Wednesday , 29 November 2023

Activision Blizzard reaches fiscal highs in Q4 2022

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Activision Blizzard has reported record breaking results for both 2022 and its fourth quarter in its most recent financial results.

For its annual performance, Activision Blizzard’s net bookings were $8.51 billion in 2022, up nearly 2% compared to 2021’s $8.35 billion. Net bookings for the fourth quarter of 2022 were up 40% year-over-year (from $2.49 billion in 2021 to $3.57 billion in 2022). In-game and mobile net bookings followed suit. In-game net bookings grew about 47% (from $1.24 billion in 2021 to $1.82 billion in 2022) while mobile net bookings grew in the mid-teens year over year.

As for engagement, Activision Blizzard reported 389 million monthly active users in Q4 2022.

Overall, Activision Blizzard seems to be highly focused on their key tentpole titles and executing content that meets (or hopefully exceeds) player expectations. Building trust with its audience is paying dividends.


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What’s driving this growth?

All three major segments of the company — King, Blizzard and Activision itself — were major contributors to Activision Blizzard’s success. All divisions reported record-breaking revenues in Q4.

Candy Crush Saga continues to prove a reliable — and growing — source of revenue for ABK despite challenges in the mobile market. The developer is focused on publishing more content for the game (such as seasons and events) and adding social and competitive features to the traditionally single-player experience. Together, this additional content is driving corresponding engagement and paying behavior. King plans to apply these learnings to the rest of its portfolio.

Blizzard attributed its success to the releases of Overwatch 2 and World of Warcraft’s Dragonflight expansion as well as the ongoing success of Diablo Immortal. Both these new releases and the increased engagement driven by this new content were critical to the developer’s record-breaking success. Together, all three titles brought in over $100 million in revenue each. This is despite OW2’s controversial launch and lower sales for Dragonflight compared to other expansions.

Call of Duty was another bright spot. Activision reported that its revenue segment grew 60% year-over-year in the fourth quarter. This isn’t surprising given Call of Duty: Modern Warfare II’s record breaking sales. Call of Duty Mobile also performed well, with net bookings reaching a new quarterly record.

Overall, Activision Blizzard’s bet on premium mobile titles — particularly Candy Crush, Diablo Immortal and Call of Duty Mobile — is clearly paying off financially.

Addressing headwinds

Activision Blizzard is facing numerous challenges, in particular its lapsed deal with Netease, morale concerns and increasing regulatory scrutiny regarding its pending merger with Microsoft.

Activision Blizzard acknowledged that the lapsed Netease deal was a concern for the company, but they remain optimistic about finding a new Chinese operating partner. The company estimates that about 3% of their revenue was in question after this deal ended.

With more focus on developing more consistent content and concerns around workplace harassment, Activision Blizzard has been increasingly focused on hiring and retaining talent. Game development teams grew over 25% year over year in 2022. The company has lofty goals with a five-year plan around DEI initiatives. ATVI is already seeing increased staffing retention as a result of these plans. Recently, Activision Blizzard reached an agreement with the SEC regarding concerns around whistle blowers, evaluating workplace complaints and the wording of the company’s standard separation agreements.

Of course, the biggest elephant in the room is Activision Blizzard’s pending merger with Microsoft. The company is facing regulatory inquiries from the UK, EU and U.S. regarding anti-trust. The company remains steadfast in its belief that the deal will be completed. However, it’s unclear what it will take to get regulators to accept the agreement. Currently, the breakup fee for the deal sits at $2.5 billion and will increase to $3 billion if an agreement is not reached by April 18, 2023. More news is expected this quarter.

Activision Blizzard vs. consensus

In general, most analysts expected Activision Blizzard to reach revenues of $3.19 billion. ATVI reported $3.57 billion in net bookings (which is comparable to revenue) in Q4 2022, beating expectations by about 12%. The company reaches this figure by combining its reported GAAP net revenues ($2.334 billion) plus its deferred revenue of $1.232 billion.

This high performance also translates to increased earnings per share (EPS). Q4 consensus expected $1.51 in EPS, while Activision Blizzard reported a record breaking $1.87 in EPS. As a result, the company out performed expectations by nearly 24%.

Prior to these results, Activision Blizzard’s stock was down about 5% on the day, however the stock is trending up slightly after hours. This contrasts with TakeTwo’s results which were also announced today.

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