Q4 2025 Electronic Arts Inc Earnings Call
Abby: Ladies and gentlemen, good afternoon. My name is Abby and I will be your conference operator today. At this time I would like to welcome everyone to the Electronic Arts 4th quarter and fiscal year 2025 earnings conference call.
Abby: I would now like to turn the conference over to Mr. Andrew Uerkwitz, Vice President Investor Relations. Please go ahead.
Speaker Change: Thank you. Welcome to EA's fourth quarter in fiscal year 2025 earnings call. With me today are Andrew Wilson, our CEO and Stuart Canfield, our CFO .
Speaker Change: In addition, we have posted detailed earning slides to accompany our prepared remarks.
Speaker Change: Lastly, after the call, we will post our prepared remarks, an audio replay of this call and a transcript with regards to our calendar, our first quarterly fiscal year 2026 earnings call is scheduled for July 29th, 2025.
Speaker Change: As a reminder, we post a schedule of upcoming earnings calls for the fiscal year on our IR website.
Actual events and results may differ materially from our expectations of our expectations.
Speaker Change: We refer you to our most recent form, 10Q, 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, May 6, 2025, and disclaims any duty to update them.
Speaker Change: 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. All comparisons made in the course of this call are against the same period in the prior year unless otherwise stated.
Andrew Wilson: Now I'll turn the call over to Andrew Wilson.
Andrew Wilson: Thank you Andrew good afternoon, everyone I want to start by recognizing the incredible efforts of our teams.
Andrew Wilson: Throughout FY 'twenty five they delivered high quality games that entertained and connected hundreds of millions of people around the world.
Andrew Wilson: It is because of their strong execution and unwavering focus that we were able to deliver Q4 results that significantly exceeded our expectations highlighted by reacceleration of growth in EA sports Etsy continued momentum in American football doubled.
Andrew Wilson: Double digit net bookings growth in the Sims and the highly successful launch of split fiction.
These successes illustrate the increasing momentum in our business as we continue to deliver against our strategic roadmap.
Andrew Wilson: Let me review Q4 and the year.
Andrew Wilson: Through deep community engagement innovative content and agile execution, we reignited momentum in E Sports F C. After a temporary slowdown in Q3.
Andrew Wilson: The January gameplay update which was the biggest live service update we've ever launched in F. C combined with outreach to our player community and our team of the year event resulted in a true brand building moment without fans.
Andrew Wilson: Feedback was overwhelmingly positive on the faster pace of gameplay and reward journey.
Andrew Wilson: The regular cadence of updates events and highly valued content releases that followed throughout the quarter continued the strong momentum.
Andrew Wilson: As a result, net bookings came in well above expectations with player engagement up double digits. Following the January update spin.
Andrew Wilson: Specifically, our competitive cohort engagement returned to more normalized levels and ended the quarter up year over year.
Andrew Wilson: F T mobile continues to exceed our expectations with engagement acquisition up year over year as a result of our continued focus on hot the cultural Ization of Webster, all launched last quarter driving more meaningful net bookings and our successful team of the program.
Andrew Wilson: A new player acquisition and daily active users were up over 20% year over year F.
Andrew Wilson: F T mobile remains a key strategic initiative to grow the reach of our global football franchise.
Andrew Wilson: A great demonstration of how we're growing our audience through F. T. Mobile is the fact that our four largest mobile market, including territories across the middle East and Southeast Asia are different from our four largest HD markets.
Andrew Wilson: Not only is our global football business regularly the top video game in the Western Hemisphere. It is also one of the largest sports entertainment platforms in the world.
Andrew Wilson: Q4 was a strong finish to an incredible year for our American football ecosystem applies across Madden NFL and college football across console and PC grew double digits and hours played up 68% leading to net bookings above a $1 billion up over 70% year over year.
Andrew Wilson: This quarter American football continue to perform well beyond the college season, ending National Championship in January and the Super Bowl in February.
Post season engagement and monetization continue to play a more meaningful role as players and fans look to us for their sports entertainment in the off season.
Andrew Wilson: For example, the recent NFL draft was a prime opportunity to continue to connect Madden NFL and college football through high value timely content to generate ongoing engagement connect without phase 365 days, a year and drive player retention as we head into the next fiscal year.
Andrew Wilson: In addition, UFC five F 124, and NHL twenty-five delivered consistent quality and deepen play connection across the portfolio.
Andrew Wilson: The EA sports App currently in soft launch with La Liga in Spain is delivering positive early indicators of engagement and retention reinforcing our vision to grow into the world's leading interactive sports platform.
Andrew Wilson: Looking ahead, we plan to broaden our reach into additional markets with new strategic partners, while steadily enhancing the app experience through expanded features and more personalized content.
Andrew Wilson: Our focus remains on driving daily engagement, fostering community interaction and supporting long term global growth.
Andrew Wilson: We have a number of unique opportunities to expand reach for EA sports.
Andrew Wilson: For instance, F T mobile will play a key role in deepening player engagement, starting with our recently announced partnership with Apple and MLS around integrated streaming and cross platform fandom with the first match streaming next week.
Andrew Wilson: Yeah as always on experiences and real time responsiveness truly demonstrates the commitment of our teams and our resilience and structural advantage of our business.
Andrew Wilson: Nowhere was this more evident than in our sports franchises across Q4.
Andrew Wilson: Titles like EA sports UFC, and Madden NFL align with the rhythm of global competition, keeping fans connected year round.
Andrew Wilson: This led to the biggest net bookings year ever for EA sports.
Andrew Wilson: FY 'twenty five was also a pivotal year for our entertainment Potline setting up a significant period of growth and innovation for our players and our fans.
