Q3 2025 Electronic Arts Inc Earnings Call
J.L.: Good afternoon, my name is J.L. and I will be your conference operator today.
J.L.: At this time, I would like to welcome everyone to the Electronic Arts 3rd Quarter Fiscal Year 2025 Earnings Conference Call.
Andrew Uerkwitz: I would now like to turn the conference over to Mr. Andrew Uerkwitz, Vice President of Investor Relations. Please go ahead. Thank you. Welcome to EA's third quarter fiscal 2025 earnings call. With me today are Andrew Wilson, our CEO, and Stuart Canfield, our CFO.
Andrew Uerkwitz: Please note that our SEC filings and our earnings release are available at ir.ea.com. In addition, we have posted detailed earnings slides to accompany our prepared remarks. Lastly, after the call, we will post our prepared remarks, an audio replay of this call, and a transcript.
Andrew Uerkwitz: With regards to our calendar, our fourth quarter fiscal 2025 earnings call is scheduled for May 6, 2025.
Andrew Uerkwitz: As a reminder, we post a schedule of upcoming earnings calls for the fiscal year on our IR website.
Andrew Uerkwitz: This presentation and our comments include forward-looking statements regarding future events and the future financial performance of the company.
Actual events and results may differ materially from our expectations.
Andrew Uerkwitz: We refer you to our most recent Form 10-Q for a discussion of risks that could cause actual results to differ materially from those discussed today. Electronic Arts makes these statements as of today, February 4, 2025, and disclaims any duty to update them.
Andrew Uerkwitz: During this call, the financial metrics, with the exception of free cash flow and non-GAAP operating margin, will be presented on a GAAP basis.
Andrew Uerkwitz: All comparisons made in the course of this call are against the same period in the prior year unless otherwise stated. Now, I'll turn the call over to Andrew Wilson.
Andrew Wilson: Thanks Andrew. Good afternoon. I want to start by thanking our teams. In Q3 they shared their creativity, dedication and innovation with the world through high quality games and experiences.
Andrew Uerkwitz: Our relentless focus on execution and delivery ensures we continue to bring incredible sports experiences and blockbuster entertainment to hundreds of millions of players and fans around the world.
Andrew Uerkwitz: So let me provide more context on the quarter and share actions taken to build momentum as we head into the new fiscal year.
Andrew Uerkwitz: Our Blockbuster storytelling strategy is built on three strategic objectives. First, create an authentic story and experience for the core audience.
Andrew Uerkwitz: Second, build innovative, ground-breaking features, and third, emphasize high-quality launches across both PC and console.
Andrew Uerkwitz: In order to break out beyond the core audience, games need to directly connect to the evolving demands of players who increasingly seek shared world features and deeper engagement alongside high quality narratives in this beloved category.
Andrew Uerkwitz: Dragon Age had a high-quality launch and was well-reviewed by critics and those who played. However, it did not resonate with a broad enough audience in this highly competitive market.
Andrew Uerkwitz: Now let me dive deeper into the context around EA Sports FC's temporary underperformance and the immediate actions taken.
Andrew Uerkwitz: FC started Q3 in a strong position. It had a high quality and stable launch. It won Sports Game of the Year and pre-orders, engagement and player monetization were each up year over year, leading to net bookings in October that were up double digits year over year.
Andrew Uerkwitz: However, this momentum did not sustain through the quarter. Two contributing factors to performance downside was SOF's top of final acquisition and elapsed engagement later in the quarter.
Andrew Uerkwitz: While early acquisitions started out strong, post-launch acquisition cohorts waited longer in the cycle to acquire the new title as many stayed in prior iterations.
Andrew Uerkwitz: Combined players in our full HD experiences were flat year over year. This mixed shift and slower new player acquisition accounted for about half of the titles underperformance versus expectations.
Softer-than-expected engagement made up most of the rest.
Andrew Uerkwitz: We're constantly tuning the game to drive a competitive and engaging experience. This year, after a number of key changes to gameplay, we started to hear more feedback than usual around specific issues with balance from one of our most competitive cohorts. This resulted in lower than expected engagement into the end of the quarter.
Andrew Uerkwitz: We took the time to listen and validate what we were hearing and implemented some significant changes to both the gameplay experience and corresponding progression and rewards in a large update that went live for players on January the 16th just before the launch of our Team of the Year event.
Andrew Uerkwitz: These actions were a success as we've seen a strong response to the title update and our event as well as positive gameplay sentiment indicators from our community.
Andrew Uerkwitz: Following a gameplay update and our popular Team of the Year event, we have reactivated over 2 million Ultimate Team players, with all acquisition cohorts experiencing positive trends.
Andrew Uerkwitz: Player retention rates surpassed our expectations and saw record title weekly active users over the event's weekend. Together, these markers are leading net bookings to be up year over year for the two-week event.
Andrew Uerkwitz: Our live service drives billions of hours of fan engagement annually and we're constantly updating and fine-tuning both gameplay and our programs to meet ongoing feedback and evolving expectations from our community.
