Electronic Arts is one of the largest global developers and publishers of video games. Its most important franchises are the Madden NFL and FC soccer games, which it releases annually. In 2024, it also relaunched its American college football game. Other major franchises include Apex Legends, Battlefield, and The Sims. Typically, about three quarters of the firm’s sales are from in-game spending, with the remainder coming from initial game sales.

Electronic Arts is an independent developer, publisher and distributor of interactive software video games. The company's games can be played on a variety of consoles, including the Sony PlayStation, Microsoft's Xbox, and the Nintendo Switch. The games, which are also playable on PCs, tablets, mobile video game devices, and cellular phone handsets, are delivered via internet download from company and third-party online stores, as well as on disks and cartridges. The company typically pays fees to platform manufacturers in exchange for publishing rights and technology. Incorporated in 1982, Electronic Arts is headquartered in Redwood City, California.

Fourth-Quarter 2024 Earnings: Supporting the Stock Market The change in administration has brought with it significant policy changes that are upending the status quo. Actual and threatened tariffs, reductions in the federal workforce, and other changes are moving through the economy and leading to uncertain outcomes. Meanwhile, the Fed seems ever more content to hold off on additional rate cuts as inflation ticks higher. That all said, the S&P 500 has continued higher as investors reckon the U.S. economy can withstand new disruptions and a stalled rate environment. One reason for investors' optimism is the best earnings season in three years. For the past three years, we have called out the economy, employment, and earnings as three bulwarks of the bull market in place since fall 2022. GDP for 4Q24 eased to 2.3%, still healthy but down from the 3% range in the prior two quarters. The jobs economy has remained vital, but may face a test as implications of the reduced federal workforce ripple out into the economy. Earnings growth, by contrast, is heading higher rather than moderating. Fourth-quarter earnings season is exceeding already high expectations and, as it winds down, adds to positive sentiment in a market looking for support. The outlook for 1Q25 earnings and for full calendar year 2025 earnings is also positive. Fourth-Quarter 2024 Earnings: By the Numbers Slightly more than three-quarters of S&P 500 companies had reported calendar 4Q24 earnings as of mid-February. Fourth-quarter 2024 earnings from continuing operations are up in low- to mid-teen percentages from 4Q23 levels, based on the summary reports from three industry analysis firms (FactSet, Refinitiv, and Bloomberg). All three report that 4Q24 earnings growth is the strongest since 4Q21. With 77% of constituent companies having reported, FactSet reported a blended year-over-year EPS growth rate of 16.9% for 4Q24. Refinitiv, citing a similar percentage of reporting companies, states that earnings growth on a blended basis is running at 15.3%. Bloomberg is the most conservative in this cycle and calculates blended 4Q24 earnings growth of 12.7% year over year. 'Blended' in this case includes actual results for companies that have reported, and estimated results for companies yet to report. Companies are incented to low-ball their guidance, knowing that investors will have a mildly positive response to above-consensus results but a severely negative response to below-consensus or even in-line results. Given that most companies tend to beat expectations, blended growth rates tend to rise as more and more companies report. All of the EPS appreciation in 4Q EPS season is coming from growth companies; earnings from S&P 500 Index Growth are up 31% in 4Q24 while earnings from S&P 500 Index Value are down 13%. Excluding the drag from Energy companies, 4Q24 earnings would be up 16%, according to Bloomberg; and excluding the lift from Information Technology companies, 4Q24 earnings would be up 11%. Among the 77% of companies that have reported to date, over 80% reported earnings growth, while fewer than 20% reported annual earnings declines. Most of the earnings decliners are in Energy, with Materials and Industrial also reporting an above-sector-average proportion of decliners. Among the companies reporting earnings growth, just over three-quarters have reported a positive earnings surprise. That is about in line with the five-year and 10-year averages. On average, companies with positive EPS growth are exceeding consensus expectations by about 7%. That is below the five-year average of 8%-9%. But it is better than the magnitude of EPS beats in the past two years, which have run in low- to mid-single-digit percentages. At the sector level, the various analysis firms disagree on the top contributor to earnings growth. All agree that the traditional growth sectors -- Information Technology, Communication Services, and Consumer Discretionary -- are at or near the top. Refinitiv has Financial in second place. Bloomberg has Financial in third place, while FactSet has Financial as the highest EPS growth sector for 4Q. The most-important