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Why Shares of Electronic Arts Inc. Popped Today

By Travis Hoium – May 10, 2017 at 1:08PM

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A better-than-expected earnings report had investors leveling up with the video game specialist on Wednesday.

What happened 

Shares of video game giant Electronic Arts Inc. (EA -1.30%) jumped as much as 15% in trading Wednesday after the company reported fiscal fourth-quarter earnings. As of 12:51 p.m. EDT, the stock was up 14.3%. 

So what

Revenue was up 16.7% in the quarter to $1.53 billion and net income fell 37% to $566 million, or $1.81 per share. The decline was largely attributable to an income tax credit in last year's quarter. 

Kid playing PC video games in front of a large monitor.

Image source: Getty Images.

Results topped the $1.49 billion in revenue and earnings of just $1.63 per share that analysts had expected. For fiscal 2018, management forecast earnings of $3.57 per share, below the estimate of $4.16 from analysts, but that's not the focus for investors today. 

Now what

EA has made a solid transition to the new world of mobile games and digital downloads, getting $934 million of $1.53 billion in revenue from digital sources. The company's transition from dependence on hit games each year to a more consistent revenue model is giving investors confidence in the business's performance going forward. And with more and more people looking for ways to play games, whether it's on a smartphone or a new console, EA is well-positioned to offer compelling games that will be highly profitable for investors. 

Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Electronic Arts. The Motley Fool has a disclosure policy.

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