Speaker Change: Individually, these FC play dynamics would not have materially impacted our quarter. In fact, these are part of the normal course of managing and growing a live service business.
Speaker Change: However, the convergence of these dynamics became a material source of downside, requiring our immediate and comprehensive response.
Speaker Change: We consider this to be a temporary moment, not structural. Our global football franchise net bookings have grown over 70% over the last five fiscal years, making it one of the biggest sports entertainment properties in the world.
Speaker Change: To put this year in perspective, FY25 is still expected to be the second biggest year for the franchise.
Speaker Change: Given this context around our Q3 results, we remain confident that our strategy, focusing on entertaining massive online communities, telling blockbuster stories, and harnessing the power of community remains on track. Now let me provide more color on the rest of our portfolio.
Speaker Change: The power of EA Sports comes from our team's unique ability to create deep, rich and highly valuable IP where our players fully immerse themselves in the action, fandom and culture of their favourite sport. Nowhere else can fans experience the depth, authenticity and quality that our sports titles deliver.
Speaker Change: With an incredible year, we're just beginning to unlock the immense opportunity within our growing American football ecosystem. The number of players is up double digits year over year as our expanded offerings strengthen and build on the passion of our community.
Speaker Change: Our teams continue to deliver compelling content across the ecosystem, seamlessly introducing players to new experiences. This quarter we saw players in Ultimate Team grow by double digits as we deepened player engagement and connection.
Speaker Change: We continue to build momentum into FY26 as we come off what we believe will be a record year for EA Sports.
Speaker Change: The real-life college season has culminated in its first 12-team National Championship and we have announced that College Football 26 will launch this summer.
Speaker Change: EA Sports, the NFL, and the NFLPA continue to partner to grow the sport and reach new fans around the world through our unrivaled Madden NFL franchise.
Speaker Change: Together with our partners, we are fully focused on our strategy to continue to forge our two American football titles into a massive online community where players can connect, celebrate their fandom, and harness powerful tools to create content.
Speaker Change: We are also building all new innovative modalities of social play with more access points to further engage and entertain core, new and casual players.
Speaker Change: While we continue to invest and focus on our core FC business, we are also building towards a bold vision for the future, delivering for hundreds of millions of global fans through a connected ecosystem of experiences, including new modalities of play.
Speaker Change: For example, we're developing an entirely new world within the FC platform built around ground-breaking gameplay and cutting-edge tools for social connection and content creation.
Speaker Change: We are leaning into next-level ways to engage fans of the world's biggest sport across the FC platform through play, create, watch and connect.
Speaker Change: In service of our players and fans, we are also pushing beyond the bounds of our sports franchises. Yesterday we shared that we reached an agreement to acquire TreyCab Technologies.
Speaker Change: Data is at the centre of every meaningful advancement in sports today and this group has developed best-in-class optical sports tracking, real-time volumetric data capture technology,
and analysis capabilities that can extend EA Sports' lead.
Speaker Change: accelerating how we do a more authentic, deeply immersive gameplay that mirrors the fluidity and excitement of real-world athletes and competition.
Speaker Change: Longer term, TreyCab's capabilities also help us accelerate against our bold vision for the EA Sports app to be the world's leading interactive sports platform following a successful initial regional trial in Q3.
Speaker Change: Through a combination of Tradecab's real-time data technology and our proprietary game engine, we can enable completely new opportunities for fans to create and share real-world sports content in their own way.
Speaker Change: reimagining highlights, generating casual and complex game simulations and watching broadcast alternatives on demand. We're working to make the EA Sports app the new frontier for interactive sports fandom beyond games and we look forward to sharing more about our plans in the months ahead.
Speaker Change: This is one of several bold new steps in our ecosystem plans to engage players and fans across more geographies in, around and beyond our games. That, together with our core experiences, gives us confidence in the future of EA Sports.
Speaker Change: As we look beyond sports, we've never had a stronger pipeline of entertainment experiences. We continue to execute across the portfolio and the next two years will prove to be an incredibly exciting time for EA and our players.
Speaker Change: Yesterday's announcement of Battlefield Labs is a key development in our ongoing expansion of massive online communities.
Speaker Change: Battlefield Labs is launching at a crucial moment in our development journey, at a scale that allows us to test and refine the game with our community in a way that's unprecedented for Battlefield.
Speaker Change: This is about embracing a modern, more dynamic approach to development, one that acknowledges how the market has shifted, how player expectations have evolved, and how we show up for our players in ways to deliver a truly next-level experience.
Speaker Change: This latest news from our teams is a crucial step towards Battlefield's release in FY26.
Speaker Change: These are exciting times for The Sims as well, with the cultural icon celebrating its 25th birthday this year.
Speaker Change: New updates and features are driving engagement across a massive community of players. A great proof point of our ongoing strategy at work is the launch of the first two Creator Kits ever designed by our top influencers and content creators.