EPS trend shifts, in our view, take place among the sectors in the middle and at the bottom of the pack. After two down earnings years, Healthcare finally has tipped over to a positive earnings trend. Healthcare earnings in 4Q24 are rising in mid-teen percentages that put the sector in fifth or sixth place in EPS growth. Real Estate and Utilities are also growing in in high-single to low-double-digit percentages. Energy, Industrial, and Materials were the principal drags on total 2024 earnings from continuing operations. With triple-digit declines for most of the year, Energy -- just a 3%-4% sector by market weight -- was 'punching above its weight' in terms of pulling down total S&P 500 earnings. As of 4Q24, Energy is down in the high-20% range. Industrial earnings are up in low- to mid-single-digit percentages, depending on the survey, while Materials are flat to down in single-digit-percentages. All three of the industry analysis firms are reporting that revenue growth for 4Q24 is running in the mid-single-digit percentage range. About 60% of companies are reporting revenue growth ahead of consensus and the average beat is about one percentage point -- roughly in line with long-term averages. The best revenue growth is occurring in Information Technology, while the three 'problem' sectors -- Energy, Industrial, and Materials -- are reporting negative to flat revenue growth. We estimate that unfavorable currency exchange has cost companies about one percentage point of revenue growth in 4Q24, due to post-election strength in the dollar. The Earnings Year Ahead: 2025 In fall 2024, we increased our forecasts for S&P 500 earnings from continuing operations for 2025 and 2026. For 2025, we raised our forecast for S&P 500 earnings from continuing operations to $276, from $265. Our revised forecast calls for full-year 2025 EPS growth of 12%. For 2026, we raised our forecast for S&P 500 earnings from continuing operations to $307, from a preliminary outlook in the low-$290s range. Our revised forecast models full-year 2026 EPS growth of 11%. Also in fall 2024, after a successful 3Q24 EPS season and ahead of what was expected to the strongest 4Q EPS season in years, we retained our 2024 forecast for S&P 500 earnings from continuing operations of $247. That lines up with Bloomberg's estimate of $246, which has been edging higher due to 4Q24 strength. We are not inclined to change our final number for 2024 given that our forecast, when first made, was aggressive compared to the Street consensus. We are also at this time retaining our 2025 and 2026 EPS forecasts. Here's how we expect the 2025 earnings year to play out. We are modeling high-single-digit EPS growth in the first and second quarters, as companies across a broad range of industries confront more challenging year-earlier comparisons. Energy should still be drag on earnings for all or most of this period. And earnings contributions from the other 2024 laggards (Materials and Industrial) will be muted. As we get into the second half of the earnings year, the bulk of companies should continue to face more-challenging comparisons. We look for Energy to return to earnings growth in 2H25, however, and expect Materials and Industrial to report stronger trends. As such, we are modeling low-double-digit EPS growth in the third and fourth quarters of 2025. Conclusion Our 2026 earnings outlook is similar to our 2025 outlook, although we look for growth to moderate slightly. But we also acknowledge that any forecast of 2026 EPS at this point is at best uncertain and at worst a shot in the dark. Changes in the economy, whether from fiscal, monetary, or political policy, take months and even years to play out. The Fed's current monetary policy stance will be felt later this year and into early 2026. Impacts from any tariffs are as uncertain as the extent to which tariffs will be enacted. And changes in fiscal policy related to new tax policy won't be fully felt until 2025 taxes are filed in spring 2026. While uncertainty is the norm, leading U.S. corporations repeatedly have shown that they will protect their earnings progress at all costs. Thanks to technological advances that improve companies' visibility into their processes in real time, companies can flex their cost structures, shift resources to the most-promising end markets, and otherwise adapt to their specific market conditions with agility and speed. So while we cannot know how 2026 earnings will play out, we expect companies to remain committed to sustaining their EPS growth. Thanks in part to the positive earnings outlook along with solid employment and economic growth, we remain positive on the equity market in 2025. We would regard any sell-off or even a correction as a healthy opportunity to shake out and 'reset' the market.

Electronic Arts is one of the largest global developers and publishers of video games. Its most important franchises are the Madden NFL and FC soccer games, which it releases annually. In 2024, it also relaunched its American college football game. Other major franchises include Apex Legends, Battlefield, and The Sims. Typically, about three quarters of the firm’s sales are from in-game spending, with the remainder coming from initial game sales.