A month has gone by since the last earnings report for Activision Blizzard, Inc . Shares have lost about 2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Activision Blizzard, Inc due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Activision Blizzard’s Q2 Earnings and Revenues Increase Y/Y
Activision Blizzard delivered non-GAAP earnings of 91 cents per share for second-quarter 2023, up 89.6% year over year. Consolidated revenues increased 34.6% year over year to $2.19 billion.
Total revenues increased 51.5% to $2.37 billion after adjusting for revenues from non-reportable segments, the net effect from the recognition of deferred revenues and the elimination of intersegment revenues.
Second-quarter growth was broad-based, with net bookings increasing year over year in Call of Duty, Candy Crush, Warcraft, Overwatch and Diablo IV.
The Zacks Consensus Estimate for earnings and revenues was pegged at 90 cents per share and $2.4 billion, respectively.
For the quarter ended Mar 31, 2023, overall Monthly Active Users (MAUs) were 356 million, down 1.4% year over year.
Activision Blizzard’s net bookings jumped 50.3% year over year to $2.46 billion. In-game net bookings were $1.56 billion, up 30.5% year over year.
The Zacks Consensus estimate for net bookings was pegged at $2.45 billion and total MAUs was pegged at 381 million.
Activision Blizzard is in the process of being acquired by Microsoft (MSFT). Microsoft will pay $95 per Activision share with the total transaction value being $68.7 billion. The transaction, expected to close by Oct 18, 2023, has been approved by the boards of Activision Blizzard and Microsoft.
Top-Line Details
Product sales (23.7% of revenues) amounted to $520 million, up 71.1% year over year. In-game subscriptions and other revenues (76.8% of revenues) increased 25.9% to $1.68 billion.
Based on distribution channels, Digital online revenues of $2.01 billion were up 36.5% from the year-ago quarter. Activision Blizzard reported retail channel sales of $81 million, which gained 24.6% year over year. Other revenues increased 8.6% year over year to $114 million.
Further, based on platforms, revenues from mobile and ancillary (42.9% of revenues) rose 13.5% year over year to $943 million. Revenues from consoles (25.3% of revenues) gained 47.9% year over year to $556 million. PC revenues (27% of revenues) increased 78.9% year over year to $594 million. Other revenues gained 8.6% year over year to $114 million.
On a geographic basis, revenues from the Americas (58.1% of revenues) improved 30.1% year over year to $1.27 billion. Europe, the Middle East and Africa revenues (30% of revenues) were up 40.4% year over year to $660 million. Revenues from the Asia Pacific (12.2% of revenues) jumped 40.1% year over year to $269 million.
Segment Details
Activision (24.2% of revenues) revenues rose 17.1% year over year to $574 million. The division had 92 million MAUs as of Jun 30, 2023, down 2.1% year over year. Call of Duty in-game net bookings on console and PC grew strongly year over year in the second quarter. Call of Duty Mobile net bookings also grew year over year, driven by enhancements to the player experience and live operations.
Blizzard (44.3% of revenues) revenues totaled $1049 million, up 169% from the year-ago quarter’s levels. Blizzard had 26 million MAUs as of Jun 30, 2023, down 3.7% year over year.
Diablo IV on mobile and PC also contributed to Blizzard’s second-quarter net bookings growth, with the game experiencing stable trends across engagement, retention and player investment. On mobile, Warcraft: Arclight Rumble, an action strategy game internally-developed at Blizzard, continues to progress well through regional testing.
King’s (31.5% of revenues) revenues of $747 million increased 9.2% year over year. MAUs were 238 million as of Jun 30, 2023, down 0.8% year over year. In-game net bookings increased 10% year over year, driven by the Candy Crush franchise.
The launch of the latest Candy Crush All Stars tournament, where players compete in Candy Crush Saga for a chance to appear in the live finals, drove incremental growth in installs and player investment.
Candy Crush payer numbers again grew year over year and Candy Crush was the top-grossing game franchise in the U.S. app stores for the 24th quarter in a row.
Operating Details
Product development expenses increased 30.2% year over year to $405 million. Sales & marketing expenses were up 26.6% year over year to $333 million.
Moreover, general & administrative expenses were $230 million, down 6.9% year over year.
Total costs & expenses on a non-GAAP basis increased 24.3% year over year to $1.62 billion in the reported quarter.
On a non-GAAP basis, operating income was $583 million, up 72.5% year over year.
Balance Sheet & Cash Flow
As of Jun 30, 2023, cash and cash equivalents were $10.8 billion compared with $9.2 billion as of Mar 31, 2023.
Long-term debt, as of Jun 30, 2023, was $3.61 billion, unchanged from the figure reported as of Mar 31, 2023.
Activision Blizzard generated $590 million in operating cash flow for the quarter as compared with $198 million for the second quarter of 2023.
Non-GAAP Free cash flow increased 252% year over year to $567 million.
