How Should Investors Approach EA Stock Post Q3 Earnings Results?

Core Insights - Electronic Arts (EA) reported a decline in earnings and revenues for the third quarter of fiscal 2025, with earnings per share at $2.83, down 4.4% year over year, and revenues at $2.22 billion, down 6.38% year over year due to decreased Live services and full-game revenues [1][2]. Financial Performance - The Zacks Consensus Estimate for earnings was $2.99 per share, while the revenue consensus was $2.29 billion [2]. - Net bookings for the fiscal third quarter were $2.22 billion, reflecting a 6.4% year-over-year decline, with minimal impact from foreign exchange [2]. - Full-game net bookings were $633 million, down 3% year over year, while Live services net bookings were $1.58 billion, down 8% year over year [3]. - Full-game revenues accounted for 31.8% of total revenues, decreasing 3.1% year over year to $599 million, with full-game download revenues increasing 3% to $431 million, and revenues from packaged goods plunging 18% to $187 million [4]. - Live services and other revenues, making up 68.2% of total revenues, decreased 3.2% year over year to $1.28 billion [4]. - Revenues from consoles decreased 1% year over year to $1.23 billion, while revenues from PC & Other and mobile platforms declined 7% year over year to $420 million and $296 million, respectively [5]. Operating Metrics - EA's GAAP gross profit increased 0.8% year over year to $1.43 billion, with a gross margin expansion of 300 basis points to 75.8% [6]. - Operating expenses decreased 0.1% year over year to $1.05 billion, but as a percentage of revenues, they expanded 170 basis points to 55.8% [6]. - Operating income on a GAAP basis increased 3.3% year over year to $377 million, although the operating margin contracted 130 basis points to 20% [7]. Balance Sheet and Cash Flow - As of December 31, 2024, EA had $3.16 billion in cash and short-term investments, up from $2.56 billion as of September 30, 2024 [8]. - Net cash provided by operating activities was $1.176 billion for the quarter and $2.110 billion for the trailing 12 months [8]. - EA repurchased 2.4 million shares for $375 million during the quarter, totaling 10.1 million shares for $1.45 billion over the trailing 12 months [8]. Dividend and Guidance - The company declared a quarterly cash dividend of 19 cents per share, payable on March 19, 2025, to stockholders of record as of February 26, 2025 [9]. - For the fourth quarter of fiscal 2025, EA expects GAAP revenues between $1.682 billion and $1.832 billion, with earnings per share in the range of 65 cents to $1.00 [11]. - For fiscal 2025, EA anticipates revenues between $7.25 billion and $7.40 billion, with earnings per share between $3.9 and $4.25 [11].