their business models and ensuring they are sold at reasonable prices [1] - The analysis emphasizes the importance of a company's strategy for growth, competitive advantages that yield superior returns on capital, capital structure, capital allocation, and management incentives [1] Group 2 - The author identifies as a value investor, seeking permanent ownership of robust companies with trustworthy management [1]

Group 1 - Electronic Arts (EA) is set to release its earnings on July 29, 2025, with analysts predicting earnings of $0.64 per share on sales of $1.23 billion, a decline from the previous year's earnings of $1.01 per share on sales of $1.26 billion [3][4] - Over the past twelve months, EA achieved $7.5 billion in revenue, with $1.6 billion in operating profits and a net income of $1.1 billion, resulting in a current market cap of approximately $39 billion [4] - Historical data shows that EA stock tends to have positive one-day returns following earnings announcements in 55% of cases, with a median one-day gain of 2.2% and the largest increase reaching 8.0% [2][6] Group 2 - There are 20 earnings data points over the last five years, with 11 positive and 9 negative one-day returns recorded, indicating a 55% occurrence of positive returns [6] - The percentage of positive one-day returns increases to 58% when analyzing data from the last three years [6] - The median of the 11 positive returns is 2.2%, while the median of the 9 negative returns is -5.5% [6] Group 3 - Traders can utilize historical trends for event-driven strategies, either by positioning ahead of earnings announcements or analyzing post-earnings returns to guide future positioning [3][5] - A relatively lower-risk strategy involves understanding the correlation between short-term and medium-term returns after earnings, allowing traders to position themselves accordingly [7][8]

Core Insights - Electronic Arts (EA) is expected to report quarterly earnings of $0.10 per share, reflecting an 80.8% decline year-over-year [1] - Analysts forecast revenues of $1.24 billion, indicating a 1.7% decrease compared to the previous year [1] - The consensus EPS estimate has remained unchanged over the past 30 days, suggesting analysts have reassessed their projections [1] Revenue Composition - Analysts estimate 'Net revenue by composition - Live services and other - Non-GAAP (Net Bookings)' at $1.03 billion, a year-over-year decline of 5.5% [4] - The estimated 'Net revenue by composition - Full game - Full game downloads - Non-GAAP (Net Bookings)' is projected to be $139.30 million, down 2.6% from the year-ago quarter [4] - For 'Net revenue by composition - Full game - Packaged goods - Non-GAAP (Net Bookings)', the estimate is $24.02 million, reflecting a 3.9% decrease year-over-year [5] Market Performance - EA's shares have decreased by 3.2% over the past month, contrasting with the Zacks S&P 500 composite's increase of 4.6% [5] - Despite the recent decline, EA holds a Zacks Rank 2 (Buy), indicating expectations of outperforming the overall market in the near term [5]