Speaker Change: These kits mark the first time that a full collection of in-game assets have been crafted by creators and officially published by the Sims development team. This is a great step on a path to building a global creator platform in The Sims.
Speaker Change: Following the console playtest this month, Skate remains on track for launch this year across PC, console and mobile, introducing a fresh, community-driven model for gaming with native cross-platform and cross-progression.
Speaker Change: Additionally, as we continue to make progress across our strategy to use AI to transform how we deliver entertainment to the world, we recently made the strategic decision to unify our central technology functions under a single Chief Technology Officer, Matt Tomlinson.
Speaker Change: This alignment reinforces our commitment to embedding technology at the core of our business strategies and operations, enabling us to drive innovation, expand our creative canvas, build bigger and bolder experiences, and deepen our connections as a community-driven entertainment company.
Speaker Change: Matt has been instrumental in shaping the technology strategies and infrastructure that empower our teams to create and collaborate. I greatly look forward to working with him as our CTO.
Speaker Change: We believe the fundamental long-term outlook of our business is strong as we further sharpen our focus on entertaining and connecting more people for more time across the world.
Speaker Change: EA's creative talent, production strength, broad IP and technology leadership power the execution of a vision to deliver more excitement, creation and connection for our global network of players and fans.
Speaker Change: Looking to FY26 and beyond, we are taking bold steps across our sports and entertainment portfolio to shape the future of interactive entertainment.
Stuart: And now I'll turn the call over to Stuart for a deeper look into the quarter and our business.
Stuart: Thank you, Andrew, and hello everyone. To echo Andrew's remarks, Q3 was not the quarter we expected, but despite the impact to our near-term results, our long-term outlook remains unchanged.
Stuart: Our teams remain focused on player feedback, continually adapting our games and services to reflect evolving player preferences, in addition to refining our portfolio to deliver sustainable growth.
Stuart: Today, we're announcing our plans for a $1 billion accelerated stock repurchase, in addition to our current $375 million per quarter program, bringing total stock repurchases to $2.5 billion within the first year of our $5 billion authorization.
Stuart: This action reinforces our strategy and commitment to returning capital to stockholders. It also demonstrates our confidence in our long-term growth outlook, supported by a strong balance sheet and cash flow generation.
Stuart: We remain committed to advancing our strategic initiatives while effectively balancing business investment with returning capital to stockholders. Now turning to the quarter. In Q3, net bookings was $2.2 billion, down 6% year over year.
Stuart: Dragon Age The Veil Guard underperformed, heightening the competitive dynamics of the single-player RPG market, and EA Sports FC 25 started strong but softened through the holiday period. We saw minimal impact from FX within the quarter.
Stuart: Within total net bookings, full gain was $633 million, down 3% year-over-year, and live services and other was $1.58 billion, down 8% year-over-year.
Stuart: On a trading 12-month basis, live services are 74% of our business.
Speaker Change: Let me start with Dragon Age The Veilguard. Historically, blockbuster storytelling has been the primary way an industry brought beloved IP to players.
Speaker Change: The game's financial performance highlights the evolving industry landscape and reinforces the importance of our actions to reallocate resources towards our most significant and highest potential opportunities.
Andrew Wilson: Now, I'd like to provide further insights into the quarterly dynamics in global football that Andrew shared earlier.
Andrew Wilson: Following two consecutive fiscal years of double-digit net bookings growth, our global football franchise saw a mid-single-digit decline year-over-year in Q3.
Andrew Wilson: The softer than expected results in HD was only partially offset by continued growth in FC Mobile.
Andrew Wilson: The HD underperformance was a result of two key factors. Firstly, software acquisition, which led to lower than expected full game sales of FC25.
Andrew Wilson: Despite having 40 million players across our catalogue of HD titles, our December promotional events to drive conversion fell short of expectations and historical rates, as players remain engaged with prior versions of the game.
Andrew Wilson: Secondly, as Andrew mentioned, we saw faster than usual engagement churn in a competitive cohort as the quarter progressed.
Andrew Wilson: Despite having positive key metrics early in the quarter, this player group's engagement was down high single digits, mirroring our netbooking's decline.
Andrew Wilson: While we regularly manage these factors within a live service, their combination had a compounding effect.
Andrew Wilson: Faster than usual engagement churn coupled with lower acquisition created pressure on lower funnel performance.
Andrew Wilson: Our live service model's greatest strength is our ability to experiment, tweak, respond, and deliver changes for our players.
Andrew Wilson: Our January 16th gameplay update launched ahead of our marquee team of the year event is a prime example of this adaptability.
Andrew Wilson: Since the GamePay release, we have seen a significant turnaround in momentum, with competitive cohorts trending towards prior year levels, with net bookings up year-over-year during the event.
Andrew Wilson: We remain confident in the sustainable long-term growth of global football as we continue to refine the experience, expand engagement opportunities, and build toward an even brighter future for the franchise.
Andrew Wilson: Within global football for Q3, FC Mobile saw a double-digit increase in new players, engagement and monetization year-over-year. FC Online was up slightly as strong promotional content drove monetization.
