The second quarter was another great one for Activision Blizzard (ATVI). The video game company beat its own guidance and showed growth in key markets. Still, maybe the best news is that the success of the wildly popular game Fortnite hasn't taken a meaningful bite out of the business

Here's a look at the key results from the latest report. 

People holding video game controllers.

Image source: Getty Images.

Activision Blizzard: The raw numbers

Metric Q2 2018 Q2 2017 YOY Change
Revenue $1.64 billion $1.63 billion  0.6% 
Net income $402 million  $243 million  65.4% 
Diluted earnings per share $0.52  $0.32  62.5% 

Data source: Activision Blizzard Q2 2018 earnings release. 

What happened this quarter? 

The headline numbers don't really tell the full story, so let's dive into some key engagement and segment results. First, audience reach gives investors an idea of how many people are engaged with Activision Blizzard's content, and there was some poor news on that front. The Activision division's monthly active users (MAUs) fell from 51 million in the first quarter to 45 million in the second quarter. Blizzard lost one million MAUs, reporting 37 million, and King's result fell from 285 million to 270 million MAUs. The losses are a little concerning, but as new releases come out later this year, the trend should turn positive. 

Activision segment revenue was up 7% versus a year ago to $338 million in the quarter, and operating income in the segment came in at $84 million. The company probably won't see a surge in revenue until Call of Duty: Black Ops 4 is released in October.

Meanwhile, Blizzard revenue fell 14% to $489 million, and operating income was $133 million in the quarter. Management expects revenue to rise in the second half of the year after the release of World of Warcraft: Battle for Azeroth. King's revenue grew 5% to $502 million, and operating income was $169 million. Candy Crush continues to be a strong franchise with net bookings up double digits over a year ago. 

There was also some Overwatch League news announced alongside earnings. Two teams have been added to the 2019 season, with Cox Enterprises leading the Atlanta franchise and Nenking Group owning the Guangzhou, China, franchise. This should bolster the highly successful esports business, and management thinks more franchises will be added in coming months. 

What management had to say

The traditional game business continues to churn out cash, but the growth may be in esports for the foreseeable future. COO Coddy Johnson had this to say about the opportunity:

[W]e saw significant engagement in particular around esports with interest in the playoffs and championships for the Overwatch League running above even our own high expectations. In the Call of Duty world, they continued to enjoy momentum with minutes watched up 50% year over year and now heads into its own championships later this month in Columbus, Ohio. 

With MAUs down sequentially, it'll be important to boost engagement with existing consumers. Adding teams is a piece of that puzzle, and over the next few months, we should see more revenue opportunities announced, including advertising deals.

Looking forward

Management gave third-quarter revenue guidance of $1.49 billion and earnings per share guidance of $0.16 on a GAAP basis and $0.37 on a non-GAAP basis. For the full year, revenue is expected to be $7.36 billion with GAAP earnings of $1.84 per share and non-GAAP at $2.46. Activision Blizzard has a long history of outperforming its guidance, but that's the bar they've set at the moment.

What I'll be watching in coming quarters is the MAU trends given popularity of competing titles like Fortnite. It may impact new launches coming later this year, for better or worse. Whether the title grows the pie for the entire industry or claims more market share for itself, it will be an important focus for the foreseeable future.