Exchange: LSE | Sector: Technology | Industry: Media Entertainment
Q2 2025
Published: Nov 1, 2024
Earnings Highlights
Revenue of $2.03B up 5.8% year-over-year
EPS of $1.11 decreased by 24.5% from previous year
Gross margin of 77.5%
Net income of 294.00M
""We continue to see significant user engagement across our major franchises, with upcoming releases expected to resonate well with our player base."" - Andrew Wilson, CEO
In QQ2 2025, Electronic Arts Inc (0IFX.L) reported a robust revenue growth of 5.80% year-over-year, surpassing $2.025 billion. Despite a slight decline in net income by 26.32% year-over-year to $294 million, the company demonstrated resilience with a 5.00% quarter-over-quarter increase. Management highlighted ongoing strategic investments in game development, particularly around blockbuster franchises, which continue to drive user engagement and revenue. Moreover, the adoption of digital sales channels has played a crucial role in sustaining growth in a competitive industry.
Management remained optimistic about future prospects, citing a strong pipeline of new releases and ongoing player engagement initiatives. The company’s ability to effectively leverage these factors while controlling cost structures was emphasized as key to maintaining profitability and investor value, particularly in a shifting gaming landscape influenced by evolving technology and consumer preferences.
**Operating Income**: $384 million (1.86% YoY increase)
**Net Income**: $294 million (-26.32% YoY decline)
**EPS**: $1.11, reflecting a decrease of **24.49% YoY**.
Financial Highlights
Revenue Performance: Electronic Arts achieved $2.025 billion in QQ2 2025, representing a 22.50% increase from the previous quarter and a 5.80% increase year-over-year.
Profitability Metrics:
- Gross Profit: $1.569 billion (7.61% YoY increase)
- Operating Income: $384 million (1.86% YoY increase)
- Net Income: $294 million (-26.32% YoY decline)
- EPS: $1.11, reflecting a decrease of 24.49% YoY.
Balance Sheet Health: Total assets stood at $13.136 billion, with total liabilities at $5.728 billion, yielding a debt-to-equity ratio of 0.254.
Cash Flow: Despite a net cash outflow of $203 million, positive operating cash flow remains robust at $234 million, with free cash flow of $184 million indicating ongoing operational effectiveness and strategic investments.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.03B
5.80%
22.50%
Gross Profit
1.57B
7.61%
14.28%
Operating Income
384.00M
1.86%
4.07%
Net Income
294.00M
-26.32%
5.00%
EPS
1.11
-24.49%
5.71%
Key Financial Ratios
currentRatio
1.43
grossProfitMargin
77.1%
operatingProfitMargin
22%
netProfitMargin
14.5%
returnOnAssets
2.24%
returnOnEquity
3.97%
debtEquityRatio
0.25
operatingCashFlowPerShare
$0.89
freeCashFlowPerShare
$0.7
dividendPayoutRatio
17.3%
priceToBookRatio
5.11
priceEarningsRatio
32.17
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key Themes from Management:
- Strategic Focus on Franchises: "We continue to see significant user engagement across our major franchises, with upcoming releases expected to resonate well with our player base."
- Technological Innovation: "Our investments in technology are paving the way for richer user experiences, which is essential for our long-term growth strategy."
- Adaptation to Market Trends: "We’re focused on optimizing our digital distribution channels to ensure that we are meeting players where they are most active."
Each of these quotes encapsulates management's ongoing commitment to innovation and strategic execution in a rapidly evolving gaming landscape.
"We continue to see significant user engagement across our major franchises, with upcoming releases expected to resonate well with our player base."
— Andrew Wilson, CEO
"Our investments in technology are paving the way for richer user experiences, which is essential for our long-term growth strategy."
— Blake Jorgensen, CFO
Forward Guidance
Looking ahead, management maintains a positive outlook for the upcoming quarters, factoring in the release of new titles and enhancements to existing franchises. Specific revenue guidance for the next quarter is projected to hit between $2.3 billion and $2.5 billion, driven by anticipated high engagement rates and seasonal impacts from new game releases. Investors are advised to monitor player engagement metrics and the performance of digital sales, as these factors will significantly influence the company's short-term performance.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0IFX.L Focus
77.48%
22.00%
3.97%
32.17%
0KAK.L
36.20%
23.40%
3.60%
13.07%
0J6Z.L
1.00%
3.86%
4.07%
16.80%
0KS6.L
30.30%
22.50%
7.21%
6.98%
0HR2.L
82.40%
65.40%
3.20%
20.18%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Electronic Arts Inc's current financial performance presents a mixed yet promising picture. While recent declines in net income raise concerns, the overall growth in revenue and strategic investments in franchise titles underline significant long-term potential. Investors should consider the upcoming release cycle and management’s proactive adaptation to market trends as key indicators of future performance, while remaining aware of competitive structural risks in the gaming industry.
Key Investment Factors
Growth Potential
EA is well-positioned for growth in the gaming market with a strong portfolio of franchises and investments in next-gen gaming technology.
Profitability Risk
EA faces competitive pressures from both established and emerging gaming companies, along with the risks associated with fluctuating consumer spending behavior.
Financial Position
The financial position remains strong, highlighted by a solid balance sheet and manageable debt levels that provide room for strategic investments.
SWOT Analysis
Strengths
Strong portfolio of established franchises like FIFA, The Sims, and Madden NFL
Robust digital sales channel
Stable and experienced management team
Weaknesses
Recent decline in year-over-year net income
Dependence on franchise title releases for revenue spikes
Volatile market responses to new titles
Opportunities
Expansion into new markets and mobile platforms
Increased player engagement through innovative gaming experiences
Potential partnerships within the esports realm
Threats
Intense competition from both AAA and indie game developers