Andrew Wilson: As we celebrated the 25th birthday of the Sims the franchise delivered double digit year over year growth in net bookings in Q4.
Andrew Wilson: This growth reflects successful play a reengagement and the continued impact of our strategy to expand our global audience and elevate community connection.
Highlights included the release of a new expansion pack businesses and hobbies. The return of the Sims wanted too and the release of created made kits.
Andrew Wilson: This marks the best fourth quarter net bookings performance for the franchise ever and paves the way for our continued expansion of the Sims universe over the next several years.
Andrew Wilson: Q4 also saw a strong launch of our new IP in split fiction from highs lot Studios.
Andrew Wilson: This incredible title over performed our expectations, capturing global attention and to date has reached nearly 4 million units sold.
Andrew Wilson: This success is proof that shared experiences paired with great stories, and very gameplay have the power to breakthrough and capture the imaginations of people around the world.
Andrew Wilson: This quarter was a strong finish to a pivotal year, where we acted decisively realigning resources managing costs and focusing on our biggest opportunities. We took important learnings from Q3 to sharpen our operational discipline strengthened execution across the business and deliver long term value for our players communities and stock.
Andrew Wilson: Aldis.
Andrew Wilson: As we look to the next two years and beyond we are positioned for strong growth driven by expansion across a large services new game launches and building global fandom through new experiences.
Andrew Wilson: In FY 'twenty six we are launching two of our most iconic franchises skate and battlefield.
Andrew Wilson: Bill is a dynamic live service Skype is designed to grow alongside its community offering new ways to express creativity style and progression over time.
With early access plan for FY 'twenty six we're focused on delivering a fun authentic foundation that we can build on for years to come.
Andrew Wilson: Turning to battlefield, we're taking a modern playa first approach to building testing and marketing is next level experience.
Andrew Wilson: Through battlefield labs, the biggest play testing initiatives in franchise history, we are engaging players earlier and more meaningfully than ever before testing at scale and validating core gameplay experiences to deliver something truly special for our players.
Andrew Wilson: Throughout play sessions with a core group of battlefield players across Europe, and North America with completed thousands of hours of gameplay and the response has far exceeded expectations.
Andrew Wilson: 600000 players have signed up for labs to date, alongside an amazing 350 million views of the battlefield content since our announcement.
Andrew Wilson: Based on this incredible global demand, we're expanding lives behind body more players across Europe, and North America, and we will begin to include Asia. This marks a key milestone is therefore, a full worldwide launch backed by the largest battlefield team in our history and grounded and community collaboration we remained firmly on track.
Andrew Wilson: Rack for an FY 'twenty six release with a major global reveal later this summer.
Andrew Wilson: As we look to the future of the Sims our vision is to continue to build a franchise into the one of the world's most powerful creator platforms with self expression and social connection and user generated content converge in exciting new ways in FY 'twenty six we will continue to empower our new generation of creators and players to shape culture.
Andrew Wilson: Community and commerce through the seems like never before.
Andrew Wilson: Looking further ahead, we plan to transform the franchise into a unified ecosystem across games marketplaces and social spaces.
Andrew Wilson: We also believe there are more record used to come for EA sports the immense opportunity around our global football and American football franchises is that these real live sports are growing in popularity every year, giving us an inherent multiplier of the total addressable market.
Andrew Wilson: This is a unique advantage for us to naturally grow our core player base, while greatly expanding our audience.
Andrew Wilson: Across FC Madden NFL and college football, we will continue to focus on our unrivaled KOL gameplay through innovation and bold moves like the recent acquisition of <unk> that we expect to progress how we deliver more authentic immersive gameplay than ever before as we look to expand our audiences. We will use this data to.
Andrew Wilson: To build new ways to play more ways to connect and empower our players with new tools to create and share.
Andrew Wilson: Over the next several years you should expect more milestone moments as we work to engage a football fans through EA sports UFC Madden NFL and college football.
Andrew Wilson: A relaunch of college football twenty-five was only the first step and as multiyear growth strategy for American football.
Andrew Wilson: For example, this experience grill audience by adding over 5 million new fans to the ecosystem.
Andrew Wilson: Looking ahead, our deeper integration between Madden NFL and college football is setting the stage for a unified massive online community.
Andrew Wilson: Our American football ecosystem is following the playbook of a hugely successful global football franchise positioning it for long term success.
Andrew Wilson: In global football, we've already achieved milestone growth with FC mobile NFC online two key drivers expanding our global reach.
Andrew Wilson: Looking ahead to 2026 World Cup represents a major acquisition opportunity and the next defining moment for the franchise rooted in deep social connection.
Andrew Wilson: All of this gives us confidence in the long term success of our biggest sports franchises.
Andrew Wilson: Cross our sports portfolio and beyond we are on track to deliver growth through new experiences deeper integration across platforms more robust community creation tools and the EA sports App.
Andrew Wilson: I also want to take a moment to talk about how AI is powering our future.
Andrew Wilson: We view <unk> as a powerful accelerator of creativity innovation and play connection across our teams were investing in new workflows and capabilities to integrate AI to enhance how we build scale and personalized experiences from dynamic in game worlds to delivering authentic athlete and team likenesses, adding.
Andrew Wilson: Credible scale.
Andrew Wilson: Our developers are using AI to push the boundaries of what's possible and design animation and storytelling, helping us deliver deeper more immersive gameplay.
Andrew Wilson: This is about amplifying the power of this technology to unlock new possibilities for the future of interactive entertainment.
Speaker Change: Now I'll turn the call evidenced jewett for a deeper look into the quarter and our business.
Speaker Change: Thanks, Andrew and good afternoon, everyone.