Andrew Wilson: The expansion of our American football community has continued to see strength, with weekly active users and total unique spenders up double digit year-over-year in the quarter.
Andrew Wilson: In Apex Legends, net bookings were down year over year, in the quarter, but performed in line with our expectations.
Andrew Wilson: The Sims franchise delivered year-over-year netbookings growth in Q3 as we continue to broaden the franchise by delivering focused updates and new player experiences that deeply engage and captivate our community.
Andrew Wilson: During the quarter, we launched two new Creator Kits in The Sims 4, and the launch of the My Sims Cozy Bundle outperformed our expectations. With My Sims Cozy Bundle, we saw over 50% of those who purchased the game were new to EA as we expanded our offerings on the Switch platform.
Now, moving to our GAP quarterly results.
Andrew Wilson: We've delivered Q3 net revenue of $1.88 billion, down 3% year-over-year.
Andrew Wilson: Gross margins increased 300 basis points, largely a result of lower licensing costs.
Andrew Wilson: Operating expenses came in below our expectations at $1.05 billion, flat to the prior year.
Earnings per share was $1.11, up 4% year over year.
Andrew Wilson: We deliver operating cash flow of 1.18 billion dollars for the quarter, down 7% year over year.
Andrew Wilson: On a trading 12-month basis, operating cash flow reached $2.11 billion and free cash flow reached $1.89 billion as our business continues to be a strong generator of cash.
Please see our earnings slides for further cash flow information.
Andrew Wilson: In the third quarter, we returned $425 million to stockholders through stock repurchases and dividends.
Now, turning to guidance.
Two weeks ago we updated our FY25 guidance.
I want to outline the assumptions on the pinning outlook.
Andrew Wilson: First, our American football business remains on track to surpass $1 billion in net bookings for FY25.
Andrew Wilson: Second, we revised our expectations to include lower contributions from Dragon Age to Felguard.
Andrew Wilson: Third, let me walk through our assumptions for global football. As mentioned, our global football net bookings in Q3 saw a mid-single-digit decline year over year.
Andrew Wilson: As we exited Q3, our HD experience saw double-digit declines year-over-year in net bookings during December and the early weeks of January.
Andrew Wilson: However, following the January 16th gameplay update and the launch of Team of the Year, we saw strong momentum resulting in a return to year-over-year growth during the event.
Andrew Wilson: Despite this positive trend, IFY25 guidance at the midpoint adopts a prudent approach, anticipating a low double-digit decline in global football franchise net bookings for Q4.
Andrew Wilson: That said, we remain optimistic about 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.
Andrew Wilson: Our approach is measured as our teams learn from Q3 and continue to bring updates to the game, monitor player feedback, and deliver experiences that sustain engagement.
Andrew Wilson: And fourth, beyond global football, our core life services assumptions remain largely unchanged.
Andrew Wilson: These changes to our underlying assumptions have shaped our revised guidance range, which we shared on January 22nd.
Andrew Wilson: As a reminder, we expect FY25 net bookings to be $7 billion to $7.15 billion, down 6% to down 4% year over year.
Andrew Wilson: Turning to our FY25 Gap Outlook, we are lowering Net Revenue Guidance to $7.25 billion to $7.4 billion.
Andrew Wilson: We expect the cost of revenue to be $1.48 billion to $1.49 billion.
Andrew Wilson: We now expect operating expenses to be approximately $4.38 billion to $4.39 billion, up 1% year-over-year.
Andrew Wilson: As a result, we expect GAP operating margin to be 19.2% to 20.5%.
Andrew Wilson: We expect non-GATT operating margin to be 30.5% to 31.6%. The impact from change in deferred net revenue is expected to be approximately negative 250 to negative 240 basis points.
Andrew Wilson: This results in a revised earnings per share of $3.90 to $4.25.
Andrew Wilson: We're also adjusting our operating cash flow guidance to $1.8 billion to $1.9 billion.
Andrew Wilson: Capital expenditures are still expected to be $225 million resulting in free cash flow guidance of $1.575 billion to $1.675 billion.
Andrew Wilson: As a reminder, we had a one-time cash tax benefit of $150 million in the prior year.
Andrew Wilson: If rates remain unchanged from today, we expect minimal impact to net bookings from FX.
Andrew Wilson: For more information on the impact of FX movements, please refer to our earnings slides.
Andrew Wilson: So under Q4, we expect net bookings of $1.444 billion to $1.594 billion.
Andrew Wilson: Down 13% to down 4% year-over-year, largely driven by declines in global football and Apex Legends, partially offset by the release of Split Fiction.
Andrew Wilson: We expect net revenue of $1.682 billion to $1.832 billion. Cost of revenue to be $305 million to $315 million.
Andrew Wilson: and operating expenses of approximately $1.112 billion to $1.122 billion, resulting in earnings per share of $0.65 to $1.
Andrew Wilson: Now, before I hand off to Andrew, I want to take a moment to discuss our long-term financial framework which we shared last year.
