What Happened?
Shares of video game publisher Electronic Arts (NASDAQ:EA) jumped 6% in the morning session after the company reported fourth quarter (Fiscal Q3 2025) results. Revenue and EPS guidance for the next quarter blew past analysts' expectations. In addition, EPS beat Wall Street's estimates.
On the other hand, its revenue missed significantly. The decline in revenue was driven by lower full-game and live services sales. However, the company also announced a $1 billion accelerated share repurchase, reflecting confidence in long-term growth. Overall, this quarter was mixed, but the outlook was encouraging.
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What The Market Is Telling Us
Electronic Arts’s shares are not very volatile and have only had 1 move greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 13 days ago when the stock dropped 18.8% on the news that the company reported disappointing preliminary Q3 2025 results, revealing sluggish growth. EA now anticipates a mid-single-digit decline in live services bookings, a stark reversal from its earlier forecast of mid-single-digit growth. Net revenue is also expected to clock in at $1.883 billion, closer to the lower end of its previous guidance range of approximately $1.875 billion to $2.025 billion. The slowdown was attributed to weaker-than-expected performance in Global Football (football-related video games) and underwhelming engagement from titles like Dragon Age.
Following the update, BMO downgraded the stock's rating, citing diminished visibility. The firm stated, "Despite the increasing strategic market value of Interactive Entertainment assets, we are downgrading EA to Market Perform and reducing estimates and Target Price to $145." Bank of America followed suit, downgrading the stock to Neutral, expressing doubts about EA's ability to defend its market share.
Electronic Arts is down 12.5% since the beginning of the year, and at $127.65 per share, it is trading 24% below its 52-week high of $167.97 from November 2024. Investors who bought $1,000 worth of Electronic Arts’s shares 5 years ago would now be looking at an investment worth $1,184.
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