Activision Blizzard generates $1.57 billion in Q3 revenue as Overwatch explodes

Activision Blizzard, one of the world’s biggest game publishers, beat earnings expectations for its third quarter ended September 30.

The company said non-GAAP (generally accepted accounting principles) revenues for the third quarter are $1.57 billion, up 58 percent from $990 million a year earlier. Non-GAAP earnings per share are up 145 percent from a year earlier. That’s pretty impressive, considering the company’s big games won’t make a real impact until the next reporting period. Big releases during the quarter included World of Warcraft: Legion and continued success from the team-shooter Overwatch, Hearthstone: Heroes of Warcraft digital card game, and King’s Candy Crush Saga on mobile.

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The big question of the fourth quarter is whether Call of Duty: Infinite Warfare will come out on top of the shooter competition, or if the close launch dates of Battlefield 1 (October 21) and Titanfall 2 (October 28) will hurt Call of Duty: Infinite Warfare.

Analysts expected non-GAAP earnings of 42 cents a share on revenues of $1.57 billion. GAAP earnings per share are expected to be around 6 cents a share on revenue of $1.49 billion. Activision raised its guidance for the full year.

“This quarter we again over-performed our plan, delivering record third-quarter revenues of $1.57 billion, up almost 60 percent and earnings per share of 49 cents a share, more than doubling year-over-year on a non-GAAP basis (as redefined),” CEO Bobby Kotick said in a statement.

“We continue to see enthusiasm from our global audiences for our key franchises including Call of Duty, Destiny, Candy Crush, and World of Warcraft, plus our newest franchise – Overwatch, which after only about four months had already reached over 20 million players and has incredible player engagement. Looking forward, we expect continued momentum from all of our growth strategies, especially our esports initiatives and our integration of in-game advertising.”

On October 11, Activision Blizzard disclosed that Overwatch had over 20 million players, up from over 15 million players in August and over 10 million players in June.

In the fourth quarter, Activision should see ore revenue from the launch tomorrow of Call of Duty: Infinite Warfare, the latest in a series that has generated more than $15 billion to date. For the fourth quarter, analysts expect earnings of 73 cents a share on revenue of $2.4 billion.

Like rival Electronic Arts, Activision Blizzard is no longer emphasizing non-GAAP figures, which excludes one-time items. That can be confusing. Under GAAP, revenue from certain online-enabled games is deferred for as long as companies think players will use them — six months to nine months. Activision will provide deferral information to calculate non-GAAP figures.

The company said that it had 482 million monthly active players, down from 491 million in the previous quarter. They played more than 10 billion hours during the third quarter.

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Digital channel revenues were $1.34 billion, up 114 percent from the prior year. The Activision and Blizzard segments had record combined third-quarter performance with $1.10 billion in net revenues, a 15 percent increase year-over-year, and $444 million in operating income, a 78 percent increase year-over-year.

Blizzard had the biggest quarterly online player community in its history, with 42 million monthly active users, up 25 percent quarter-over-quarter and 50 percent year-over-year. This reflects the continued success of Overwatch and the launch of World of Warcraft: Legion. Blizzard has more than doubled its monthly active players in just two years thanks to launches like multiplayer online battle arena Heroes of the Storm and the market-leading digital card game Hearthstone: Heroes of Warcraft.

On August 30, 2016, Blizzard launched World of Warcraft: Legion, which sold-through 3.3 million copies on day one, matching all-time records achieved by previous expansions, and ranking among the fastest-selling PC games ever.

Hearthstone had record quarterly monthly active users, which grew a double-digit percentage year-over-year. Activision had the biggest third quarter online player community in its history with 46 million monthly active users. Over the last two years, Activision has grown its monthly active users by 18 percent.

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On September 20, 2016, Activision and Bungie released Rise of Iron, a large new expansion for the Destiny universe. The expansion included fresh new content in the form of a new location, a new Raid, a new Strike, additional quests, gear, and a new game mode, which drove an increase in monthly active users quarter-over-quarter.

King’s monthly active users of 394 million were down slightly this quarter. King had three of the top-20-grossing titles in the U.S. mobile app stores for the 11th quarter in a row.

Activision Blizzard’s esports network, Major League Gaming, in partnership with Facebook, recorded about 50 million views, growing 67 percent quarter-over-quarter. At peak, a record 11 million users were reached in a single day. From September 2 through 4, 2016, Activision hosted Call of Duty XP, its largest fan event ever which included the culmination of the Call of Duty World League Championship. More than 1,000 teams participated in the Call of Duty World League during the 2016 season, which recorded 121 million views.

On October 16, 2016, Activision released Skylanders: Imaginators, and for the first time in toys-to-life history, fans are able to create their own digital Skylanders from scratch. Blizzard’s tenth BlizzCon event debuts on Friday in Anaheim, California.

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