Speaker Change: Why 25 was a year of focused execution as we prioritize our highest impact initiatives and continued realigning our investments around our long term growth framework.
Speaker Change: That focus was particularly evident in our fourth quarter, where we saw accelerating momentum heading into FY 'twenty six.
Speaker Change: Q4, outperformance was driven by exceptional execution from IEA Spools FC teams.
Speaker Change: With the January gameplay update and targeted community driven tuning.
Speaker Change: This resulted in a significant rebound in engagement and monetization.
Speaker Change: Combined with sustained strength in American football beyond the end of the season and the breakout success of split fiction we expanded.
Speaker Change: Margins.
Speaker Change: Generally had strong free cash flow and return of a $1 billion to stockholders through our enhanced repurchase program and dividends.
Speaker Change: This performance reinforces the execution of our teams and the resilience of our business model and resulted in a strong close to FY 'twenty five.
Speaker Change: Turning to FY 'twenty five results.
Speaker Change: We delivered net bookings of 736 billion.
Speaker Change: One 1%.
Speaker Change: Our expanded American football ecosystem.
Speaker Change: <unk> 1 billion net bookings up over 70% year over year.
Speaker Change: Growth was offset by impact from slight timing and softness in apex legends.
Speaker Change: Full game net bookings was $2 2 billion up.
Speaker Change: Up 1% driven by strength in EA Sports College football 25.
Speaker Change: And new blockbuster releases, including split fiction and.
Speaker Change: And Dragon age the Val <unk>.
Speaker Change: Which offset prior year contributions from Star Wars, Jedi Survivor, and softness in FC 25 full game sales.
Speaker Change: Live services net bookings was 534 billion.
Speaker Change: Down, 2%, reflecting an approximate four point headwind from apex Legends. In addition to an approximate three point headwind from the December and January softness and FC Ultimate team.
Speaker Change: These headwinds were partially offset by the strength of American football.
Speaker Change: Moving to our GAAP results, we delivered net revenue of 746 billion down 1%.
Speaker Change: Cost of revenue decreased by 10% to 154 billion driving a gross margin of 79, 3%.
Speaker Change: An improvement of nearly 200 basis points driven in part by lower licensing fees.
Speaker Change: Operating expenses were $4 4 billion up 2% with increases in people costs, largely offset by cost savings in other areas of the business.
Speaker Change: Our earnings per share was $4 and 25.
Speaker Change: We delivered our second highest fiscal year operating cash flow result of $2.08 billion.
Speaker Change: The business continues to be a strong generator of cash.
Speaker Change: Capital expenditures was $221 million, resulting in free cash flow of $186 billion.
Speaker Change: For the year, we returned 145% of our free cash flow or $2 7 billion.
Speaker Change: To stockholders through our accelerated stock repurchase program.
Speaker Change: Normal course buybacks and dividends.
Speaker Change: Please see our earnings slides for further cash flow information.
Speaker Change: Turning to Q4 performance we.
Speaker Change: We delivered net bookings of $1 8 billion up 8% exceeding our January revised guidance by double digits as a rebuilt momentum across the quarter.
Speaker Change: Full game net bookings were $384 million up 48% driven by the successful launch of split fiction with units sold nearly double our expectations.
Speaker Change: Live services and other net bookings were $1 four 2 billion.
Speaker Change: Up 1% exceeding our revised guidance on the strength in FC Ultimate team.
College football ultimate team and the Sims.
Speaker Change: Now turning to key franchise performances in the fourth quarter.
Speaker Change: In global football engagement and monetization rebounded following the January 16th gameplay update.
Speaker Change: After the game play update F T ultimate team posted high single digit net bookings growth in constant currency.
Speaker Change: By strong re engagement for our competitive cohort.
Speaker Change: F T mobile so double digit growth in net bookings ahead of our expectations with a web store accounting for mid single digit percentage of the overall total.
Speaker Change: As T mobile continues to be an important contributor to global reach and engagement as.
Speaker Change: As we expand and deepen our presence in top geographies that differ from our <unk> title.
Speaker Change: Typically in southeast Asia, and the Middle East.
Speaker Change: And American football late cycle engagement trends remained strong in the ecosystem.
Speaker Change: With a Q4 average for weekly active users higher than the fiscal year average.
Speaker Change: In the quarter College football Ultimate team significantly outperformed which average net bookings for <unk> more than 50% above expectations driven by high impact content drops like rewind and names of the game.
Speaker Change: Madden NFL 25 acquisition also exceeded our expectations driven by expanded platform rates as well as strong late holiday demand for the title relative to prior quarters.
Speaker Change: The Sims franchise or the 30% net bookings growth in Q4.
Speaker Change: Given by the 25th birthday celebrations that reignited player engagement and accelerated way engagement across the community.
Speaker Change: The rerelease of legacy titles.
Speaker Change: Find with targeted updates align to our broader franchise roadmap drove higher attach rates, particularly among casual spenders.
Speaker Change: On a GAAP basis, we delivered net revenue of $1 9 billion.
Speaker Change: Up 7%.
Speaker Change: Cost of revenue was $368 million, resulting in a gross margin of 86% supported by favorable digital mix.
Speaker Change: Operating expenses were 113 billion down 5% as we lap a comparable periods that include a $61 million restructuring and related charge.
Speaker Change: Earnings per share was <unk> 98.
Speaker Change: Up 46% driven by net revenue growth and improved operating leverage.
Speaker Change: Operating cash flow was $549 million.
Speaker Change: With capital expenditures of $54 million, we delivered free cash flow of $495 million.
Speaker Change: Now moving to our outlook.
