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Which Business Segments Look Promising for Activision Blizzard?

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Rising revenues from Blizzard in 3Q16

Activision Blizzard (ATVI) has three business segments: Blizzard, Activision, and King. In 3Q16, revenues from Blizzard rose 97% YoY (year-over-year) to $727 million. The 2Q16 launch of Overwatch, Blizzard’s game franchise, also drove user engagement in 3Q16. The operating income for this segment rose 151% YoY in 3Q16.

Blizzard launched the World of Warcraft: Legion on August 30, 2016, and sold more than 3.3 million units on that day. This was among the fastest-selling PC games ever. Activision stated that Overwatch was the top game played in Korean (EWY) game rooms in 3Q16.

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Revenue from Activision fell in 3Q16

In 3Q16, revenues from Activision fell 36% YoY to $377 million. However, Activision recorded the highest number of monthly active users (or MAU) of 46 million. Call of Duty and Destiny primarily drove user engagement in 3Q16. Activision has increased its MAU 18% in the last two years.

In 3Q16, revenues from King rose to $459 million. The Candy Crush franchise is a significant user engagement driver for King Digital (KING).

Improvement in operating margins

The rise in digital revenues for Activision Blizzard (ATVI) was one of the company’s major highlights in 3Q16. Driven by digital performance, the operating margin for Activision rose to 37% in 3Q16 from 26% in 3Q15.

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