Speaker Change: A multi-year outlook is designed to provide the flexibility needed to effectively manage two critical drivers of success, game development timelines and market dynamics.
Speaker Change: With a strong lineup of new experiences, including EA Sports College Football 26, Battlefield and Skate, we are positioned to return to growth in FY26.
Speaker Change: Beyond FY26, we will continue to expand our current franchises, while also bringing blockbuster storytelling to market.
Speaker Change: Additionally, we will make measured progress beyond our games as we continue to scale our EA Sports app, advertising, and sponsorship opportunities.
Speaker Change: Altogether, we believe these initiatives will drive both top-line growth and margin expansion through FY27 and into the future as we outlined at our September Investor Day.
Speaker Change: We'll look forward to providing further updates on FY26 in May and remain focused on discipline execution, prioritized capital allocation, and strategic investments that drive value for our players, employees, and stockholders.
Now, I'll hand back to Andrew.
Speaker Change: Thank you Stuart. Exceptional effort and posh execution don't always generate the results we aim for. The actions we have taken demonstrate the focus and determination of our teams and the deep resiliency of our business.
Speaker Change: The very definition of entertainment is rapidly changing. Now, more than ever, our success as a company will come from anticipating and exceeding player expectations to deliver innovative experiences that engage, entertain and connect people everywhere across an ever-evolving landscape.
Speaker Change: Thank you, and now Stuart and I are here for your questions.
Stuart: As Andrew said, we are ready for your questions. We'll take one question and one follow-up from each analyst. With that, we are now ready for the first question.
Speaker Change: Thank you. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.
Speaker Change: If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
One moment, please, for your first question.
Speaker Change: Your first question comes from the line of Andrew Marock of Raymond James. Your line is open.
Andrew Marock: Hi, thanks for taking my questions. Maybe one on the aspect of FC around the slower than anticipated.
acquisition.
Speaker Change: Do you have any sense of the drivers behind the slower uptake of the current year title? Is it anything maybe to do with market structure, like a console generation transition effect? Or maybe something like people hearing negative feedback in the community and deciding to hold off on purchase for a little bit?
Speaker Change: Great question, thank you. First off, let me reiterate, this was not the quarter that we wanted or expected, and any underperformance in our business, particularly on a tentpole franchise like FC, we take very, very seriously.
Speaker Change: As I think about answering the question, the thing I want to reiterate that's really important is this will still be an incredibly big FC. It will in all likelihood be the second largest FC in the history of the franchise, coming off two years of record growth.
Speaker Change: I actually think that's a big part of why we may have seen the ebb, at least in the acquisition level, in the business.
Speaker Change: As we look across the industry, it's not unnatural for these massive online communities or live service driven businesses to see ebbs from time to time.
Speaker Change: Typically, they are of a significantly greater magnitude than what we experience with FC. Be that as it may, when you have a franchise as big as FC is, even a small deviation from our expectations can have a pretty dramatic impact on our quarter, as we saw in Q3.
Speaker Change: As we look at the top of the funnel, again, we had over 40 million people playing across iterations.
Speaker Change: And I think we had an exceptional game in 23 with two World Cups and a December World Cup in the year, which brought in a lot of new players. We then had the launch of our own brand EA Sports FC that we invested, you know, meaningfully behind at a marketing level to bring in new players.
Speaker Change: And at some level I think that many of those players were very satisfied with the games they were playing.
Speaker Change: And one of the things that we recognize is that we have to do a better job of bringing those new players across.
Speaker Change: Our latest version of FC is far and away the best version that we've ever built. It won Game of the Year and widely regarded across almost all cohorts to be an exceptional game. And we just have to do better at bringing our players who are in the ecosystem across to the new version. And certainly with the work that the team has done since then, we've seen meaningful progress on that metric.
Speaker Change: The second part of it that we talked about inside of the prepared remarks
Speaker Change: is the highly competitive cohort that lapsed later into the quarter.
Speaker Change: And again, as we think about managing these massive online communities and these live service-driven businesses,
Speaker Change: We're always tweaking and tuning based on player feedback, again we have an incredible player community across the globe that invests meaningful amounts of time in these experiences.
Speaker Change: this year we started to hear kind of as the quarter progressed that the tuning of the gameplay particularly for this highly competitive cohort felt more defensively focused than past iterations
Speaker Change: and they were asking for a more open, aggressive, attacking version of football.
Speaker Change: Our teams do what our teams do best, which is listen closely to the core community and validated what they were hearing, and then began to tweak and tune and test gameplay in advance of what was perhaps the most major gameplay update we've ever done in the history of the franchise ahead of our January 16th event.
Speaker Change: We saw incredible momentum going into the Team of the Year event.
Speaker Change: just some core stats as we came out of that weekend. We had record net bookings for the team of the year event.
We had record weekly active users over the event's weekend.
