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Electronic Arts (EA) is Set to Lay Off 6% of Its Workforce
Electronic Arts (EA - Free Report) recently announced that it is planning to cut its workforce by 6% and reduce office space. This is the first major video game developer to announce job cuts.
Shares of Electronic Arts have decreased 6.6% in the past year compared with the Zacks Consumer Discretionary sector’s decline of 23.4% in the same period.
EA reported third-quarter 2023 profit of $2.71 per share, missing the Zacks Consensus Estimate of $3.05 per share. Revenues increased 5.1% year over year to $1.88 billion, which missed the Zacks Consensus Estimate of $2.49 billion.
Soon after the presidential elections of FIFA, the split with EA was announced. This split was due to the fact that FIFA is looking to release its own games from now on. They believe that they could build better games than EA and the demand for the games were primarily due to the authenticity of FIFA.
FIFA 23 will be the last game of FIFA made by EA. FIFA 23 is to be the largest title in the franchise history.
This split and upcoming competition from FIFA are expected to affect the top line in upcoming quarters. The Zacks Consensus Estimate for EA’s revenues for fourth-quarter 2023 is currently pegged at $1.73 billion, indicating a decline of 1% year over year.
Electronic Arts Inc. Price and Consensus
Electronic Arts Inc. price-consensus-chart | Electronic Arts Inc. Quote
EA Joins Other Tech Giants Cutting Jobs
Big technology companies have been laying off its workforce owing to macroeconomic conditions. These conditions are making an economic downturn and rising interest rates.
Meta Platforms (META - Free Report) and Amazon.com (AMZN - Free Report) have already announced round two of job cuts this month. Total Technology layoffs added to 63,000 in the first two months of the year.
EA had 12,900 employees at the end of March last year. The company is expected to incur $170 million to $200 million in restructuring costs.
EA, the maker of FIFA and The Sims video game, will try to provide opportunities for employees to shift to other projects. If that is not possible, the company will try to give severance pay and additional benefits to its employees.
Video game sales have slowed down this year and the spending on video game content is also down by 2%.
EA lowered its annual booking prediction after the delay in release of a game based on Star Wars. Warner Bros. Discovery (WBD - Free Report) recently launched Hogwarts Legacy game which topped the video game sales chart in February.
This Zacks Rank #4 (Sell) company’s top line could shrink in the upcoming quarters due to its split with FIFA. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.