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EA delivers best Q1 ever and improves Outlook as COVID-19 remains a Live Service Boon

Electronic art (NASDAQ: EA) delivered them results for the quarter ended June 30, 2020, and it appears that the company continues to survive the COVID-19 pandemic. More than good actually. Q1 2021 net sales were above expectations at $ 1.46 billion, compared to $ 1.21 billion for the same quarter last year, and net income was $ 365 million. Earnings per share are $ 1.25, above the $ 1.09 per share forecast by financial analysts. EA shares are up about 2 percent in trading outside the hours after the positive earnings report.

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COVID-19 immunity

As we learned during the industry’s last round of earning reports, the COVID-19 pandemic that has puzzled much of the world has actually been of great benefit to video game publishers. EA didn’t release a lot of notable content during Q1, with Command & Conquer Remastered Collection and a Nintendo Switch version of Burnout Paradise Remastered being their only new releases. That said, the company’s various live service titles performed exceptionally well with their audiences caught at home.

Apex Legends Season 5 generated the highest engagement since Season 1, and player acquisitions for the FIFA and Madden NFL franchises increased 100 percent and 140 percent, respectively, during Q1. EA kept the live service machine running smoothly and released over 30 traditional game updates and 50 mobile updates during the quarter. EA clearly knew that there would be a hunger for more content from well-known franchises during these difficult times and has satisfied that hunger well.

Big profits despite a slim release calendar

In the future, EA should continue to take advantage of the prevailing conditions, especially if another full COVID-19 second wave and lockdown occurs as predicted. As such, EA has raised their guidance for FY2021 from $ 5.55 in net income to $ 5.63 billion. Net booking guidelines, including net income plus deferred income from in-game purchases, have further improved – from $ 5.55 billion to $ 5.95 billion. Meanwhile, EA expects $ 1.23 billion in net income in Q2. EA can pull off a strong year simply by continuing to rely on FIFA, Madden, Apex Legends and The Sims, which is good because otherwise their release calendar is a bit weak.

Madden NFL 21 and EA Sports UFC 4 are doing well, of course, but the recently released hero shooter Rocket Arena is a bona fide flop and it’s hard to predict how Star Wars: Squadrons will fare. There is a lot of hardcore fan support for Squadrons, but there is a chance that the space combat game is a bit too niche for its own good. Q3 will see the launch of FIFA 21 and NHL 21, and Q4 does not currently have any releases planned. But then again, in addition to the annual sports releases, should EA even release new things? Andrew Wilson, CEO of Electronic Arts, certainly seems convinced of the publisher’s plans for the rest of the year …

This was an extraordinary quarter and we are very proud of everything our Electronic Arts teams do for our players and communities. We have launched new games, highly engaged players in our live services and welcomed tens of millions of new players into our network. It was an unprecedented first quarter of growth in our business, and we will build on that strength with more innovative experiences, more groundbreaking content, and more ways to connect with friends and play great games year-round.

It’s hard to argue with Wilson’s feelings – reliability has always been Electronic Arts’ strategy, and reliability is exactly what people are looking for in these uncertain times. That said, hopefully EA won’t rest on their laurels and continue to produce new technology and IPs from their security position. We are entering a new generation of gaming and so far EA has not really made clear how they will benefit from this. EA is solid now, but they don’t want to get so comfortable leaving them behind.

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