SAN FRANCISCO (Reuters) - Video game publishers Electronic Arts Inc and Activision Blizzard Inc posted quarterly profit and revenue that beat expectations on Tuesday, sparking a rally in their shares.
On Nasdaq, Electronic Arts rose 15 percent after closing at $28.05, and Activision climbed 4 percent after closing at $19.31.
Electronic Arts also said it will set aside $750 million for a new share repurchase program.
The games publisher, known for its “FIFA” and “Madden” games, recorded non-GAAP net revenue of $914 million in its fiscal fourth quarter, down from $1.04 billion a year ago but more than the $812.4 million that Wall Street had expected.
The Redwood City, California-based company posted non-GAAP earnings of 48 cents a share, far exceeding analysts’ forecast of 11 cents.
“The real driver there was our digital business, which grew much faster than anticipated and our titles are doing well on the new consoles,” EA Chief Financial Officer Blake Jorgensen said in an interview. “We’re the No. 1 publisher on both Playstation4 and Xbox One.”
Activision Blizzard said its income growth was driven by robust digital sales of titles such as its personal computer game “Diablo III: Reaper of Souls” and console games like “Call of Duty.”
“We’re continuing to see margin expansion and the shift of our revenues going to digital from retail,” Activision Chief Executive Bobby Kotick said in an interview.
Activision said non-GAAP revenue, adjusted for the deferral of digital revenue and other items, dropped 4 percent to $772 million from $804 million a year ago. Digital sales set a new record as it made up 68 percent of the total revenue, the Santa Monica, California-based company said.
Non-GAAP income per share rose to 19 cents from 17 cents in the year-ago period.
Wall Street analysts had estimated revenue of $688.3 million and earnings per share of 10 cents, according to Thomson Reuters I/B/E/S.
Electronic Arts is on track to launch a fresh iteration of its city-building “Sims” game later this year and a new “Ultimate Fighting Challenge” title in June. The company expects to see non-GAAP revenue of $4.1 billion and earnings per share of $1.85 in the fiscal year ending March 2015.
For the first quarter ending June 30, it expects non-GAAP revenue of $700 million and a loss of 5 cents per share. This beat analysts’ estimates of $632.7 million for revenue and a loss of 23 cents per share.
Activision’s upcoming releases include sci-fi game “Destiny” and military-action shooter “Call of Duty: Advanced Warfare.”
Potentially breaking industry records, the company intends to shell out $500 million to develop and promote “Destiny,” which will launch on September 9, as it seeks to build the “shooter” video game into its next multibillion-dollar franchise.
With a clearer view into its game pipeline, Activision slightly raised its 2014 non-GAAP earnings per share forecast to $1.27 from its previous forecast of $1.26. This fell short of Wall Street analysts’ earnings per share estimate of $1.29, according to Thomson Reuters I/B/E/S.
Reporting by Malathi Nayak; Editing by Chris Reese; Editing by Richard Chang and Cynthia Osterman