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Electronic Arts Q1 profit dips; stock falls on weak guidance

Earnings of video game publisher Electronic Arts (EA) declined in the first quarter of 2019 when a sharp fall in product sales more than offset higher digital revenues. Despite the results beating analysts’ estimates, the stock dropped sharply after the company’s unimpressive guidance triggered a sell-off.

First-quarter net income was $293 million or $0.95 per share, compared to $644 million or $2.06 per share in the same period last year. However, the bottom-line came in above Wall Street estimates.

Electronic Arts (EA) first quarter 2019 earnings
Electronic Arts Q1 2019 Earnings Infographic

Revenues fell 22% annually to $1.14 billion, hurt mainly by a sharp decrease in packaged goods and other net revenue. Analysts had predicted a faster decline. Meanwhile, digital net revenue advanced 9% to $957 million, reflecting the management’s aggressive online push.

Net bookings, a key metric to measure the sales performance, dropped 3.4 % to $749 million during the quarter, when more than 48 million players participated in the updated version of the popular FIFA World Cup franchise. Digital net bookings were higher by 2% compared to last year.

The stock dropped sharply after the company’s unimpressive guidance triggered a sell-off

During the quarter, the Redwood City, California based gaming software company repurchased 2.3 million shares for about $300 million.

“We have a strong slate of products to launch through the rest of the fiscal year, great content coming in our live services, and are continuing to grow our esports competitions,” said Electronic Arts CFO Blake Jorgensen.

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For fiscal 2019, the company expects revenues of $5.6 billion and earnings of $1.108 billion or $3.55 per share. Full-year net bookings are expected to be about $5.55 billion. For the second quarter, it is looking for net profit of $150 million or $0.48 per share on revenues of $1.27 billion.

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Take-Two Interactive (TTWO) and Activision Blizzard (ATVI), the other leading video game makers, are expected announce results for their most recent quarter on August 2 after the closing bell.

Last week, Electronic Arts shares hit an all-time high after gaining progressively since the beginning of the year. The stock traded lower during Thursday’s regular session, and fell about 7% after the earnings announcement.

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