Speaker Change: Prior to the update, our competitive cohort engagement was down high single digits.
post-update clearly trending back prior to prior year levels
Speaker Change: We had positive trends across all cohorts, so not just that highly competitive cohort, but we started to see all cohorts come across. We reactivated 2 million Ultimate Team players with all acquisition cohorts experiencing positive trends.
Speaker Change: and we're still seeing that momentum progress into this past weekend's Future Stars event.
Speaker Change: So again, not the quarter that we wanted or expected, not unnatural for massive online communities to have these ebbs. I think our teams demonstrated their commitment to our player base and the resilience of their business in both targeting
Speaker Change: acquisition top of funnel and engagement deeper into the experience and the momentum that we see coming out of these events going into the rest of the quarter and into FY26 feels very strong to us. Perhaps I'll let Stuart add a little bit from a financial standpoint.
Stuart: Andrew, just to kind of wrap that out a little bit, how we think about that's reflecting in the Q4 guide.
Stuart: We did put into the script that we did reflect through low double-digit declines at the midpoint. As you heard, Andrew just talked through some of those stats, and we obviously did the pre-announcement. We were four days into Team of the Year. It represents roughly 25
Stuart: of the quarter, and we saw netbooking significantly trend up year-over-year for the event.
Stuart: Just flagging here that not considering the guide is that if that momentum should continue through the next
Stuart: You have six odd weeks at the end of the quarter through the events and all the actions we have planned.
Stuart: That would not be factored into that midpoint, and thus it should provide momentum for us Q4 and then heading into FY26.
Speaker Change: Well, thank you for all of that. Really, really appreciate the detail there and if I could maybe sneak in one more really quick. Of course, still very early, but how has that community reception to the Battlefield Labs announcement been relative to your expectations or hopes? And how have the last couple Battlefield releases informed this pre-launch cycle? Looks like you're bringing players along in a more meaningful fashion than usual. Thanks.
Speaker Change: Yeah, another great question. I would say the response to the playtest and the Battlefield Labs initiative has been overwhelmingly positive and well beyond our expectations, which is great. It's demonstrative of just the fan love out there for this storied franchise.
Speaker Change: There's really two big reasons why our team is taking this approach.
Speaker Change: The first is, as I think you talk about, there is some trepidation amongst the core community as to what this battlefield will be.
Speaker Change: with our players to ensure that they understand what we're doing, they feed into the tuning and balancing at scale of this game.
Speaker Change: The second reason is it is the biggest battlefield we will ever build.
or at least we have ever built to date.
Speaker Change: It exists on an incredible scale, both in terms of breadth and depth of gameplay, in terms of access points, in terms of way that you can play this game. And a big part of the modern development process that the team is taking is to test and tune everything to ensure that even as we launch something of this scale, it launches both stable and secure.
this initiative which is Battlefield Labs and and the
Speaker Change: The way the community has responded has been very positive to date.
Speaker Change: Your next question comes from the line of Doug Krutz of TD Kellyn. Your line is open.
Thank you.
Hey, thanks. I was wondering if you could talk about...
Speaker Change: how the kind of Apex Legends work is going to getting it back to where you want it to be. I know back in August you had talked about some of the initiatives that you've taken and just kind of what's the progress update, what's worked, what hasn't worked, and where do you see things going from here? Thank you.
Speaker Change: and I know our teams are incredibly committed to them in service of our player communities. Apex is probably one of the great new launches in our industry over the last decade and has been loved by that core cohort. We've had over 200 million people play the game.
Speaker Change: However, the trajectory of the business of that franchise has not been headed in the direction that we have wanted for some time. I think you highlight we have been trying, tuning and testing many things in the context of the ongoing support of the community.
Speaker Change: As we think about APEX today, I really think about the development happening across three core vectors.
Speaker Change: The first is how do we continue to support this incredible community that plays the game day in and day out, which numbers tens of millions of people. And that's both quality of life...
anti-cheat.
Speaker Change: and all of the things that make the CORE experience great as well as the creation of new content for that community and we continue to try and test and develop more and great content for that community and I would say we have seen some progress in that but probably not as much as we would have liked.
Speaker Change: The second phase, and I think I've talked about this before, is we do believe there will be a time where we need to do a more meaningful update of Apex as a broad game experience.
Speaker Change: and the team is diligently working on that. You should imagine we probably wouldn't drop that on top of a battlefield launch and so from a timing standpoint, our thinking right now is that that would exist post-battlefield.
Speaker Change: And then on a longer term time horizon, again, these franchises that exist at this level and have this much fan love don't come along all that often.
Speaker Change: What I think we've demonstrated as a company is an ability to build franchises that last 10, 20, 30 years and growing. Our expectation is that Apex will be also one of those franchises and at some time on a longer term time horizon, there will be an even bigger, more meaningful update to that broader game experience, an Apex 2.0 if you will. This will not be the final incarnation of Apex.
So, the team remains incredibly committed.
Speaker Change: We continue to invest behind the core community who continues to play that numbers in the tens of millions of players.
Speaker Change: We do believe that there should be a more major update.
