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Why Did the Share Price of Electronic Arts Rise on May 11?

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Impressive fiscal 4Q16 results

On May 11, 2016, Electronic Arts (EA) announced its fiscal 4Q16 and 2016 results. Electronic Arts declared revenues of $924 million in 4Q16, easily beating analyst estimates of $886.4 million. Non-GAAP (generally accepted accounting principles) earnings per share (or EPS) totaled $0.50 in fiscal 4Q16, compared to $0.39 in fiscal 4Q15.

EA’s shares rose by 7.7% in after-market trading to $73.38, following better-than-expected earnings. The increase in revenue was mainly driven by growing digital revenues and impressive sales of Star Wars: Battlefront. In fiscal 2016, EA sold over 14 million units of the game.

Shares of EA’s peers Take-Two Interactive Software (TTWO), Activision (ATVI), and Zynga (ZNGA) rose by 1%, 1.9%, and 0.40%, respectively, on May 11, 2016.

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Digital revenues rise 18.3% in fiscal 4Q16

Non-GAAP digital revenues accounted for 77% of total revenues and rose by 18.3% YoY (year-over-year) to $712 million in fiscal 4Q16. Revenues from Electronic Arts and other business segments fell by 27.9% to $212 million.

Revenues from full game downloads rose by 18% YoY to $134 million and EA’s revenue from mobile games also rose by 15% YoY to $173 million, driven by Star Wars: Galaxy of Heroes and Madden NFL.

EA’s revenues from advertising, subscriptions, and other segments also rose by 4% YoY to $95 million. Revenues driven by FIFA Ultimate Team extra content revenues rose by 26% to $310 million in 4Q16.

EA and Activision account for 1.2% of the Technology Select Sector SPDR ETF (XLK).

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