Speaker Change: We expect fiscal year net bookings of $7 6 billion to $8 billion.
3% to 9% year over year.
Our assumptions for FY 'twenty six reflect four key factors first we expect the battlefield launched in the fiscal year.
Speaker Change: Second we expect growth to be driven by our EA sports portfolio, the <unk> franchise, and a launch of battlefield unscathed.
Speaker Change: Third while FX remains volatile our guide assumes an approximate one point headwind from FX.
Speaker Change: Please see our earnings slides for more detail on our currency assumptions.
Speaker Change: And fourth we expect an approximate five point headwind from catalog in apex legends.
Speaker Change: In regards to these headwinds.
Speaker Change: First our catalog is seeing near term pressure as a transition to a more focused slate anchored around massive online communities and select blockbuster storytelling investments.
Speaker Change: As a result catalog is now a smaller contributor to total net bookings that historically and we expect this shift to weigh on year over year comparisons in the year as our portfolio continues a structural transition.
Speaker Change: Second while apex legends is tracking in line with our expectations. The past two quarters I FY 'twenty six guide assumes an approximately 40% year over year decline in net bookings.
Speaker Change: We expect stronger headwinds in the first half of the fiscal year <unk>.
Speaker Change: Followed by more moderate declines in the back half.
Speaker Change: We continue to focus on delivering for our coal plants and investing in the long term evolution of the franchise.
Speaker Change: Turning to gap.
Speaker Change: We expect net revenue of $7 1 billion to $7 5 billion.
Speaker Change: We expect GAAP operating expenses to be $4 $47 billion to $4 five 7 billion.
Speaker Change: Up 2% of up 4% year over year predominantly related to battlefield marketing.
Speaker Change: We expect GAAP operating margin to be 16, 3% to 18, 9%.
Speaker Change: We expect non-GAAP operating margin to be 27, 2% to 29, 2%.
Speaker Change: The impact from change in deferred net revenue is expected to be approximately 480 to 440 basis points, we expect GAAP EPS of $3 90.
Speaker Change: The $3 and 79.
Speaker Change: We reiterate our financial margin framework through FY 'twenty seven with margin expansion underpinned by continued life services growth.
Speaker Change: Multiple new plan releases, a world Cup in the summer of 2026, and a milestone melons EA sports UFC.
Speaker Change: We expect operating cash flow between $2 2 billion and $2 4 billion.
Speaker Change: With capital expenditures expected to be relatively flat to the prior year at $225 million, we expect to deliver free cash flow of $1 97 5 billion.
Speaker Change: The $2 $175 billion up 6% to 17%.
Speaker Change: We remain committed to a strong return of capital program with a goal to return at least 80% of free cash flow with stock repurchases and dividends through FY 'twenty seven.
Speaker Change: Now turning to our Q1 guidance.
Speaker Change: We expect net bookings for Q1 to be $1 75 billion.
Speaker Change: To 1.2 dollars 75 billion.
Speaker Change: Down 7% to up 1%.
Speaker Change: As is typical for Q1 this reflects seasonally lower contributions from our EA sports portfolio.
Included in our outlook is an approximate five point headwind from apex legends, which we anticipate will continue at a similar rate through the first half of the fiscal year.
Speaker Change: We also expect an additional two point headwind from catalog.
Speaker Change: As a reminder, we expect some of these headwinds in addition to challenging year over year comparisons to also weigh on Q2 with growth accelerating in the back half of the year driven by the typical seasonality of our esports franchises as well as the anticipated battlefield launch.
Speaker Change: For Q1, we expect live services, excluding apex legends to grow low single digits led by growth in IEA sports portfolio in.
In particular, EA sports FCA, showing positive net bookings momentum through the early weeks of Q1.
Speaker Change: That said, we're taking a measured view of the quarter overall as team of the season Q1 largest event remains in progress.
Speaker Change: Turning to GAAP, we expect net revenue of $1 55 billion to $1 65 billion cost of revenue to be $265 million to $285 million and operating expenses of approximately $1, one 1 billion.
Speaker Change: The 112 billion up.
Speaker Change: Up 7% to 8%.
Speaker Change: Roughly half of this year over year increase is related to continued investments in line with Q4.
Speaker Change: The other primary driver of expense growth being cost associated with the resource we proposition.
Speaker Change: We expect earnings per share of 49 to <unk> 66 cents.
Speaker Change: To close.
Speaker Change: FY 'twenty five was a year of focused execution we.
Speaker Change: We delivered strong performance across our biggest franchises expanded margins.
Speaker Change: <unk> had over $2 billion in operating cash flow and returned $2 7 billion stockholders.
Speaker Change: As we enter FY 'twenty six in FY 'twenty seven we do so from position of strength in our business structurally positioned for growth and margin expansion.
Speaker Change: Led by sustained leadership in esports.
Speaker Change: Battlefield skate and unannounced new releases.
Speaker Change: Our multi year growth trajectory remains firmly underway consistent with what we shared at Investor day, and our conviction in our financial margin framework remains unchanged.
Andrew Wilson: We remain focused on disciplined investment operational agility and delivering strong returns now I'll hand, the call back to Andrew.
Andrew Wilson: Thank you Stuart.
Andrew Wilson: FY 'twenty five was a pivotal year for electronic arts, a year defined by creative breakthroughs stronger play connection and meaningful progress across our portfolio. We sharpened our focus delivered bold new experiences and lay the groundwork for an even more ambitious future.
Andrew Wilson: As we look ahead, we are confident in a strong slate of upcoming releases our strategy to invest in our biggest long term opportunities and our focus well tested execution approach with leading IP transformative technology, a global network of passionate players and the best creative talent in the industry EA is uniquely positioned.