Speaker Change: That will probably happen after a battlefield launch, just in terms of timing, and the team is diligently working through what that would be.
Speaker Change: and then longer term our expectation is that we'll continue to expand what this franchise is and how we support a core community of highly competitive players and new communities that want to come and experience all the greatness that Apex has to offer.
Speaker Change: So I'll just wrap a couple of things on there on the financials in and around everything Andrew just outlined Q3 was largely in line with expectations. We set out albeit down year on year
Speaker Change: We have started to see some sequential improvement with strength in sort of player conversion and monetization. The content enhancements and some of the changes in the Battle Pass have started to shift where we're seeing more spend uptick against the Battle Pass than in previous seasons as we've come through 18 through 21.
Speaker Change: The outlook for Q4 remains largely unchanged at this point and we obviously look forward to season 24 next week
Great, thank you.
Speaker Change: Your next question comes from the line of Chris Scholl of UBS. Your line is open.
Chris Scholl: Great, thank you. Appreciate the update on battlefield timing. Seemingly the industry pipeline could be crowded with a number of major titles being released this year. Can you just remind us how the pipeline for your peers influences your willingness to launch titles in close proximity?
Speaker Change: and maybe just one more industry question. Given the anticipation for the new Switch Console, any thoughts on what opportunity this might present for your IP and the ability to expand the level of collaboration beyond what you've done today? Thank you.
Speaker Change: Great question. Certainly, you know, we exist in a competitive marketplace.
Speaker Change: I've had the great fortune of being in this company for 25 years and we have done a great job of competing with all of our great franchises over time.
Speaker Change: That being said, we've invested more in this battlefield than any battlefield before it. We have four studios, we've had a meaningful amount of time, we're looking for this to be the biggest battlefield we've ever made, and we of course want to make sure that we launch that into a window where we can deliver on the fullness of the promise of what Battlefield can be and grow the community to a level that is commensurate with the size of the game that we're making.
Speaker Change: I do believe that this year might be a nuanced year relative to competition. There may be some things happening in the year that may cause us...
Speaker Change: to think differently about our launch timing. We have an FY26 launch window that the team is targeting. We believe the game will be great and ready at that time. But if we got close to that time frame and believed that this wasn't going to be a great window for us, then we would...
Speaker Change: We would take a look at what an alternate window might be that would give us the appropriate time, energy, and player acquisition opportunity for this battlefield to be all that it needed to be.
Speaker Change: and Chris just to add on to that I think it's important to say you know
Speaker Change: It's partly why we've discussed and shared the multi-year framework that we laid out last year to account to give us the flexibility to think about a potential range of growth rates that could occur depending on market dynamics and timing that Andrew alluded to for our own pipeline.
Speaker Change: We'll also give greater clarity on FY26 guidance on our Q4 call, but the growth is really built around the conviction we have around the pipeline.
Speaker Change: We expect FC to rebound through next year, we obviously have college football we just announced in January coming out in the summer.
Speaker Change: We have an exciting year on the lifestyle brands. We've talked to skate and obviously continue to expand on the sims.
Speaker Change: We've just talked with Battlefield, as Andrew a second ago, and obviously we'll continue to balance all of that with the industry slate we have up ahead, but I think it's just important to remind that we have that multi-year framework out, it's what we remain committed and aligned against, and again, growth in 2026, but that range of growth will depend on timing.
Speaker Change: And then to the second part of your question around a new console, you know, anytime a new console comes into the marketplace, that's of a benefit to us. It gives us the ability to access and acquire new players. Typically, we've had franchises perform very well on Nintendo platforms.
Speaker Change: Certainly, our expectation is that products like FC and Madden and others might find real energy on the platform, as they have done in the past.
Speaker Change: When you think about something like the Sims and the My Sims Cozy Bundle, which performed well ahead of our expectations, 50% of all players were new to EA, that represents a great opportunity for us.
Speaker Change: So, again, nothing in our models at this juncture, but our expectation is that any time a great new console comes into the marketplace that gives us access to new players and new communities, that we have the IP that will benefit from that.
Great, that was very helpful. Thank you for the color.
Speaker Change: Your next question comes from the line of Clay Griffin of Moffitt-Nathanson. Your line is open.
Clay Griffin: Great, thank you. Sorry, I've had some technical issues, so I apologize if this has been asked, but Andrew, I wanted to come back to FC if I could. You know, you spoke very positively about Rush in October, understanding that, you know, engagement had sort of slipped beyond what you guys thought throughout the quarter, but
Speaker Change: Just curious, just if you could provide some context around how that mode, the introduction of that mode might have played a role in the trends that you saw or maybe just you know kind of general commentary about how you think that mode evolves from here, and then I've got a follow-up.
Yeah, great question.
Speaker Change: One of the advancements of Rush over what had been a similar type of mode, and I think there may have been some confusion outside of the FC community, Volta, which was a small-sided football mode, was very separate.
Rush actually permeated many different aspects of the game.
