Core Viewpoint - Saudi Arabia is significantly investing in the gaming industry as part of its Vision 2030 strategy to diversify its economy beyond oil and improve its international image [3][6][8]. Group 1: Investment in Gaming Industry - Electronic Arts (EA) is set to be acquired by Saudi Arabia's Public Investment Fund (PIF) and other investors for approximately $55 billion, representing a 25% premium over its market value at the time [4]. - PIF, which manages $1.15 trillion in assets, has previously invested in major gaming companies such as Activision Blizzard, Nintendo, and Take-Two [4]. - The establishment of Savvy Gaming Group by PIF, with a budget of around $37.8 billion, aims to create a gaming and esports company similar to Disney [5]. Group 2: Motivations Behind Investments - Crown Prince Mohammed bin Salman, an avid gamer, is driving these investments to enhance public entertainment options in Saudi Arabia [5]. - The gaming industry, valued at $187 billion, has surpassed film and music, making it a strategic target for investment to boost Saudi Arabia's influence in global entertainment [7]. - The local population, with about 70% under 35 years old and a significant portion of female gamers, presents a promising market for gaming [8]. Group 3: Potential Impacts of the Acquisition - The acquisition of EA may lead to a leveraged buyout, with around $20 billion in loans potentially resulting in studio closures or the sale of game IPs to repay debts [9]. - Concerns exist regarding the impact of conservative influences from Saudi investors on game inclusivity, particularly for titles like The Sims [9]. - Jared Kushner's involvement in facilitating the deal raises questions about regulatory scrutiny, although it is suggested that the acquisition may not face antitrust challenges [9].

Investment Rating - The report maintains a "Buy" rating for Electronic Arts (EA) with a target price of $179.80 [5][13]. Core Insights - EA reported FY26Q1 net revenue of $1.67 billion, exceeding consensus expectations by 7.4% and showing a year-over-year increase of 0.7% [1][5]. - The net bookings revenue reached $1.3 billion, surpassing consensus expectations by 4% and reflecting a year-over-year growth of 2.9%, primarily driven by stable growth in core products like the global football and rugby series [1][5]. - Despite an increase in new game release investments leading to a decline in net profit margin by 4.9 percentage points to 12%, the company achieved a net profit of $201 million, exceeding expectations by 51.6% [1][5]. Financial Performance - FY26Q1 net bookings revenue was $1.3 billion, higher than the previous guidance of $1.23 billion, with game net bookings revenue at $214 million, up 27.4% year-over-year, driven by the new title "Split Fiction" [2]. - Real-time service net bookings revenue was $1.08 billion, down 0.9% year-over-year, mainly due to stable growth in the "FC" and rugby series, partially offset by a decline in "Apex Legends" [2]. - The core game series saw a modest single-digit year-over-year growth in "FC" series net bookings, with "FC Online" achieving double-digit growth and "FC Mobile" reaching a record high with over 50 million installations [2]. Upcoming Releases - EA released the first trailer for "Battlefield 6" on July 24, with over 7 million views by July 29, and the full game is expected to launch within FY26 on platforms including PS5, Xbox X|S, and PC [3]. - The core football game "FC 26" is anticipated to be released on September 26 across all platforms, including the Switch 2, focusing on enhancing player experience with competitive and realistic gameplay modes [3]. Earnings Forecast and Valuation - The report slightly lowers the FY26-28E net revenue estimates by 1%, 0.8%, and 0.8% to $7.19 billion, $8.11 billion, and $8.36 billion respectively, primarily due to pressure on net bookings revenue from the rugby series [4][11]. - The FY26-28E net profit estimates are also reduced by 4.7%, 2.3%, and 2.6% to $910 million, $1.38 billion, and $1.43 billion respectively, attributed to increased promotional costs for "Battlefield 6" [4][11]. - The valuation is based on a PE of 33 times for FY27, aligning with the average of comparable companies, resulting in a target price of $179.80, down from a previous estimate of $184.60 [4][13].