Activision Blizzard (NASDAQ:ATVI) has been on a tremendous run since acquiring King Digital in early 2016. It's made a transition to a more mobile business with a higher percentage of sales from digital downloads.

When the company reports earnings on Thursday, Nov. 2 after the market closes, here's what investors should be watching.

Young people at a table playing video games.

Image source: Getty Images.

Measuring against the company's own expectations

The first thing to measure results against is management's guidance from the second-quarter earnings release. Here are the key figures:

Metric Q3 2017 GAAP Guidance Q3 2017 Non-GAAP Guidance
Revenue $1.385 billion $1.385 billion
Operating margin 10% 28%
Earnings per share $0.09 $0.34

Source: Activision Blizzard Q2 2017 earnings presentation. 

Management has a history of topping guidance, so a miss would be quite notable to investors.

Are new games gaining traction?

Destiny 2 was released on Sept. 6, and management should give us an idea of how the title is performing. The next big release will be Call of Duty: World War II, which comes out on Friday. Pre-orders are already rolling in, and if this game lives up to its history as one of the biggest franchises in the industry, it'll end up being a robust fourth quarter.

These games should drive Activision's revenue and operating income, which has lagged Blizzard and King so far in 2017. But the impact on the third quarter could be muted given the short amount of time Destiny 2 was available during the period.

Engagement will be key

In the second quarter, Activision reported 47 million monthly active users (MAUs), Blizzard had 46 million MAUs, and King said it had 314 million MAUs. This is a measure of consumer engagement in Activision Blizzard's gaming platform, and investors should watch for growth in MAUs, particularly when big games are launched.

MAUs aren't a perfect measure of the company's future, but with digital revenue accounting for 80% of overall revenue in the first half of the year, keeping consumers engaged and interested in buying additional digital content is a key piece of the strategy.

Esports is a wildcard

Investors may see esports as an unproven fad, but this could be the next big opportunity for Activision Blizzard. The company can create new games and leagues, generating revenue from owning the league and from selling franchises.

Initially, Overwatch League will be the most important to follow. Preseason begins on Dec. 6 with the regular season launching on Jan. 10, 2018. League play will take place at Activision Blizzard's new stadium, where Jay Leno's The Tonight Show was filmed.

If the Overwatch League is successful, it could be a business worth hundreds of millions of dollars on its own while laying the groundwork for more esports leagues based on other games. And it could keep millions of people highly engaged in the video games Activision Blizzard is making.

Building a foundation for continued growth

Hit games feed the business model for Activision Blizzard, driving MAU growth and continuous digital downloads. If the company can add on other ways to drive engagement and increase revenue, like esports, it'll be an incremental positive that will propel the business long term. Look for progress on all of these fronts in the third quarter.

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