On a trailing 12-month basis, free cash flow increased 27% to $2.44 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Activision Blizzard, Inc has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Activision Blizzard, Inc has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Activision Blizzard, Inc (ATVI) Down 2% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Activision Blizzard, Inc . Shares have lost about 2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Activision Blizzard, Inc due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Activision Blizzard’s Q2 Earnings and Revenues Increase Y/Y
Activision Blizzard delivered non-GAAP earnings of 91 cents per share for second-quarter 2023, up 89.6% year over year. Consolidated revenues increased 34.6% year over year to $2.19 billion.
Total revenues increased 51.5% to $2.37 billion after adjusting for revenues from non-reportable segments, the net effect from the recognition of deferred revenues and the elimination of intersegment revenues.
Second-quarter growth was broad-based, with net bookings increasing year over year in Call of Duty, Candy Crush, Warcraft, Overwatch and Diablo IV.
The Zacks Consensus Estimate for earnings and revenues was pegged at 90 cents per share and $2.4 billion, respectively.
For the quarter ended Mar 31, 2023, overall Monthly Active Users (MAUs) were 356 million, down 1.4% year over year.
Activision Blizzard’s net bookings jumped 50.3% year over year to $2.46 billion. In-game net bookings were $1.56 billion, up 30.5% year over year.
The Zacks Consensus estimate for net bookings was pegged at $2.45 billion and total MAUs was pegged at 381 million.
Activision Blizzard is in the process of being acquired by Microsoft (MSFT). Microsoft will pay $95 per Activision share with the total transaction value being $68.7 billion. The transaction, expected to close by Oct 18, 2023, has been approved by the boards of Activision Blizzard and Microsoft.
Top-Line Details
Product sales (23.7% of revenues) amounted to $520 million, up 71.1% year over year. In-game subscriptions and other revenues (76.8% of revenues) increased 25.9% to $1.68 billion.
Based on distribution channels, Digital online revenues of $2.01 billion were up 36.5% from the year-ago quarter. Activision Blizzard reported retail channel sales of $81 million, which gained 24.6% year over year. Other revenues increased 8.6% year over year to $114 million.
Further, based on platforms, revenues from mobile and ancillary (42.9% of revenues) rose 13.5% year over year to $943 million. Revenues from consoles (25.3% of revenues) gained 47.9% year over year to $556 million. PC revenues (27% of revenues) increased 78.9% year over year to $594 million. Other revenues gained 8.6% year over year to $114 million.
On a geographic basis, revenues from the Americas (58.1% of revenues) improved 30.1% year over year to $1.27 billion. Europe, the Middle East and Africa revenues (30% of revenues) were up 40.4% year over year to $660 million. Revenues from the Asia Pacific (12.2% of revenues) jumped 40.1% year over year to $269 million.
Segment Details
Activision (24.2% of revenues) revenues rose 17.1% year over year to $574 million. The division had 92 million MAUs as of Jun 30, 2023, down 2.1% year over year. Call of Duty in-game net bookings on console and PC grew strongly year over year in the second quarter. Call of Duty Mobile net bookings also grew year over year, driven by enhancements to the player experience and live operations.
Blizzard (44.3% of revenues) revenues totaled $1049 million, up 169% from the year-ago quarter’s levels. Blizzard had 26 million MAUs as of Jun 30, 2023, down 3.7% year over year.
Diablo IV on mobile and PC also contributed to Blizzard’s second-quarter net bookings growth, with the game experiencing stable trends across engagement, retention and player investment. On mobile, Warcraft: Arclight Rumble, an action strategy game internally-developed at Blizzard, continues to progress well through regional testing.
King’s (31.5% of revenues) revenues of $747 million increased 9.2% year over year. MAUs were 238 million as of Jun 30, 2023, down 0.8% year over year. In-game net bookings increased 10% year over year, driven by the Candy Crush franchise.
The launch of the latest Candy Crush All Stars tournament, where players compete in Candy Crush Saga for a chance to appear in the live finals, drove incremental growth in installs and player investment.
Candy Crush payer numbers again grew year over year and Candy Crush was the top-grossing game franchise in the U.S. app stores for the 24th quarter in a row.
Operating Details
Product development expenses increased 30.2% year over year to $405 million. Sales & marketing expenses were up 26.6% year over year to $333 million.
Moreover, general & administrative expenses were $230 million, down 6.9% year over year.
Total costs & expenses on a non-GAAP basis increased 24.3% year over year to $1.62 billion in the reported quarter.
On a non-GAAP basis, operating income was $583 million, up 72.5% year over year.
Balance Sheet & Cash Flow
As of Jun 30, 2023, cash and cash equivalents were $10.8 billion compared with $9.2 billion as of Mar 31, 2023.
Long-term debt, as of Jun 30, 2023, was $3.61 billion, unchanged from the figure reported as of Mar 31, 2023.
Activision Blizzard generated $590 million in operating cash flow for the quarter as compared with $198 million for the second quarter of 2023.
Non-GAAP Free cash flow increased 252% year over year to $567 million.
On a trailing 12-month basis, free cash flow increased 27% to $2.44 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Activision Blizzard, Inc has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Activision Blizzard, Inc has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.