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    EA
    Earnings call· Dec 2024(Q3 FY25)

    ELECTRONIC ARTS INC. EA

    Feb 4, 2025 Source

    Executive summary

    Electronic Arts Q3 FY25 — Underperformance in Global Football and Dragon Age, but Strong Pipeline and FY26 Growth Expected

    Electronic Arts reported a challenging Q3 FY25, with net bookings down 6% year-over-year, primarily due to underperformance from Dragon Age: The Veilguard and a mid-single-digit decline in Global Football net bookings. The company attributed the Global Football softness to slower new player acquisition and unusual engagement churn. However, post-quarter updates and events for EA Sports FC have shown strong player reactivation and record engagement. Management remains confident in its long-term strategy, pipeline of new titles including Battlefield and SCAPE for FY26, and commitment to capital returns, expecting a return to growth in FY26.

    Highlights

    5

    • EA Sports FC reactivated over 2 million Ultimate Team players following the January 16 update.

    • EA Sports FC Team of the Year event saw record net bookings and weekly active users.

    • American Football ecosystem (Madden NFL, College Football) player count up double digits year-over-year.

    • The Sims franchise delivered year-over-year net bookings growth in Q3.

    • Announced a $1 billion accelerated stock repurchase, bringing total repurchases to $2.5 billion in the first year of a $5 billion authorization.

    Concerns

    5

    • Q3 net bookings were $2.2 billion, down 6% year-over-year.

    • Dragon Age: The Veilguard underperformed expectations in a competitive market.

    • EA Sports FC 25 saw a mid-single-digit decline year-over-year in Q3 net bookings for the global football franchise.

    • FY25 net bookings guidance revised down to $7.0 billion-$7.15 billion (down 6%-4% year-over-year).

    • FY25 GAAP net revenue guidance lowered to $7.25 billion-$7.4 billion.

    Guidance & targets

    20
    CategoryTargetConfidence
    FY25 Net Bookings
    $7.0B-$7.15B
    high materiality
    High
    FY25 GAAP Net Revenue
    $7.25B-$7.4B
    high materiality
    High
    FY25 Cost of Revenue
    $1.48B-$1.49B
    medium materiality
    High
    FY25 Operating Expenses
    ~$4.38B-$4.39B
    medium materiality
    High
    FY25 GAAP Operating Margin
    19.2%-20.5%
    high materiality
    High
    FY25 Non-GAAP Operating Margin
    30.5%-31.6%
    high materiality
    High
    FY25 GAAP EPS
    $3.90-$4.25
    high materiality
    High
    FY25 Operating Cash Flow
    $1.8B-$1.9B
    high materiality
    High
    FY25 Capital Expenditures
    $225M
    medium materiality
    High
    FY25 Free Cash Flow
    $1.575B-$1.675B
    high materiality
    High
    Q4 Net Bookings
    $1.444B-$1.594B
    high materiality
    High
    Q4 Net Revenue
    $1.682B-$1.832B
    medium materiality
    High
    Q4 Cost of Revenue
    $305M-$315M
    medium materiality
    High
    Q4 Operating Expenses
    ~$1.112B-$1.122B
    medium materiality
    High
    Q4 GAAP EPS
    $0.65-$1.00
    high materiality
    High
    Global Football Franchise Net Bookings
    low double-digit decline
    high materiality
    Medium
    American Football Net Bookings
    surpass $1B
    high materiality
    High
    Battlefield Release
    FY26 launch window
    high materiality
    High
    Company Growth
    return to growth
    high materiality
    High
    Top Line Growth and Margin Expansion
    through FY27 and into the future
    high materiality
    High

    Operational metrics

    22
    Live services as % of business
    74%
    TTM

    On a trailing 12-month basis.

    Global Football franchise net bookings
    mid-single-digit declineYoY
    Q3

    Softer-than-expected results in HD partially offset by continued growth in FC Mobile.

    FC Mobile new players
    double-digit increaseYoY
    Q3

    Double-digit increase in new players, engagement, and monetization.

    FC Mobile engagement
    double-digit increaseYoY
    Q3

    Double-digit increase in new players, engagement, and monetization.

    FC Mobile monetization
    double-digit increaseYoY
    Q3

    Double-digit increase in new players, engagement, and monetization.

    FC Online net bookings
    up slightly
    Q3

    Strong promotional content drove monetization.

