Earnings Results: Activision Blizzard delivers a ‘disappointing’ holiday-quarter amid Microsoft offer

Microsoft’s record offer completely changed the conversation about Activision Blizzard, which in its last earnings call was still digging itself out from the summer’s public-relations avalanche of sexual discrimination and harassment charges and game delays.

The company reported fourth-quarter net income of $564 million, or 72 cents a share, compared with $508 million, or 65 cents a share, in the year-ago period. Activision Blizzard said adjusted earnings, which exclude share-based compensation expenses and other items, were $1.01 a share, from 76 cents a share in the year-ago period.

Adjusted earnings plus the effect of non-GAAP deferrals was $1.25 a share, compared with $1.21 a share in the year-ago period.

Revenue declined to $2.16 billion from $2.41 billion in the year-ago quarter. Net bookings fell to $2.49 billion from $3.05 billion last year, because of “lower-than-expected performance in the Activision segment, which offset record performance at King,” the company said in a statement. Bookings represent the value of digital products and services sold during a quarter, but part of the revenue from those purchases is often recognized in future quarters.

Analysts surveyed by FactSet had forecast $1.31 a share on revenue of $2.82 billion and bookings of $2.8 billion, based on the company’s forecast of $1.29 a share — adjusted earnings plus the effect of non-GAAP deferrals — on revenue of $2.02 billion and bookings of $2.78 billion.

Activision Blizzard publishes such games as  “Call of Duty” through its Activision label; “World of Warcraft,” “Overwatch,” and “Diablo” through its Blizzard label; and “Candy Crush” through its King label.

Benchmark analyst Mike Hickey, who has a buy on the stock and a $95 price target, called the quarter “disappointing.”

“The ‘Call of Duty: Vanguard’ release disappointed and player engagement in ‘Warzone’ has decreased,” Hickey observed. “‘World of Warcraft’ delivered its strongest engagement and revenue outside of a Modern expansion year in a decade. King’s in-game revenue grew 14% Y/Y to a new record in the quarter, primarily from ‘Candy Crush’ growth of 20% Y/Y.”

“Call of Duty: Vanguard” was released in early November, right after the company’s previous earnings report.

Read: Microsoft’s Activision deal will reportedly be subject to FTC review

The company did not provide a forecast, and said it was not hosting a conference call with analysts because of the pending acquisition, which it said was expected to close in Microsoft’s fiscal year ending June 30, 2023.

Analysts estimate earnings of 74 cents a share on revenue of $1.88 billion and bookings of $1.88 billion for the first quarter, according to FactSet.

Shares were flat after hours, following a 0.4% decline in the regular session to close at $78.95, well below Microsoft’s $95 a share offer. Activision Blizzard shares are down 15% over the past 12 months, while Microsoft’s are up 24%, the S&P 500 index SPX, -2.44% is up 17%, and the tech-heavy Nasdaq Composite Index COMP, -3.74% is up 2%

Read: The pandemic boom in videogames is expected to disappear in 2022

On Tuesday, Electronic Arts Inc. EA, +0.09%, one the few large videogame publishers not caught up in some M&A deal so far, issued a lighter-than-expected forecast.

Read: Microsoft could have just kicked off a Big Tech gold rush, which helps videogame stocks but maybe not gamers

In addition to the Activision Blizzard offer in January, Sony Corp.  SONY, -3.76% 6758, -6.08% said it would buy videogame publisher Bungie for $3.6 billion, and Take-Two Interactive Inc.  TTWO, -1.23%  announced it would acquire Zynga Inc. ZNGA, -0.33%  for $12.7 billion.

Take-Two is scheduled to report earnings Monday, with Zynga on Wednesday.