(Bloomberg) — Activision Blizzard Inc., the biggest US video game publisher, reported revenue that beat analysts’ estimates, but adjusted sales declined 15% from a year ago due to a soft Call of Duty launch last fall and a slow year for the gaming industry overall.
Activision, which is in the process of being acquired by Microsoft Corp., brought in adjusted revenue in the second quarter of $1.64 billion, compared with the average analyst’s projection for $1.6 billion. Adjusted revenue excludes deferred sales from online purchases. Adjusted earnings per share were 47 cents, almost 50% lower than a year earlier and slightly below analysts’ estimates, according to data compiled by Bloomberg.
Last fall’s Call of Duty Vanguard, which Activision said hasn’t performed as well as anticipated, has had a ripple effect on the company’s fiscal year. The game received negative reviews and faced stiff competition from new entries in the popular Halo and Battlefield series.
During the second quarter, Activision’s Blizzard division released Diablo Immortal, a new mobile entry in the action series. Activision’s Chinese partner NetEase Inc. delayed Diablo Immortal’s launch in the world’s biggest mobile app market by about a month, saying it needed additional time. It was finally released on July 25. Activision didn’t give revenue figures for the new Diablo game on Monday.
The video game industry has faced a sluggish year as it deals with hardware supply chain issues affecting consoles, inflation and a lack of big hits. Interest in gaming has also cooled off as pandemic stay-at-home orders lifted and people resumed outside interests and activities. Spending in the video game industry is expected to drop 8.7% this year, according to a report from the analytics firm NPD Group.
Activision said it expects revenue and earnings per share to “remain lower year-over-year in the second half.” The shares were up less than 1% in extended trading at $80.45.
Call of Duty Modern Warfare II, a new entry in the series, will be released on Oct. 28. But the series will then skip 2023, Bloomberg has reported. Activision will instead release add-ons for Modern Warfare and other Call of Duty related content. The next mainline game in the series, from the Treyarch studio, is planned for 2024. Call of Duty is Activision’s biggest video game series and the titles regularly top yearly sales charts. They have sold more than 400 million units since the series began in 2003.
Activision said it will also release the Blizzard games Overwatch 2 in early access on Oct. 4 and Dragonflight, a new expansion for the online game World of Warcraft, later this year. Diablo IV will be out next year, the company said.
The Santa Monica, California-based publisher increased developer headcount by 25% from a year earlier, in part due to acquisitions of the Boston-based game company Proletariat, which will assist on World of Warcraft expansions, and Sweden-based AI company Peltarion. However, it said it “remains cognizant of risks including those related to the labor market and economic conditions.”
Microsoft announced its purchase of Activision in January. The Xbox maker swooped in while Activision’s shares had suffered amid an ongoing sexual misconduct scandal last year. Activision’s stock has gained about 20% since the January announcement, although it is still trading well below the offer price of $95 a share, suggesting market uncertainty that the deal will go through. Lina Khan, the newly appointed head of the Federal Trade Commission, has indicated that she plans to take a tough stance against technology mergers. Activision has said it expects the transaction to close in Microsoft’s fiscal year ending June 2023.
(Updates with headcount increase.)
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