Speaker Change: socially driven gameplay is a meaningful part of the advancement of the franchise and certainly the platform beyond what has been typical 11-on-11 competition, and the community has responded very well to that. Again, I would come back to...
Speaker Change: I believe that we can attribute the softness in Q3 to top of funnel acquisition that we've been targeting meaningfully since then and seeing very positive trends.
Speaker Change: and some gameplay balancing and tuning that the teams addressed in that meaningful player update right before the January 16th event.
Speaker Change: of which has also generated very positive trends. And so overall, I think Rush is a net positive to the franchise, both now and certainly over the long term.
Speaker Change: I had read some interesting theories on server delay, desync, and just sort of the general
Speaker Change: kind of server availability and caching as perhaps, you know, causing you guys some issues here in FC25. I certainly would not have suspected that to be a meaningful year of your driver, per se. But, you know, can you speak to that idea? And if that's true, you know, what needs to get fixed and on what timeline?
Certainly, again,
Speaker Change: We listen and interact with all members of our community. Our role is always to serve every aspect and ensure a high-quality, stable, secure game experience.
Speaker Change: From our standpoint, the data that we see would suggest that this is an incredibly stable FC. At least as stable and likely more stable than FCs in the past. That doesn't mean that server issues don't happen from time to time and that we don't need to go and address them.
Makes sense. Thanks.
Speaker Change: Your last question comes from the line of Mike Hickey of Benchmark Company. Your line is open.
Mike Hickey: Andrew, Stuart, thanks for taking our questions. Just two. One, it's good to see or hear you expect growth for fiscal 26. Just curious if you think you can grow that year without the release of Battlefield.
And the second question on
Mike Hickey: College football obviously a massive success to you and your teams, but also I think there was the feeling that there's a fair amount of pent-up demand that may have been driving sort of outsized
Mike Hickey: growth from that game. So just curious how you think about the ability to grow college football in fiscal 26 and maybe your American football, I guess, overall now as an ecosystem. Thanks, guys.
Mike Hickey: Mike, may I take the first part in sort of a broader context? Yes, in short, we expect the growth in 26
Mike Hickey: to be part of the broader pipeline initiative, which obviously includes Battlefield and even would exclude Battlefield.
Mike Hickey: When you think about some of the things I just outlined earlier, of course we expect to continue to build with FC Certainly as we head towards a World Cup year in North America towards the back end of the fiscal and into 27
We've talked about the launch of S.C.A.P.E. through the summer.
Mike Hickey: The continued expansion we've outlined for sims and we talked some of that on the call today as we continue to expand the audience and platforms
that we address.
Mike Hickey: We also have college returning in the summer of 2026, we look to build on that both through the American football ecosystem across both Madden and college, and know that we continue to push online live services across the rest of the portfolio in the year. So yes, again, coming back to before, we do expect to grow in 2026.
Mike Hickey: We are cognizant there may be a range of that scale of growth, hence we push through that multi-year framework through 26 and 27 to kind of smooth out the element of timing and obviously set a benchmark where we believe we can drive the business over the next 12 to 24 months.
On college, yes, it was an exceptional year on college.
Mike Hickey: And there was almost certainly meaningful pent-up demand in the context of people coming into that.
Mike Hickey: But a few things are also true. One is that when you put 12,000 young athletes into the game, they are incredible ambassadors for the franchise they are part of.
Mike Hickey: Two, the sport of college football is reaching new heights as we see the machinations of what's happening at a conference level and a college football championship level. Our expectation is the sport in and of itself is going to continue to grow.
Mike Hickey: When combined with what's happened to the NFL, which also continues to grow, and we're now seeing it grow into new days and new categories, certainly as part of Amazon, the Christmas Day games of Netflix were an incredible boon for the NFL. So when we think about American football in totality, and our ability to deliver games
Mike Hickey: content experiences that harness the power and the passion of that American football community across both college and the NFL.
Mike Hickey: where both of those sports are growing meaningfully and we get a compounding effect.
Mike Hickey: by really merging the communities together and allowing them to move seamlessly through both products and grow on a year-over-year basis, both in the context of competition but also in collaboration, deep social connection, and user-generated content creation. We actually believe that we're at the very
Mike Hickey: early stages of what could be our next great, massive online community, one that will continue to grow in the way that FC has done over the past few years. So net-net, we feel very good about where we're at with college football and our ability to grow the overall American football business on a year-over-year basis.
Thanks, guys.
Speaker Change: Okay, so well thank you all for your excellent questions. You know, as you've heard me say, interactive entertainment, it's constantly evolving, shaped by changing player expectations. Our teams remain agile, highly focused and adaptable, responding swiftly to market dynamics and player feedback.
Speaker Change: Looking ahead, we've never had a stronger pipeline of entertainment experiences, including the launch of Battlefield and Skate in FY26.
Speaker Change: We're accelerating our vision for the EA Sports app and we continue to see significant opportunities to expand our EA Sports franchises.
Speaker Change: That concludes today's meeting. Thank you all for joining. You may now disconnect.