    American Football weekly active users
    up double-digitYoY
    Q3

    Expansion of American Football community continued to see strength.

    American Football total unique spenders
    up double-digitYoY
    Q3

    Expansion of American Football community continued to see strength.

    Apex Legends net bookings
    downYoY
    Q3

    Performed in line with expectations.

    The Sims franchise net bookings
    growthYoY
    Q3

    Continued to broaden the franchise by delivering focused updates and new player experiences.

    MySims: Cozy Bundle new players
    over 50%
    Q3

    New to EA, expanded offerings on the Switch platform.

    GAAP Gross Margins
    increased 300 bps
    Q3

    Largely a result of lower licensing costs.

    Capital returned to stockholders
    $425M
    Q3

    Returned through stock repurchases and dividends.

    Stock repurchases
    $1B
    accelerated

    Plans for a $1 billion accelerated stock repurchase in addition to current $375 million per quarter program, bringing total to $2.5 billion in the first year of $5 billion authorization.

    Impact from change in deferred net revenue
    negative 250 to negative 240 bps
    FY25

    Expected impact.

    Cash tax benefit
    $150M
    prior year

    One-time cash tax benefit in the prior year.

    FC Ultimate Team players reactivated
    2M
    post Jan 16 update

    Following the gameplay update and Team of the Year event.

    FC competitive cohort engagement
    down high single digits
    prior to Jan 16 update

    Post update, clearly trending back to prior year levels.

    FC net bookings
    upYoY
    Team of the Year event

    Record net bookings for the event.

    FC weekly active users
    record
    Team of the Year event weekend

    Record weekly active users over the event weekend.

    FC global football franchise net bookings growth
    over 70%
    last 5 fiscal years

    Making it one of the biggest sports entertainment properties in the world.

    FC combined plays in full HD experiences
    flatYoY
    Q3

    Mix shift and slower new player acquisition accounted for about half of the titles underperformance.

    Industry KPIs

    7
    MetricValueDetails
    Total revenue$1.88BUSD
    Net income EPS$1.11USD/share
    CAPEX capital program$225MUSD
    Operating income margin19.2%-20.5%%
    Total operating expenses$1.05BUSD
    Content title performanceWon Sports Game of the Year
    Free cash flow operating cash flow$1.89BUSD

    Product announcements

    5
    ProductTypeDetails
    College Football 26launch
    Battlefield Labslaunch
    The Sims Creator Kitslaunch
    SCAPElaunch
    EA Sports Appexpansion

    Deals & partnerships

    1
    TRACAB TechnologiesAcquisition of a leader in optical sports tracking, real-time volumetric data capture technology, and analysis capabilities.

    Agreement reached to acquire TRACAB Technologies, which has developed best-in-class optical sports tracking and real-time volumetric data capture. This will accelerate how EA delivers more authentic gameplay and helps accelerate the EA Sports app vision.

    Risks & headwinds

    6
    Dragon Age: The Veilguard underperformanceQ3 FY25

    Did not resonate with a broad enough audience.

    Mitigation: Reallocate resources towards most significant and highest potential opportunities.

    EA Sports FC 25 underperformanceQ3 FY25

    Mid-single-digit decline YoY in Q3 net bookings for global football franchise.

    Mitigation: Addressed with a significant gameplay update on January 16, leading to player reactivation and record engagement during Team of the Year event.

    Slower top-of-funnel acquisition for FC 25Q3 FY25

    Post-launch acquisition cohorts waited longer to acquire new title, staying in prior iterations. Combined plays in full HD experiences flat YoY.

    Mitigation: Teams are focused on doing a better job of bringing players from the ecosystem across to the new version.

    Lapsed engagement in FC 25 competitive cohortQ3 FY25

    Engagement down high single digits prior to January 16 update.

    Mitigation: Implemented a major gameplay update on January 16 to address balance issues, resulting in positive gameplay sentiment and engagement trending back to prior year levels.

    Apex Legends business trajectoryOngoing

    Trajectory of the business has not been headed in the direction that we have wanted for some time.

    Mitigation: Ongoing support for core community, planning a more meaningful broad game update post-Battlefield launch, and a longer-term 'Apex 2.0' vision.

    Crowded industry pipeline impacting Battlefield launchFY26

    This year might be a nuanced year relative to competition.

