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Activision Blizzard, Inc Keeps the Earnings Beats Coming

By Travis Hoium – Feb 10, 2017 at 10:32AM

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2016 ended on a high note for the video game king.

Activision Blizzard, Inc (ATVI -0.71%) can't seem to do anything wrong at the moment. Its games are a hit, revenue is pouring in, and management can't raise its guidance fast enough.

This is an incredible wave for investors to ride and the fourth-quarter numbers released Thursday after the market closed showed another outstanding quarter for the game company. Here's a look at the highlights.

A man playing a first-person shooter video game.

Image source: Getty Images.

Activision Blizzard's results: The raw numbers


Q4 2016

Q4 2015

Year-Over-Year Change

Most Recent Guidance

Net revenues

$2,014 million

$1,353 million


$1,856 million

Operating margin



300 basis points


Earnings per share





Data source: Activision Blizzard.

The figures above are on a GAAP basis. On a non-GAAP basis, the numbers were even more impressive. Operating income jumped from $284 million a year ago to $681 million and operating margin was 34% in the fourth quarter. On a per-share basis, earnings were $0.65, which trounced guidance of $0.40 in earnings for the quarter.

What happened with Activision Blizzard this quarter?

The revenue and earnings figures at Activision Blizzard are outstanding. But, as highlighted in my earnings preview, engagement numbers are an important indicator of the company's long-term health. Here are the highlights on a segment basis.

  • Monthly active users (MAUs) at Activision jumped by 5 million in the quarter to 51 million. Blizzard's MAUs fell by 1 million sequentially to 41 million, but had a record for the fourth quarter. King Digital's MAUs fell from 394 million to 355 million sequentially.
  • Digital channel revenues were a record $1.45 billion and in-game revenues were over $1 billion for the quarter and $3.6 billion for the year, up 126% from a year ago.
  • Users spent 43 billion hours playing Activision Blizzard's suite of games in 2016, close to the 45 billion hours people spent watching Netflix. If you want a good engagement metric, that's it.
  • One of the future growth drivers is e-sports franchises. Major League Gaming saw social platform views rise 50% versus a year ago and the COD World League delivered 120 million video views with double the engagement from a year ago.

What management had to say

CEO Bobby Kotick said the Blizzard Overwatch launch was a huge success for the company with the fastest launch to 25 million players. He's also encouraged by King's mobile advertising tests. If mobile advertising can be launched successfully, it would be a way to monetize hundreds of millions of users who spend time playing the company's games each day but don't necessarily spend money in-app.

The cash flow from the business is so strong that management announced a $1 billion stock repurchase program over the next two years. And management also plans to pay down $500 million of debt.

Looking forward

Guidance for 2017 is for $6 billion in revenue and earnings of $0.72 per share on a GAAP basis and $1.70 per share on a non-GAAP basis. But given Activision Blizzard's recent history of crushing expectations, the guidance figures should be taken with a grain of salt.

Activision Blizzard is hitting on all cylinders with great games, high engagement, and new revenue streams forming for the business. Long term, the company is in a great position to benefit from increased gaming, whether it's on mobile, PC, or console games.

Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Activision Blizzard. The Motley Fool has a disclosure policy.

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