What we think about Electronic Arts (EA)

Electronic Arts in Three Words: Games, Social, Sports

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Background

Electronic Arts creates and distributes games that are played and watched across different platforms. The video game publisher’s strategy is to use its portfolio of gaming IP to “create innovative games and content that enables us to build ongoing and meaningful relationships with communities of players, creators, and viewers.” This includes incorporating different business models (like subscription services, individual game sales, etc.), distribution channels (like digital downloads vs. physical retail sales), and platforms (like mobile, console, and PC), dependent on the preferences of the end customer.

In EA’s recent second quarter results, revenue remain flat year-over-year at $1.9 billion, while earnings per share rose 5% to $1.13 (excluding a one-time tax benefit). Live services – including online gameplay subscriptions and in-game content – now represents 67% of revenue and 73% of total future bookings.

In the first week of FIFA 2023 launch, more than 10 million players across more than 200 countries participated in gameplay, making it the biggest launch in EA Sports history. FIFA Mobile’s daily, weekly, and monthly active players were all up more than 100% year over year. FIFA unit sales were up 10% versus the comparable launch for FIFA 22, and FIFA Ultimate Team players saw a 6% rise. As the World Cup is played in Qatar, management planned to capitalize on that exposure by releasing new World Cup content across its console, PC, and mobile games.

EA’s player network has now surpassed 600 million people and the company is extremely profitable. CEO Andrew Wilson believes its network can grow to one billion players averaging one hour of gameplay daily, with playing finding new communities and forging meaningful connections. This profitable, highly engaging business has outperformed the S&P 500 by more than 327 percentage points during the past decade. We’re considering that a win, and recommending investors stick around to level up even higher.

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