    Mitigation: If the FY26 launch window is not optimal for player acquisition, EA would consider an alternate window to ensure the game's success.

    What to watch in Q4 FY25

    5

    FC Global Football Net Bookings

    Q4 FY25 and into FY26
    CurrentMid-single-digit decline YoY in Q3
    TargetReturn to growth or sustained positive trend (above low double-digit decline)

    Why it matters

    The performance and rebound of this core franchise are critical for overall company growth and investor confidence.

    Despite this positive trend, our FY '25 guidance at the midpoint adopts a prudent approach, anticipating a low double digit in global football franchise net bookings for Q4. With that said, we remain optimistic and the potential for continued momentum given Team of the Year's performance, the start of our Future Stars event and other upcoming events and updates this quarter.

    Q&A highlights

    7

    What were the drivers behind the slower-than-anticipated acquisition for EA Sports FC 25, considering market structure, console transitions, or community feedback?

    Management stated that while FC 25 is still expected to be the second biggest in franchise history, slower acquisition was partly due to many players being satisfied with prior iterations (especially after two World Cups and the brand launch). Gameplay tuning issues for a competitive cohort (too defensive) were addressed with a January 16 update, leading to a strong rebound in engagement and bookings.

    “As we look at the top of the funnel, again, we had over 40 million people playing across iterations and I think we had an exceptional game in '23 with 2 World Cups and the December World Cup in the year, which brought in a lot of new players. We then had the launch of our owned brand, EA Sports FC that we invested meaningfully behind at a marketing level to bring in new players. And at some level, I think that many of those players were very satisfied with the games that we're playing.”

    asked by Andrew Marok · answered by Andrew Wilson

    2 min read7 chapters

    Detailed Narrative

    01

    Q3 Performance and Global Football Dynamics

    The quarter did not meet financial expectations, primarily due to underperformance in Dragon Age: The Veilguard and the Global Football franchise. EA Sports FC 25 experienced a mid-single-digit decline in net bookings in Q3, attributed to slower top-of-funnel acquisition and unusual engagement churn among competitive players. Players stayed in prior iterations, and gameplay balance issues for a competitive cohort led to lower engagement.

    02

    Strategic Response and Turnaround

    Following player feedback, EA implemented a significant gameplay update on January 16, just before the Team of the Year event. This update successfully reactivated over 2 million Ultimate Team players, with record net bookings and weekly active users during the event. The company views the Q3 underperformance as a temporary issue, not structural, and sees positive momentum continuing into Q4 and beyond.

    03

    EA Sports Ecosystem Expansion

    EA is expanding its sports ecosystem, with American Football (Madden NFL and College Football 26) showing double-digit growth in players and unique spenders. College Football 26 is set to launch this summer. The company is also developing new social play models and a connected ecosystem for FC, including an entirely new world within the platform built around groundbreaking gameplay and content creation tools.

    04

    TRACAB Technologies Acquisition

    EA announced the acquisition of TRACAB Technologies, a leader in optical sports tracking and real-time volumetric data capture. This acquisition aims to enhance game authenticity, accelerate immersive gameplay, and extend the capabilities of the EA Sports app as a leading interactive sports platform, enabling new opportunities for fans to create and share real-world sports content.

    05

    Broader Portfolio and Pipeline

    Beyond sports, EA has a strong pipeline, with Battlefield Labs launching as a key development for the Battlefield franchise, targeting an FY26 release. The Sims franchise continues to grow, with new creator kits designed by top influencers and the MySims: Cozy Bundle outperforming expectations. SCAPE remains on track for launch this year across PC, console, and mobile, introducing a fresh community-driven model.

    06

    Technology and AI Strategy

    EA is unifying its central technology functions under a new Chief Technology Officer, Matt Thomlinson, to embed AI and technology at the core of its business. This move is expected to drive innovation, expand creative capabilities, build bigger and bolder experiences, and deepen connections within the community as a community-driven entertainment company.

    07

    Capital Allocation and Long-Term Outlook

    The company announced a $1 billion accelerated stock repurchase, bringing total repurchases to $2.5 billion in the first year of its $5 billion authorization, demonstrating confidence in its long-term growth outlook and strong cash flow generation. EA expects to return to growth in FY26, driven by its pipeline and continued expansion of franchises, with top-line growth and margin expansion through FY27 and into the future.

    AI-generated summary of the company’s earnings call. Not investment advice.