The value of Electronic Arts' shares experienced a significant fall, amounting to 17%.
It seems like Electronic Arts (EA) is facing some turbulence recently, with their shares plummeting by 17.5% as of 11:55 a.m. ET on Thursday. This downturn came after EA preannounced their fiscal Q3 2025 earnings, revealing that they're projected to fall short of Wall Street's expectations, expected earnings per share will be $1.11 instead of the projected $1.15.
Let's delve into the details. Initially, EA had anticipated a mid-single-digit growth in their "live services net bookings" for the fiscal year. However, after a visibly slow pace in bookings for their popular Global Football franchise and a nearly 50% decrease in anticipated players for their Dragon Age games in Q3, they've revised their outlook to a mid-single-digit decline instead of growth. This shift in expectations has led to a projected net revenue of around $1.88 billion for Q3, with earnings as mentioned, at $1.11.
Now, you might be thinking, "Is EA stock a sell?" Well, considering the revised earnings forecast, EA stock is currently trading at roughly 30 times trailing earnings. Given the company's slumping sales, this price might be a bit steep.
As for the specifics, EA's Global Football franchise, which includes the EA SPORTS FC series, experienced a slowdown in bookings during the quarter. On top of that, the Dragon Age franchise only engaged around 1.5 million players during the period, significantly lower than the company had anticipated. The combination of these factors led to a miss in net bookings expectations, ultimately contributing to the overall earnings miss.
In the highly competitive video game market, EA's underperformance might raise concerns about the company's ability to maintain market share and growth in the face of intense competition. Nonetheless, it's worth noting that while EA is expected to miss Q3 sales estimates, they were initially forecasted to earn only $1.06 this quarter. If their earnings do meet expectations at $1.11, it would still be considered a positive beat, albeit a smaller one than initially anticipated.
Investors might want to reconsider their strategy when it comes to investing in Electronic Arts, given the current turmoil in the company's finance. The steep trading price of EA stock at around 30 times trailing earnings, combined with the company's slumping sales, might not be an attractive proposition for potential investors.
To mitigate potential losses, some financial advisors might suggest diversifying investments in the finance sector, considering EA's underperformance in the highly competitive video game market.
