Electronic Arts (NASDAQ:EA) reported fiscal 2018 fourth-quarter financial results on May 8. The digital entertainment giant is profiting handsomely from the surging growth of esports, which is boosting sales of its video games.

Electronic Arts results: The raw numbers

Metric

Q4 2018

Q4 2017

Year-Over-Year Change

Net revenue

$1.582 billion

$1.527 billion

4%

Net income

$607 million

$566 million

7%

Earnings per share

$1.95

$1.81

8%

Data source: Electronic Arts Q4 2018 earnings release.

What happened with Electronic Arts this quarter?

Electronic Arts' esports offerings are exploding in popularity; the number of players engaged in its FIFA 18 and Madden NFL 18 competitive tournaments surged 75% year over year to 18 million. Moreover, the company's total player base for its EA Sports franchises -- which include its FIFA, Madden NFL, NBA Live, NHL, and UFC games -- is now nearly 90 million players strong on current-generation consoles, and "tens of millions more" on PC and mobile devices.

"Fiscal 2018 was a year of strong growth and continued transformation for Electronic Arts, as we expanded the reach of our leading franchises like FIFA, Battlefield and The Sims to more players across more platforms and geographies," CEO Andrew Wilson said in a press release.

To Wilson's point, Electronic Arts' Battlefield community now exceeds 54 million gamers, while its Sims franchise tops 80 million players. In all, EA now has more than 300 million registered players worldwide.

Two gamers face off during EA's FIFA esports tournament

Electronic Arts' gamer base is growing rapidly, fueled by the rise of esports. Image source: Electronic Arts. 

This strong player growth is driving returns across EA's business. Net bookings -- essentially, the amount of products and services EA sold during the period -- leapt 15% to $1.3 billion in the fourth quarter. Net bookings for EA's live services, which deliver game experiences that update and evolve, leapt 31% to $679 million, boosted by the ongoing success of its Ultimate Team game mode, which lets players upgrade their in-game teams.

"By adding features to broaden Ultimate Team's appeal, layering in a packed calendar of events, and building eSports on top of that, the team is continuing to grow fun and engaging games that players want to come back to time after time," CFO and COO Blake Jorgensen said during a conference call with analysts.

Jorgensen also noted that live services are helping to smooth out Electronic Arts' revenue and cash generation:

Our success is driven by the way we have changed, and continue to change, our relationship with players. They want more depth in their favorite games and fresh content that can hold their attention year-round. ... This has made our business much more stable and enabled us to deliver dependable and growing cash flow to investors.

All told, EA's operating cash flow climbed 41% to $615 million in the fourth quarter, while free cash flow soared 46% to $595 million.

Looking forward

Electronic Arts also issued its financial targets for 2019, which include:

  • Net bookings of $5.55 billion.
  • Net revenue of $5.6 billion.
  • Operating cash flow of $1.825 billion.
  • Net income of $1.108 billion.
  • EPS of $3.55.

For the first quarter, EA expects net bookings of approximately $720 billion and net revenue of $1.08 billion. The company is also guiding for net income of $200 million, or $0.64 per share.

"In the year ahead, we will expand the world of play with amazing new experiences and new IP, more competition, and industry-leading subscription programs," Wilson said. "There has never been a more exciting time to be engaging and entertaining global communities."

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Electronic Arts. The Motley Fool has a disclosure policy.