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Activision Blizzard remains robust even in slow quarters

Activision Blizzard remains robust even in slow quarters

Market-leading video game developer and publisher Activision Blizzard published first quarter results recently that demonstrated a robust underlying business – even when there aren’t any hyped-up games being released. The first quarter is a seasonally slow one for Activision, meaning investors will have to wait and see how its upcoming titles perform later in the year to gauge its real strength. But it’s nonetheless a very positive sign that the company’s ongoing business remains profitable even in the absence of new blockbusters.

Activision Blizzard’s share price is up by 9% over the past 30 days

Source: Yahoo Finance

Activision dropped about 11 million users from the fourth quarter of 2017, for a total of 374 million across its various segments. This might not sound like great news, but it’s important to understand the impact that a lack of new releases has on active gamers – in other words, this metric is necessarily subject to temporary fluctuations, when the company releases its next big title later in the year, expect to see it jump again.

And if Activision had just shy of 3% fewer people in its audience, it more than made up for the dip in numbers with a rise in engagement: the people that stayed around were more eager to make the most of Activision’s games than ever before. Time spent on casual gaming superstar Candy Crush (owned by the company’s King division, which focuses on mobile games) hit a new record; fans interacted more than ever with the Overwatch franchise – pushed, at least in part, by the company’s new eSports league devoted to it.

When it came to the financials, Activision beat its own guidance by some way. This outperformance was driven by better than expected margins – operating margin came in at 39% of sales against management’s 36% target. As a result, the company delivered earnings of 78¢ per share instead of its forecast 65¢. Why was profit margin up in the first place? Down to a continued, but faster than expected, shift towards digital sales channels. When a company like Activision sells a game digitally, it benefits from less manufacture costs (no need for disks, packaging, or manuals), and it keeps more of the profit, not needing to share it with owners of physical stores.

The company’s CEO, Bobby Kotick, was suitably pleased with the results, and issued the following statement:

“Activision Blizzard had another strong quarter, growing year-over-year, setting top and bottom line records, and over-performing guidance. Our continued ability to set new records speaks to the quality of our teams and the breadth and enduring nature of our portfolio of franchises against the backdrop of a large and growing interactive market. As we look ahead, our innovative core gaming pipeline, as well as initiatives like mobile, esports, and advertising, will continue to drive growth for our business.”