A month has gone by since the last earnings report for Electronic Arts (EA Quick QuoteEA - Free Report) . Shares have added about 1.8% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Electronic Arts due for a pullback? 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 drivers.

Electronic Arts' Q3 Earnings and Revenues Rise Y/Y

Electronic Arts reported third-quarter fiscal 2024 earnings of $2.96 per share, which jumped 9.2% year over year.

Revenues increased 3.4% year over year to $1.94 billion, driven by new releases, continued live services growth and healthy engagement.

The Zacks Consensus Estimate for earnings was pegged at $2.92 per share. The consensus mark for revenues was pinned at $2.39 billion.

Net bookings for the third quarter were $2.36 billion, up 1% year over year or 2% in constant currency (cc). The figure missed the Zacks Consensus Estimate by 0.73%.

Live services net bookings were $1.71 billion, up 3% year over year or 5% in cc.

Quarter Details

EA’s full-game revenues (31.8% of total revenues) decreased 0.6% year over year to $618 million. The figure beat the Zacks Consensus Estimate by 15.22%.

Full-game download revenues increased 2% year over year to $431 million. The figure beat the Zacks Consensus Estimate by 18.7%.

Revenues from packaged goods remained flat year over year at $187 million. The figure beat the Zacks Consensus Estimate by 7.91%.

Live services and other revenues (68.2% of total revenues) increased 5.4% year over year to $1.33 billion. The figure beat the Zacks Consensus Estimate by 1.46%.

Based on platforms, revenues from consoles increased 7% year over year to $1.23 billion in the reported quarter. The figure beat the Zacks Consensus Estimate by 10.98%.

Revenues from PC & Other declined 3% year over year to $420 million. The figure missed the consensus mark by 4.16%.

Revenues from the mobile platform increased 1% year over year to $296 million. The figure missed the Zacks Consensus Estimate by 0.87%.

Gaming Metrics

EA SPORTS Madden NFL delivered a strong quarter, with net bookings up 5% year over year, as exciting new in-game innovations continued to drive growth across player acquisition and engagement.

EA SPORTS FC was a huge achievement for EA. In the third quarter, the total global football business significantly exceeded expectations. The franchise outperformed third-quarter expectations, delivering 7% net bookings growth compared with a prior year that included the World Cup.

New releases of EA SPORTS UFC, NHL and World Rally Championship contributed to further expanding the aggregate fandom and strength of the EA SPORTS community, creating additional value-added services in one of the largest sports brands and platforms in the world.

Apex Legends did not meet the company’s expectations, as the teams continued to learn and iterate with each new season and event. In the past few weeks, the recent cross-over promotion showed promising early signals, delivering two of the highest net bookings days over the fiscal year. With the launch of Season 20 in February, the teams will deliver more innovation as they continue to build for the long term.

Operating Details

EA’s GAAP gross profit rose 7.8% from the year-ago quarter’s levels to $1.42 billion. Gross margin expanded 300 basis points (bps) on a year-over-year basis to 72.8%.

Operating expenses increased 2.6% year over year to $1.051 billion. As a percentage of revenues, operating expenses contracted 40 bps on a year-over-year basis to 54%.

Operating income on a GAAP basis increased 26.3% year over year to $365 million. The operating margin expanded 340 bps year over year to 18.8% in the reported quarter.

Balance Sheet and Cash Flow

As of Dec 31, 2023, EA had $3.1 billion in cash and short-term investments compared with $2.3 billion as of Sep 30, 2023.

Net cash provided by operating activities for the quarter was $1.264 billion, up 13% year over year. For the trailing 12 months, net cash provided by operating activities was a record $2.352 billion.

EA repurchased 2.5 million shares for $325 million during the quarter, bringing the total for the trailing 12 months to 10.4 million shares for $1.300 billion.

EA has declared a quarterly cash dividend of 19 cents per share of the company’s common stock. The dividend is payable on Mar 20, 2024, to shareholders of record as of the close of business on Feb 28, 2024.

Guidance

For fourth-quarter fiscal 2024, EA expects GAAP revenues between $1.625 billion and $1.925 billion and diluted earnings in the range of 20-68 cents per share. Net bookings are expected between $1.625 billion and $1.925 billion.

For fiscal 2024, EA expects revenues in the range of $7.408-$7.708 billion and diluted earnings of $4.21-$4.68 per share.

The company expects net bookings guidance for the year between $7.389 billion and $7.689 billion.

Operating cash flow is estimated in the band of $1.95-$2.1 billion.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Electronic Arts has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front 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 B. 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, Electronic Arts has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.