Andrew Wilson: <unk> to lead in a rapidly evolving world.
Speaker Change: We know the road ahead may bring near term economic uncertainty, but our focus adaptability and strategic clarity gives us the tools to thrive. This is an important moment for our company and we've never been more optimistic about what comes next thank you and now Stuart and I are here for your questions.
Speaker Change: Thanks, Andrew we are ready for your questions. We will take one question and one follow up from each analyst.
With that Abbvie, we are now ready for our first question.
Speaker Change: Thank you.
Speaker Change: And if you have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question simply press Star one a second time.
Speaker Change: You are called upon to ask your question and our listening via Speakerphone on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: Again, it is star one if you would like to join the queue.
Speaker Change: And our first question comes from the line of Matthew cost with Morgan Stanley. Your line is open.
Speaker Change: Yeah.
Speaker Change: Hi, everyone. Thanks for taking the questions I guess wanted to start for Andrew when you think about the you know.
Speaker Change: The temporary slowdown that you saw in FC and then the efforts everyone was very successful to turn it around in January what ultimately were the main issues in retrospect how.
Speaker Change: Oh did you fix them what changes in the game, where the most effective to fix them and how will that impact how you approach future FC games, and then I have one follow up thank you.
Speaker Change: Thank you Matt Great question.
Speaker Change: I think if we take two or three steps back now and really look at the total situation I think the first thing to recognize is it's actually not unnatural for franchises of this size. This scale and this level of enduring strength to have momentary lags from time to time that kind of ebbs and flows of alive.
Speaker Change: Service business as.
Speaker Change: As we look at a lot of large scale global franchises coming out of covered many of them had prolonged.
Speaker Change: Slowdowns at 40%, 50%.
Speaker Change: The annual revenue before kind of clawing, some back and some never really made it back to where they were so it's not an unnatural thing that we had to deal with again, we didn't expect that FC would go through that but it did and so then we started thinking about well why would that have happened.
Speaker Change: And why does it happen at that time.
Speaker Change: The first is as you know we've been growing exceptionally well year over year.
Speaker Change: Throughout the history of the franchise, but certainly through Covid and since covered and so we grew a lot. We brought in a lot of new pleasure in Covid and grew the business meaningfully.
Speaker Change: And coming out of covered many franchises kind of.
Speaker Change: That moment to have a little slowdown or a prolonged slowdown in some cases, we did not.
Speaker Change: And part of the reason was we rolled straight into a World Cup, which as we know is always a great acquisition and engagement opportunity for the franchise.
Speaker Change: Then as we go back to your history, sometimes we would see some momentary softness coming out of a World Cup.
Speaker Change: This time, we rolled straight into an FC rebrand and that was.
Speaker Change: A very large concerted effort across the entire franchise both in the context of development.
Speaker Change: In the context of marketing and the college of the partnerships that we were working through and working with to relaunch our football franchise under our own brand EA sports UFC and so that was really why we hadn't seen any slowdown at that point.
Speaker Change: So again not unnatural that's why we think we had the timing.
Speaker Change: That we did then it came down to you know what was really driving it and there was two things we've talked about this a few times. Since then but there are really two things one was given how many new players we brought into the franchise over the proceeding three years and the level of engagement, we adrift were driven.
We didn't see the same migration track from the outgoing titled to the incoming Tuttle. The good news for US at that time of course was that we werent, losing people out of the ecosystem. They just weren't moving from FC 24 to <unk> 25 at the same rate they had in the past or certainly at the same rate that we had.
Speaker Change: Seen early in the launch window.
Speaker Change: The second piece was as our core cohort a KOL competitive cohort.
Speaker Change: Got deeper into the game experience they started to give us feedback that it was more defensively June than they would otherwise like in some of the skull lines that we're seeing in some of the gameplay tactics that were being used weren't conducive to the kind of outcomes that they typically would be looking for in their highly competitive play again.
Speaker Change: This wasn't across the entire.
Speaker Change: Cohort of the game for the most part it was very well received it was sports game of the year was very highly rated and for all bought out very core cohort. They thought the game was exactly as it should be with this competitive cohort is very important to us we work very closely with them and as they got deeper into the game play they felt that.
Speaker Change: It wasn't really churned in the way that they would like so as we came through Q3, we listen we learn and we really had two tracks of action that we had to take the first track was really incentivizing players to move from 24 to 25 and that was a very deliberate personal marketing.
Speaker Change: Graham against cohorts that were still engaged deeply in 24 that we believed were going to really enjoy the twenty-five experience and we spoke to them individually in digital channels and really.
Speaker Change: Personalize the marketing to them in order to incent them to make the transition and certainly we saw meaningful transition and as we came into Q4, we're seeing more normalized levels between 'twenty four and 'twenty five that we would have seen in years gone by the second track, which was a far more involved track.
Speaker Change: Was our development team spent countless hours interacting with that core community listening to them evaluating their feedback.
Speaker Change: And that feedback with what they were singing game play and then built out.
Speaker Change: The most robust gameplay update we've ever done in the history of the franchise and launched that with our biggest event of the season to that point and again feedback was overwhelmingly positive that cole cohort came back into the game at normalized levels and engaged deeply and we ended the year up here.
Speaker Change: Every year and so as we look through that.
Speaker Change: The learning for US as this is one it's not unnatural for there to be ebbs and flows in these massive online live service businesses.
Speaker Change: We had delayed al EB by virtue of Covid The World Cup and then an FC launch.
Speaker Change: The second thing is that.
