A month has gone by since the last earnings report for Activision Blizzard, Inc . Shares have added about 5.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Activision Blizzard, Inc due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Activision Q3 Earnings, Revenues Fall Y/Y on Soft Demand

Activision Blizzard delivered non-GAAP earnings of 68 cents per share for third-quarter 2022, down 23.6% year over year due to a slow year for the gaming industry so far. The industry has been dealing with hardware supply chain issues affecting consoles, inflation and lack of big hits.

Consolidated revenues declined 13.9% year over year to $1.78 billion. Total revenues declined 4% to $1.71 billion after adjusting for revenues from non-reportable segments, the net effect from the recognition of deferred revenues and the elimination of intersegment revenues.

The Zacks Consensus Estimate for earnings and revenues was pegged at 51 cents per share and $1.70 billion, respectively.

For the quarter ended Sep 30, 2022, overall Monthly Active Users (MAUs) were 368 million, down 5.6% year over year.

Activision Blizzard’s net bookings declined 2.7% year over year to $1.82 billion. In-game net bookings were $1.35 billion, up 13.2% year over year.

Activision Blizzard is in the process of being acquired by Microsoft (MSFT). Microsoft will pay $95.00 per Activision share, with the total transaction value being $68.7 billion. The deal is expected to close in fiscal 2023.

The transaction, expected to close in Microsoft’s fiscal year ending Jun 30, 2023, has been approved by the boards of Activision Blizzard and Microsoft.

Top-Line Details

Product sales (13% of revenues) amounted to $231 million, down 45.4% year over year. In-game subscriptions and other revenues (87% of revenues) fell 5.8% to $1.55 billion.

Based on distribution channels, Activision Blizzard reported retail channel sales of $25 million, which fell 63.8% year over year. Digital online revenues of $1.6 billion were down 13.3% from the year-ago quarter. Other revenues declined 21.1% year over year to $105 million.

Further, based on platforms, revenues from mobile and ancillary (50.5% of revenues) rose 4.5% year over year to $831 million. Revenues from consoles (22.9% of revenues) declined 49.2% year over year to $376 million. PC revenues (20.2% of revenues) plunged 47.1% year over year to $332 million. Other revenues improved 1.3% year over year to $151 million.

On a geographic basis, revenues from the Americas (56.1% of revenues) declined 14.3% year over year to $999 million. Europe, the Middle East and Africa revenues (27.9% of revenues) were down 19.5% year over year to $498 million. Revenues from the Asia Pacific (16% of revenues) remained flat year over year at $285 million.

Segment Details

Activision (28% of revenues) revenues dropped 25.1% year over year to $480 million. The division had 97 million MAUs as of Sep 30, 2022, down 18.5% year over year.

Blizzard (31.7% of revenues) revenues totaled $543 million, up 10.1% from the year-ago quarter’s levels. Blizzard had 31 million MAUs as of Sep 30, 2022, up 19.2% year over year.

King’s (40.3% of revenues) revenues of $692 million increased 6.1% year over year. MAUs were 240 million as of Sep 30, 2022, down 2% year over year.

Operating Details

Product development expenses contracted 19.5% year over year to $239 million. Sales & marketing expenses were up 15.3% year over year to $272 million.

Moreover, general & administrative expenses were $168 million, up 38.8% year over year.

Total costs & expenses on a non-GAAP basis remained flat year over year at $1.17 billion in the reported quarter.

On a non-GAAP basis, operating income was $605 million, down 32.3% year over year.

Balance Sheet & Cash Flow

As of Jun 30, 2022, cash and cash equivalents were $7.7 billion compared with $10.5 billion as of Jun 30, 2022.

Long-term debt, as of Sep 30, 2022, was $3.61 billion, unchanged from the figure reported as of Jun 30, 2022.

Operating cash flow decreased 51% year over year to $521 million. Free cash flow declined 51% year over year to $498 million.

On a trailing 12-month basis, free cash flow decreased 41% to $2.81 billion.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Activision Blizzard, Inc has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Activision Blizzard, Inc has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Activision Blizzard, Inc is part of the Zacks Toys - Games - Hobbies industry. Over the past month, Mattel (MAT Quick QuoteMAT - Free Report) , a stock from the same industry, has gained 1.7%. The company reported its results for the quarter ended September 2022 more than a month ago.

Mattel reported revenues of $1.76 billion in the last reported quarter, representing a year-over-year change of -0.4%. EPS of $0.82 for the same period compares with $0.84 a year ago.

For the current quarter, Mattel is expected to post earnings of $0.29 per share, indicating a change of -45.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -2% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Mattel. Also, the stock has a VGM Score of D.