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Electronic Arts (NASDAQ:EA) just took a brutal hit, with shares plunging 18% this morning, after the company slashed its revenue forecast. EA had initially expected mid-single-digit growth in live-service net bookings for fiscal 2025, but now it's bracing for a mid-single-digit declinemostly due to weaker-than-expected performance from its Global Football franchise. This marks a stark reversal after two years of double-digit net booking growth, as FC 25 lost momentum in Q3. On top of that, Dragon Age: The Veilguard flopped, engaging just 1.5 million players50% below expectations. As a result, EA is now forecasting Q3 net bookings of $2.215 billion and has revised its full-year outlook down to a range of $7.0 billion to $7.15 billion.
The market didn't take the news well. Oppenheimer slashed its price target from $165 to $140, calling this EA's biggest guidance cut since FY19. Stifel, Baird, and BMO Capital Markets followed, cutting targets to $133, $158, and $145, respectively. Analysts are particularly concerned about the Global Football slowdown, as the franchise has long been EA's cash cow. The stock is still trading at a P/E of 36.5x, but with the live-service revenue model under pressure, investors are questioning whether EA can maintain its profitability streak.
Despite the chaos, EA's leadership is holding firm. CEO Andrew Wilson pointed to a major gameplay refresh for FC 25 that's getting positive feedback and reiterated EA's commitment to balancing future growth with cost discipline. The company is betting big on its next wave of franchise launches to turn things around in fiscal 2026. But with competition heating up and uncertainty looming, all eyes are on EA's February 4 earnings call to see whether this is just a rough patchor a deeper problem.
This article first appeared on GuruFocus.