Speaker Change: As we've done that we need to make sure that we're working very closely with our core cohort and marketing to each of the cohorts individually to ensure they understand the benefits of the incoming title as we look into our FY 'twenty six launches you should imagine that not only will be we're working very very closely with.
Speaker Change: Our core cohorts.
Speaker Change: Around the tuning and balancing and polishing of the game. We also took a lot of learning with how we incentivize plays to move from one year's version to the next year's version and certainly we come out of Q4 with incredible momentum and we come into FY 'twenty six feeling very good about the future of the franchise at this scale.
Speaker Change: Bill.
Speaker Change: Great. Thank you and then as Stuart if I could ask about some commentary in the press release.
Speaker Change: There's a comment in here about continued growth in live services and the launch of some new non annual titles in fiscal 'twenty seven is that consistent with what the long term growth profile that you shared during the Investor day in September where you expected to consistently outperform the videogame market.
Speaker Change: Yes, I think the commentary in the prepared remarks is ready to help continue unpack.
Speaker Change: The conviction we have in the framework, we put out for Investor day, we are a little bit more context on lagging behind the various components and pieces I think if you see the FY 'twenty six and the guidance. We just put out you can start to see the power in the model that we have today who've looked at margin expansion capability of the cash flow numbers plus six to plus seven.
Speaker Change: <unk>, what you see there is us continuing to build out how we drive growth and in both components. Both on the top line through growth in our continuing track core business. So our live service massive online communities and secondly, you wanted to be clear the Oc inside of that between 26 and 27 also be additional titles for my pipeline, but yes to that.
Speaker Change: Point, we've reiterated remain on track for the margin framework that we laid out back in Investor day.
Speaker Change: Great. Thanks, so much.
Speaker Change: And our next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open.
Eric Sheridan: Thanks, so much for taking the question maybe I can ask a two parter on battlefield.
Eric Sheridan: Given the approach you took just sort of have the game out in the community.
Eric Sheridan: Sort of in a beta test over multiple quarters now what are some of the key learnings about how to position battlefield for creative and commercial success and how would you compare some of those learnings to prior versions of the games and what you might have learned from bringing the gaining of market in prior years and the SEC.
Eric Sheridan: Good part would be.
Speaker Change: Is there any way identify how to think about the growth investments behind battlefield that may be aligned with the titles launched in the fiscal 'twenty six guidance. Just so we can line up elements of supporting growth against the potential for the franchise. Thank you so much.
Speaker Change: Let me take the first part of that and then I'll hand, it off to Stuart for the second part.
Stuart Canfield: This battlefield as we've said many times is the biggest battlefield, we've ever made and of course, you would expect us to say that but we've certainly had the biggest team behind it and we've given them as much time as they need to get to a real quality aligned with our KOL battlefield community.
Stuart Canfield: If you go back through our battlefields all the way back to battlefield four.
Stuart Canfield: I might argue that we've we've released incredible games every time.
Stuart Canfield: <unk> always been high quality, we've always worked closely with the community, but we haven't always worked as closely as we should have we haven't always really worked to help them understand the things that we're building and for us to understand the things that they really want out of a battlefield. We noted that when we get it right battlefield is a giant.
Stuart Canfield: Franchise, and often the biggest shooter in the year.
Stuart Canfield: So this time, we wanted to ensure that one our player base and our global community had a better understanding of the things that we are building and how we're building and some of the approaches that we're taking to building, but more importantly, we wanted them to have the ability to feedback on that construction weapon lineup progression all of the things that make battlefield great.
Stuart Canfield: At battlefield scale and given that this is the biggest battlefield ever there was really no other way to go about that other than battlefield labs and the way we have.
Stuart Canfield: And I would tell you we.
Stuart Canfield: Been overwhelmed by the feedback not just the positive feedback that our players are giving us around what we're doing how we're doing at the scale and nature of what we're doing but also just their willingness to deeply engage with us through this process.
Stuart Canfield: Hundreds of thousands of people have weighed into this and really given us feedback that is going to help us tune in balance.
Stuart Canfield: Incredible scale game and as we know as we move into the next phase.
Stuart Canfield: We will start to open up to a wider audience, bringing more across North America, and Europe, and starting with Asia and so again. This is all about two things one is helping our community understand the nature of the things that we're building, but more important have us understand the things that they want out of this game and ensuring what tuning.
Stuart Canfield: And balancing and polishing in a way that is aligned with our expectations and we know when we get that right.
Stuart Canfield: The opportunities is incredibly large.
Stuart Canfield: Alright to your second question, we think about unique investments this year versus last year, and how we think about growth investment around battlefield.
Stuart Canfield: We call it out obviously, our opex structure. This year remains flat outside of the go to market cost of benefits, which all youll see unique.
Stuart Canfield: As the prior year as you know we expenses. We go so predominantly the R&D incremental this year is slight versus material, which is just cost that continue to increment themselves as we get closer to some aspects of game development that come later in the cycle as we release you should also assume that we continue to invest behind the product post launch.
Stuart Canfield: Which will be incremental in the year, but overall I'd focus you that the biggest change year over year as the go to market cost, which we've called out as the only dominant driver investment structure for us.
Stuart Canfield: Outside of that we've managed to continue to reallocate I continue to be disciplined in how we capture costs against that part in our strategy and we'll continue to do so quarter over quarter.
Stuart Canfield: Great. Thank you.
Speaker Change: And your next question comes from the line of Doug <unk> with TD Cowen Your line is open.
Doug: Hey, Thank you.
I just wonder if you could talk a bit about how to think about American football in the coming year, obviously cost about 25, you had a huge amount of pent up demand and that that could create a tough comp depending on a lot of things, but just how are you guys thinking about the puts and takes for that franchise. This fiscal year and how to think about potential growth.
