Electronic Arts(EA) - 2026 Q2 - Quarterly Report

Financial Performance - Total net revenue for the fiscal quarter ended September 30, 2025, was $1,839 million, down 9% year-over-year[126] - Live services and other net revenue was $1,221 million, down 7% year-over-year[126] - Net revenue attributable to digital full game downloads was $1,478 million, an increase of 10% from $1,343 million in 2024[123] - Net revenue for the three months ended September 30, 2025 was $1,839 million, a decrease of $186 million or 9% compared to the same period in 2024[157] - Full game net revenue for the three months ended September 30, 2025 was $618 million, down $98 million or 14% year-over-year, primarily due to a decline in EA SPORTS College Football[160] - Live services and other net revenue for the three months ended September 30, 2025 was $1,221 million, a decrease of $88 million or 7% compared to the same period in 2024, driven by lower sales of extra content for Apex Legends[162] - For the six months ended September 30, 2025, net revenue was $3,510 million, a decrease of $175 million or 5% compared to the same period in 2024[163] - The composition of net revenue for the six months ended September 30, 2025 included $907 million from full game sales and $2,603 million from live services and other[164] - Full game net revenue for the six months ended September 30, 2025, was $907 million, a decrease of $59 million, or 6 percent, compared to the same period in 2024[165] - Live services and other net revenue for the six months ended September 30, 2025, was $2,603 million, down $116 million, or 4 percent, year-over-year[166] Net Bookings - Net bookings for the three months ended September 30, 2025, were $1,818 million, a decrease of 13% compared to $2,079 million in 2024[129] - Live services and other net bookings were $1,118 million, down 10% year-over-year[129] Operating Income and Expenses - Operating income was $200 million, down 48% year-over-year[126] - Gross margin was 75.9%, down 2 percentage points year-over-year[126] - Research and development expenses for the six months ended September 30, 2025, increased by $115 million, or 9 percent, compared to the same period in 2024[174] - Marketing and sales expenses for the three months ended September 30, 2025, increased by $32 million, or 12 percent, year-over-year[176] - General and administrative expenses for the three months ended September 30, 2025, decreased by $8 million, or 4 percent, compared to the same period in 2024[179] Cash Flow and Stockholder Returns - The company returned $423 million to stockholders through capital return programs, including repurchasing 2.3 million shares for approximately $375 million[126] - During the six months ended September 30, 2025, the company returned $846 million to stockholders, including $750 million from repurchasing 5.3 million shares and $96 million from quarterly cash dividends[194] - Net cash provided by operating activities for the six months ended September 30, 2025, decreased by $207 million compared to the same period in 2024[186] - Cash and cash equivalents as of September 30, 2025, were $1,148 million, a decrease of $988 million from March 31, 2025[185] Debt and Financing - The company entered into a Merger Agreement on September 28, 2025, to be acquired by a Consortium[119] - The company entered into a $500 million unsecured revolving credit facility on March 22, 2023, with no amounts outstanding as of September 30, 2025[192] - The company believes its cash, cash equivalents, short-term investments, and available financing will be sufficient to meet material cash requirements for the next 12 months[193] Market Risks - The company is exposed to various market risks, including changes in foreign currency exchange rates and interest rates, which have experienced significant volatility[199] - A hypothetical adverse foreign currency exchange rate movement of 10% could result in potential declines of $249 million in the fair value of foreign currency forward contracts used in cash flow hedging[204] - As of September 30, 2025, a hypothetical 150 basis point increase in interest rates would have resulted in a $1 million, or 1%, decrease in the fair market value of the company's short-term investments[207] - The company employs foreign currency forward contracts to hedge anticipated exposures related to foreign currency-denominated sales and expenses, with maturities generally of 18 months or less[201] - The company believes that the risk of counterparty nonperformance in its foreign currency forward contracts is not material, although financial market disruptions could affect this[203] Revenue Recognition - The company recognizes revenue for service-related performance obligations for digitally-distributed games over an estimated eight-month period beginning in the month of sale[145] - The estimated change in the offering period for service-related performance obligations will move the recognition of approximately $78 million in net revenue from fiscal year 2026 into fiscal year 2027[146] - The company expects a decrease in net revenue of $8 million and net income of $6 million for the three and six months ended September 30, 2025 due to the change in the Estimated Offering Period[146] Other Financial Information - Packaged goods revenue for the three months ended September 30, 2025 was $217 million, down $24 million or 10% year-over-year[158] - Full game downloads for the three months ended September 30, 2025 were $401 million, a decrease of $74 million or 16% compared to the same period in 2024[158] - The company does not have any off-balance sheet arrangements as of September 30, 2025[198] - The company's short-term investments were classified as available-for-sale securities, recorded at fair value as of September 30, 2025[206] - As of September 30, 2025, approximately $737 million of the company's cash and cash equivalents were domiciled in foreign tax jurisdictions, all available for repatriation without a material tax cost[195]