Electronic Arts Earnings: Core Franchises Drive Outperformance

Narrow-moat EA EA ended its fiscal 2023 strongly as fourth-quarter bookings and adjusted operating income both came well ahead of FactSet consensus. EA benefited from strong showings with core franchises as Apex Legends received a boost from its fourth anniversary and FIFA 23 became the bestselling launch in the franchise’s long history. We are maintaining our $142 fair value estimate.

Net bookings of $2.3 billion, up 15% year over year in constant currency, came in well ahead of guidance. The adjusted operating margin improved to 31% from 29% a year ago on higher bookings and cost controls. Mobile bookings improved 3% to $331 million, driven by FIFA Mobile, which was up triple digits and posted its first $100-million quarter. Outside of FIFA, the mobile portfolio “stabilized” in the quarter. Given the decision to cancel Apex Mobile, the firm expects mobile revenue to decline in fiscal 2024.

Net booking for PC jumped by 22% to $516 million as EA benefited from Apex and the continued success of Sims 4. While Sims 4 has generated a significant amount of revenue since its 2014 launch, the title has benefited from relatively little direct competition over the last few years. That could change in September when Paradox will release Life by You from Rob Humble who was head of the Sims Label for The Sims 2 and 3. We believe the next installment of The Sims is likely in development given its importance to EA.

Console net bookings increased by 9% to $1.1 billion, driven by the strong FIFA quarter. FIFA 23 surpassed its predecessor in lifetime sales six months after launch. The overall franchise on console, PC, and mobile grew 20% for the full fiscal year. The FIFA growth is particularly important since the franchise will lose the FIFA name license for the installment due later this year. We expect EA will increase marketing ahead of the launch of EA Sports FC to hold on to more casual fans and to forestall any confusion with future games with the FIFA name.