Doug: Yeah I'll start just in terms of an overarching strategy for American football and then I'll, let Joe kind of lean into more in the forecast and projection.
Doug: The good news for US is American football in the closet, both NFL and college continues to grow.
Doug: And both fandom and engagement broadly.
Doug: And so our expectation is that overall, the sports will grow and typically where we deliver in line with fans' expectations. We have the benefit of that growth and that acts as a multiply for us and we certainly expect that in the corners of American football on a go forward basis.
Doug: We have a big ambition around building the largest football community in this country and really being a leading digital.
Doug: <unk> platform through interactive entertainment the launch of college football in this past year was just the first step.
Doug: Again, I acknowledge that there was almost certainly pent up demand, having not launched the franchise for 10 years, but I'd also say given the quality of the game that our team built given that level of engagement that we had from a fan base. Those fans don't Love College football any less this year than they did last year.
Doug: And certainly as we look forward now to building much deeper connection between college and the NFL product.
Doug: This year, and then building out much bigger social ecosystems around the combined franchise in future years, our expectation that we will continue to grow this business in line with the growth of the sport.
Doug: And benefit from the ongoing uptake of young fans with interactive entertainment.
Doug: And Doug Great. Thanks for the question.
Doug: You should think that we.
Speaker Change: We've been pretty prudent and balanced for many of the reasons that kind of you outlined and Andrew Boll Tom.
Doug: We know obviously last year was a record year.
Really a tough comp and we would expect that Q2 likely could be a tougher comp based on the pent up demand for college football as well. We also expect to continue to build on on learnings and get given its year two how do we see the mix play out between the titles.
Doug: How do we think about the incredible service that we saw continue for college and the opportunity for that next year. So overall in the guidance as is general across the entire guidance for the fiscal year, we've been pretty pragmatic and balanced.
Andrew Wilson: But to Andrew's points expectations, both this year and beyond to continue to drive growth through this franchise.
Doug: Great. Thank you.
Speaker Change: And our next question comes from the line of Chris Shaw with UBS. Your line is open.
Chris Shaw: Great. Thank you maybe a two part question. Appreciate you are now guiding in a very dynamic macro environment to the extent the economy does soften what areas of your business do you believe are most macro sensitive and any learnings from history that you would point to and second question. We've seen your peers announced games at higher price points, how do you think about the pricing.
Chris Shaw: Power for your own IP and could we see you take a similar approach with your own key franchises going forward. Thank you.
Chris Shaw: Great questions.
Chris Shaw: First on the macro I think having been in this company now for 25 years.
I've had the great fortune of navigating many twists and turns in the macro environment. What has typically been the case is our industry and in particular, our company and more specifically our biggest franchises.
Chris Shaw: Have not been immune but they've been incredibly resilient through even macro challenging times.
Chris Shaw: Typically we've seen our biggest franchises performed very well and there's really good reason for that entertainment is a fundamental human need it's been with us since the beginning of time at this point in time, our form of entertainment is the first form of entertainment for much of the global population and that grows every year.
Chris Shaw: Our industry continues to grow and we represent incredible value. When you think about the amount of money of game costs the amount of money it cost to extend and enhance that over the course of 365 day supply it still represents incredible value to get that entertainment fix.
Chris Shaw: And so while we are always prudent and pragmatic and thoughtful.
Chris Shaw: As we navigate.
Chris Shaw: Macro uncertainty.
Chris Shaw: We do believe that if we continue to deliver incredible entertainment experiences, we continue to invest behind our biggest <unk>.
Chris Shaw: Franchises that remember at just about entertainment, but are also about connection this is where people spend their best time with their best friends with a connect with them every day to enjoy the best moments of the day that even in a world, where we may not be immune from a meaningful macroeconomic downtime. We do believe that we will be <unk>.
Chris Shaw: Jillian and we do believe that we can grow over the course of time through that.
Chris Shaw: In term of pricing power again, our business is very different today than it was even just 10 years ago.
Chris Shaw: In a world where everything we did 10 years ago was about selling shiny discs and plastic boxes in retail shelves well, that's still a part of our business. It's a significantly smaller part of our business and we now have pricing represented everything from free to play all the way to deluxe editions and beyond at the end of the day.
Chris Shaw: Whether we're doing something that costs, a dollar or we're doing some of the cost $10 or doing something that costs $100. Our objective is always to deliver incredible quality and exponential value for our player base and what we've discovered over the course of time is whether we can marry quality and value together our business is strong.
Chris Shaw: Resilient and continues to grow.
Chris Shaw: And Chris just to close quickly from a guidance perspective, we put out we have reflected no changes in that contract here at this point.
Speaker Change: Great. Thank you very much.
Speaker Change: And our next question comes from the line of Andrew <unk> with Raymond James Your line is open.
Andrew: Thank you for taking my question now that the Big major expected release has moved out of fiscal 2006 in the industry I guess, how do you see the rest of the gaming industry positioning potential releases over the next few months and how does that impact your thoughts on the competitive landscape for the battlefield launch window and subsequent performance expectations.
Andrew: I'm not sure I can comment on the rest of the industry.
Andrew: Launches all launch timing other than to say typically today games take many years to build and develop.
Andrew: And it's unlikely that if you weren't already ready to launch.
Andrew: In this window it may be hard to get ready and take advantage of what might be otherwise are less competitive window than we may have anticipated earlier relative to battlefield. What we have said all along as we've been building towards a window that we thought made the most the most sense for battlefield, but we wouldnt launch in.
Andrew: The window that we thought truncated the value that we've invested into the franchise or the value that we think that players will derive from it once they jump in and start playing.
