What happened

Shares of Activision Blizzard (NASDAQ:ATVI) rose 12% last month, according to data provided by S&P Global Market Intelligence.

ATVI Chart

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The rally added to impressive gains for the video game developer, which is up about 60% in the past 12 months.

So what

Activision's May surge came after the company announced first-quarter earnings results that blew past management's forecast on both the top and bottom lines. Revenue rose 19%, operating cash flow improved by 22%, and earnings jumped to a quarterly record of $0.56 per share.

Two friends playing video games.

Image source: Getty Images.

CEO Bobby Kotick credited fresh gaming properties for helping drive the surprising gains. These include Overwatch, which has quickly established itself as the eighth billion-dollar franchise in Activision's portfolio. At the same time, soaring digital revenue from one of its oldest franchises, World of Warcraft, lifted profit margins.

Now what

Activision noted a decline in active mobile users in its recently purchased King Digital business, and investors will want to keep an eye on that metric over the coming quarters. The company has big plans to monetize this 342 million-player base with advertisements and microtransactions, but that can't happen if large numbers of these casual gamers drift out of the ecosystem.

Still, the outlook appears bright for this business. Kotick and his team raised their 2017 sales and profit forecasts and believe the company can power market-beating growth through its record engagement levels and deep content portfolio. Looking further out, Activision aims to capitalize on booming demand for esports while also exploring new business lines, including consumer products.

Demitrios Kalogeropoulos owns shares of Activision Blizzard. The Motley Fool owns shares of and recommends Activision Blizzard. The Motley Fool has a disclosure policy.