Activision Blizzard 09.30 NASDAQ: ATVI continue to benefit from people at home who play video games in the second quarter. Net provisions jumped 72% year-over-year to $ 2 billion. Strong results were driven by various franchises across the business, but the Activision segment stood out, with net revenue nearly doubling during the year to $ 993 million in the quarter.
The most Call of Duty The franchise has helped the company reach a much wider audience in platforms and geographies, and this has propelled Activision Blizzard to record levels of total bookings and earnings per share this year. Although management remains cautious about its short-term prospects, rising demand is the basis for long-term growth.
Call of Duty is the star of the show
The strategy for releasing multiple versions of Call of Duty in various platforms and price points has worked extremely well. The free game Call of Duty: Warzone attracted more than 75 million players. While millions of new players try Military zone, they are upgraded to the premium version Call of Duty: Modern Warfare, which leads to higher revenues and commitment to franchising.
The hours played in Modern war increases eight times compared to a year led by new and existing players. The Activision segment ended the quarter with 125 million active users per month, up 22.5% from the first quarter. That’s 37 million in the second quarter of 2019.
Management called this a “step change” in engagement. “In the first three quarters, the total net reservation in the game for Modern war now exceed the previous three Call of Duty titles combined for the same period, “said Chief Operating Officer Daniel Alegre during the conference.
Obviously, the pandemic will not be forever to lock people locked in their homes who play video games. However, higher levels of player engagement are likely to remain for some time.
Sony is reportedly increasing its initial supply of PlayStation 5 consoles to 10 million units for the upcoming launch of this holiday, as it expects greater demand.
During the second quarter of Activision’s call, CFO Dennis Durkin said: “We continue to experience strong business speeds, even as the spirit of reversing from a shelter to a moderate location.” In the second half of the quarter, Activision Blizzard saw a drop in demand for King’s mobile games. However, the rest of the company is enjoying tremendous speed at the moment.
Allegre explained this in detail during the conversation, stating: “While casual franchises return to more typical trends faster, our major franchises, with the greatest emphasis on social, multiplayer gameplay, see that engagements remain elevated, even when the regions are reopening. ”
Activision Blizzard allows the severe recession to change its short-term results, but management sees this period of high demand creating a new plateau for future performance. One reason for this is that Activision Blizzard has a total of 428 million monthly active users across the company.
In particular, the Activision and Blizzard segments have a total of 157 million users. That’s 88 million more users than in the previous quarter, giving the company a much larger audience to launch new games to boost revenue.
“In the second half, we plan to release basically new content in key franchises with a significantly larger audience than we’ve seen before, creating opportunities for strong financial results,” Durkin said. The two most important upcoming versions are World of Warcraft: Shadowlands expansion and the new premium version for Call of Duty,,
Laying the foundation for long-term growth
The updated forecast requires total net provisions to reach a record $ 7.6 billion for the full year, while non-GAAP earnings should reach $ 2.87.
Beyond 2020, management seeks to implement the lessons of Call of Duty to other franchises. CEO Bobby Kotik cited the recent success of Call of Duty as “a roadmap we plan to follow for the many franchises we have in our library dating back to 1980.”
Video game stocks are currently performing well for investors during the pandemic, but Kotick’s comment suggests that Activision Blizzard has a lot more sleeves to achieve long-term returns.