Andrew: I think now without going too far we believe that window is clearer than it was before and we feel very good about launching battlefield in FY 'twenty six.
Andrew: Thank you.
Speaker Change: And our next question comes from the line of James <unk> with Jefferies. Your line is open.
James: Great. Thanks, guys for taking my questions. Maybe Stuart you are guiding to some fairly impressive operating leverage in fiscal 2026 can you just talk about whats specifically driving that and if there's anything in particular you'd you'd want to call out and then I had a follow up for Andrew.
James: Yes, Thanks, James I think what we alluded to before and we are trying to indicate through the Investor day, It's really the power of incredible IP at scale through a massive online community construct like battlefield also bringing skate.
James: Really for us that we've been carrying the cost of battlefield.
James: And the multiple studios over a four year period already within the P&L. So you start to bring these IP to scale and get to market.
James: We get to accelerate the top line.
James: Our incredibly high margins, so theyre owned IP.
James: Battlefield instant has a high PC penetration and so both of those enable us to get meaningful leverage from the business.
James: We've also continued to be very disciplined around our investment structure. We've been deliberately continue to make decisions on a regular basis that reallocate them re prioritize capital in service of our strategic growth model.
James: You can see that as we continue to hold that investment structure, which we appreciate has been a headwind over the last two or three years now you're starting to see that investment structure pay up in the growth and importantly, the leverage of the business and you should think that if we continue to have strength and expand beyond that guidance range, you'll see that leverage continue.
James: And it's and it's not that DISA line from the cash that I just talked to earlier on the question on Nicole while you get plus six to plus 17% is the incredible.
James: Alignment on proxy that you see in terms of how we get growth across the business. So that is the power of the model we have.
James: Has the virtue of expensing investments along the way.
James: Most importantly, it's the IP the one license state of those and the scale through service, we can bring against them.
James: That's helpful. And then Andrew could you just talk about how you are planning to market Madden versus CFB. This year, along with that MVP bundle just interested to hear your perspective on how important overall bonder bundling is for your sports strategy going forward. Thank you.
James: I think what we recognize is that there is a great. Many fans who love both college football and the NFL.
James: This is an opportunity for them to pieces bite in both it was it was a very successful bundle last season.
James: At one time it was one of the most you know we had madden in the in the top 10, and we had college and we had the bundle.
James: Alex Big picture is that this year. There will also be a number of players maybe even more players that choose to jump into both college and the NFL.
James: And we will look to provide that opportunity for our player base.
James: Otherwise, we will continue to drive Madden will congeal drugs college, but remember the biggest part of our overarching strategy here is to build out the largest American football fan community in this country and be the leading digital football fan platform.
James: We believe we can do that through college football through Madden and through the ongoing social ecosystem. We built around those two franchises that make it make even more sense for our player base to play both even if they aren't currently thinking about doing so.
James: Thank you both.
Eric Handler: And our final question comes from the line of Eric Handler with Roth Capital Partners. Your line is open.
Eric Handler: Good afternoon, Thanks for squeezing me in.
Eric Handler: Wonder if you could talk about a little bit about the monetization impact of the World Cup.
Eric Handler: Past couple of World Cups, there's been some delay.
Eric Handler: Delayed gratification, because the World Cup British people and they don't necessarily spend right away, but then they spend later.
How do we think about the trajectory with the World Cup and then also do you think with.
The World Cup.
Eric Handler: Next year in <unk>.
Eric Handler: North America.
What do you think that impact might have on the game itself.
Eric Handler: Thank you for the question.
Eric Handler: Again, we've seen different outcomes of the World Cup over many many world Cups, and having been deeply involved with with what was our FIFA franchise and our web C franchise. Since 2004 I've seen the full spectrum of outcomes. One thing is almost certainly true and.
Eric Handler: System through every one.
Eric Handler: Is that when the world is thinking about football that is that's great for our business, where we can offer the opportunity for fans to come together compete collaborate and celebrate the world of football in the context of our franchise.
Eric Handler: That's a great benefit to our business. It almost certainly is a great acquisition tool for us it's absolutely a great engagement tool for us and over the course of time.
Eric Handler: It also works out to drive growth in the business.
Eric Handler: Relative to being in North America. The last time, we came through World Cup, we actually grew our player base here by 50% and so we think that that's a really big opportunity for us certainly as the sport grows globally. It also grows here in North America, and with the tournament happening here and our ability to act.
Eric Handler: <unk> deeply in and around the celebration of football in the context of our game.
Eric Handler: Our game community, we think there is real upside there.
Eric Handler: Certainly over the course of time as we grow through 26 through 27 into 'twenty eight.
Eric Handler: Again. This is this is the biggest sport in the world. It continues to grow every year, we will be using all opportunities to celebrate global football and we'll do that across console PC and more importantly, we're doing that more in mobile, which gives us growth in new markets and new territories.
Eric Handler: Even with the hosting of Wolfcamp.
Eric Handler: Thank you.
Speaker Change: Well. Thank you all for joining us today and for your thoughtful questions as we wrap FY 'twenty five this she stands out is a powerful reflection of our momentum and connects with players.
Speaker Change: In college football and the continued strength of FC drove another record year for EA sports. The Sims closed the year with its strongest ever performance reaffirming its place as a cultural icon and a vibrant platform for creativity and community with a robust pipeline. We see the next two years as an important inflection point for our business, we couldnt be more.
Speaker Change: What about what we're building towards and are positioned for growth.
Speaker Change: Thanks, again and look forward to speaking next quarter.
Speaker Change: And ladies and gentlemen that concludes today's call and we thank you all for joining you may now disconnect.