Activision Blizzard hits Q3 earnings targets with strong World of Warcraft Classic results

Activision Blizzard reported today that its earnings for the third quarter ended September 30 beat Wall Street’s expectations on both earnings and revenues. The company had a big launch of World of Warcraft Classic during the quarter, and that helped drive the audience much higher in both Asia and the West, the company said.

Activision Blizzard’s core businesses include games like Overwatch, Call of Duty, and World of Warcraft on consoles and PC and its Candy Crush mobile games.

“Our third quarter results exceeded our prior outlook for both revenue and earnings per share,” said CEO Bobby Kotick in a statement. “Recent launches have enabled significant growth in the size of our audiences for our Call of Duty and World of Warcraft franchises. As we introduce mobile and free-to-play games based on our franchises we believe we can increase audience size, engagement and monetization across our wholly owned franchises. With a strong content pipeline and momentum in mobile, esports and advertising, we are confident we will remain a leader in connecting and engaging the world through epic entertainment.”

For the quarter ended September 30, 2019, the Santa Monica, California-based company said that its revenues were $1.282 billion, as compared with $1.105 billion for the third quarter of 2018.

For the quarter ended September 30, 2019, on a non-GAAP basis, Activision Blizzard’s earnings per diluted share were 38 cents, compared to 42 cents for the third quarter of 2018. Analysts had expected 23 cents a share.

For the fourth quarter, the company said it expects revenues of $1.812 billion and earnings per share of 43 cents on a non-GAAP basis. That’s only slightly up from the third quarter, and less than some of the most optimistic forecasts. (Overall, analysts expected $2.20 a share for Q4, before the earnings were announced). Perhaps as a result, the stock price is down 1.98% to $53.47 in after-hours trading.

Activision said earlier that Call of Duty: Modern Warfare generated $600 million in its first three days of sales, more than WWII and Black Ops 4, which both made more than $500 million in their opening weekends. And today, the company said that Modern Warfare is outselling last year’s Black Ops 4 by a percentage margin in the “teens.”

Call of Duty: Mobile

Above: Call of Duty: Mobile already has more than 100 million downloads.

Image Credit: Activision

This year’s game launched after the third quarter, on October 25, and it is edgy with ultraviolent scenes in the single-player campaign that include torture, child combat, and shooting unarmed women. Fans have reacted positively to the realism of both the content and the graphics, as it brings the game closer to being more like a documentary of modern warfare.

But the game has faced protests in Russia because it depicts Russian soldiers as war criminals, and it has a fictionalized “Highway of Death” that is blamed on Russian bombers, even though there was an actual “Highway of Death” scene perpetrated by Americans in the Gulf War. Call of Duty Mobile, which launched on October 1, generated more than 100 million downloads in its first month, which Kotick said in an earnings call was one of the most successful mobile launches ever. The game is in the top 10 in monetization charts in more than 100 countries.

Chief operating officer Coddy Johnson said in a call that Activision Blizzard will be able to spend a lot of money marketing Call of Duty Mobile, and this will affect profitability in Q4.

Meanwhile, the Blizzard Entertainment side of the company showed off its games in the works such as Diablo IV and Overwatch 2 last week at its BlizzCon 2019 conference in Anaheim, California. While the company faced some protesters related to its banning of a Hearthstone player who advocated liberating Hong Kong, the games were pretty much well received.

Kotick said in an analyst call that he expects Blizzard to deliver consistent results thanks to strong franchises like Overwatch, Hearthstone, and World of Warcraft.

World of Warcraft Classic drove the biggest quarterly increase to subscription plans in franchise history, in both the West and East, the company said. World of Warcraft’s next expansion, Shadowlands, will launch in 2020.

In the third quarter, Activision had 36 million monthly active users, Blizzard had 33 million, and King had 247 million.

The Candy Crush mobile franchise grew over the past year, the company said, driven by last year’s launch of Candy Crush Friends Saga. Advertising bookings almost doubled from a year ago.

The company laid off about 800 employees in February. This followed financial results for the fiscal year 2018 that were the company’s best-ever but fell short of expectations.

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