Video game giant Activision Blizzard, Inc. (NASDAQ:ATVI) has been on a tear both on its financial statements and in the stock market over the past year. New product hits like Overwatch have combined with stalwarts like World of Warcraft and new acquisitions from King Digital to create a cash flow machine. 

On Thursday after the market closes, investors will get a look at how the company did in the first quarter. It may be a little harder this time to wow investors with growth, but there are a few signs of strength in the business that we need to watch for. 

Video game controller sitting on a couch with a TV in the background.

Image source: Getty Images.

Activision Blizzard's own measure of success

The first measure of the quarter should be management's own guidance for Q1 2017. Below are its key metrics, which will be the headline numbers investors should examine first. 

Metric Q1 2017
Q1 2017
Net revenues  $1.55 billion  $1.55 billion 
Operating margin  18%  35% 
Earnings per share $0.25  $0.51 

Data source: Activision Blizzard Q4 2016 earnings presentation

The key metrics here will be revenue and operating margin. Revenue is expected to decline from $6.6 million in 2016 to $6.0 billion in 2017 as fewer hit titles make it to market, so beating current expectations could help bring an even more bullish outlook.  

Active users drive the gaming business

Activision Blizzard's success has long been driven by popular games that bring users back day after day, and that growing user base is a key long-term driver of the business. 

At the end of 2016, Activision had 51 million monthly active users (MAUs), Blizzard had 41 million, and King had 355 million MAUs. These might be tough levels for Activision Blizzard to top, particularly after the incredibly successful launch of Overwatch in 2016. With fewer big game launches expected this year, MAUs will be watched closely by investors

The model of selling digital content in games, whether on consoles, PCs, or mobile devices, also requires constant engagement. Keeping the MAU numbers near the all-time highs the company hit in 2016 will keep the business' finance driving forward. 

What's going on with e-sports? 

More and more gamers are looking at video games as a competitive sport, providing opportunities for players and spectators alike. Major League Gaming and Call of Duty World League are Activision Blizzard's two plays in e-sports, as the new industry is known. 

Activision Blizzard has been a little cryptic in explaining how e-sports are impacting finances, but it'll likely give clues to its engagement for the business. Last quarter, management said that social platform viewership of MLG was up 50% year over year and COD World League delivered 120 million video views in 2016, more than double from the year before. Look for similar numbers to be reported and investors should be looking for strong growth in this segment. 

If e-sports sounds like a far-fetched product for Activision Blizzard to be investing in, it's not. MGM Resorts recently announced that it'll be building an e-sports arena on the Las Vegas Strip that could become home of the world's biggest e-sports events, and prize pools for tournaments can now be in the millions of dollars. This is big business and will help drive long-term engagement for Activision Blizzard. 

Tempered expectations in 2017

As I mentioned, this year is relatively slow from a product launch standpoint and revenue is expected to be down about 10% as a result. But if customer engagement is strong and margins continue to demonstrate favorable economics, the company will be set up for big wins as new games are developed. The gaming business isn't going anywhere, and this is still the biggest name in the business. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.