Video game maker Electronic Arts (NASDAQ: EA) reports its fiscal second-quarter earnings on Tuesday, Oct. 31, right after market close, so you'll have plenty of time to get ready to hand out candy to scary little monsters and princesses.
The stock is up nearly 50% year to date, so investors will be very tuned in to what management has to say about performance of recent game releases, and its take on current trends impacting the company heading into the important holiday quarter.
Here's what investors need to know.
Screenshot from EA's upcoming Star Wars: Battlefront II. IMAGE SOURCE: EA.com
Headline numbers
Management is calling for GAAP revenue to grow 6.3% year over year to $955 million. Operating expense will be up from the prior-year quarter due to investments in marketing, new games, and the development of live services. This is expected to result in a loss per share of $0.18 on a GAAP basis, worse than last year's loss of $0.13.
In the short term, the stock price will likely fluctuate based on whether the game maker meets or beats consensus analyst predictions of $1.18 billion in non-GAAP revenue and $0.54 in non-GAAP earnings per share.
Key games
EA released new versions of its two most popular sports titles during the quarter -- Madden NFL 18 and FIFA 18, both of which received good reviews overall. Rounding up the new-game releases for the quarter were NBA Live 18 and NHL 18. Keep in mind that the fiscal second quarter is expected to make up only 23% of non-GAAP revenue for 2018. A much more significant 39% chunk should come during the holiday quarter.
So far, recent and upcoming releases have generated twice as much interest on social media as last year's game slate, according to the company. Star Wars: Battlefront II will be the headline title for the holiday quarter and is expected to drive strong sales. Other fiscal third-quarter releases include a console version of The Sims 4 and Need for Speed: Payback -- two of the best-selling franchises in the industry.
Investors should listen for any updates from management about these upcoming releases, as they will be important to how well EA performs through the end of fiscal 2018.
Digital revenue growth
Investors will also want to hear about EA's digital revenue. The growth of digital revenue has been driving higher margins and cash from operating activities. For the trailing-12-month period, digital revenue is up 23% and makes up 63% of total revenue. Since digitally delivered content costs less to produce than physical game discs, gross margin reached a company record of 73.2% in fiscal 2017 (ended in March), and management expects it to climb further to 74.9% for fiscal 2018.