Over the past half-decade, Activision Blizzard (ATVI) has been on fire, soaring over 280% -- more than five times the gains of the S&P 500. Tech stocks were particularly vulnerable during the recent market adjustment, and Activision was no different, having given up its 30% year-to-date gains, leaving the stock flat for the year.

Investors are hoping that the recent launch of Call of Duty: Black Ops 4 and the mobile release of Diablo Immortal could help the stock overcome the recent market malaise. Investors will be watching carefully when Activision reports its third-quarter financial results after the market close on Thursday, Nov. 8. Let's look at the company's recent results and what fans are saying about the game releases to see if it gives us any insight into what to expect when Activision reports earnings.

A screenshot from Activision's Call of Duty: Black Ops 4's Blackout mode.

A screenshot from Activision's Call of Duty: Black Ops 4's Blackout mode. Image source: Activision Blizzard.

Better than expected

For the second quarter, Activision reported net revenue of $1.64 billion, up 1% year over year, and adjusted earnings per share of $0.62. Both numbers soared past expectations, as analysts' consensus estimates were calling for revenue of $1.4 billion and earnings per share of $0.36. They also exceeded the company's own guidance on both counts.

Activision said that for the first half of the year, it generated record revenue, net bookings (net revenue less deferrals), and earnings per share. The company was also able to lower its overall expenses year over year, both on a percentage of revenue and absolute basis.

A rare miss?

Activision has an enviable track record with fans, generating eight $1 billion franchises, but the company appears to have made a rare misstep. Players have been unforgiving in their opinions about Diablo Immortal, likely causing additional weakness in the stock in recent days.

More than 32,000 fans have signed a petition on change.org asking Activision to cancel the launch of Diablo Immortal, while others are expressing their dislike using the hashtag #NotMyDiablo on Twitter. Similar contempt popped up on the game's cinematic trailer on YouTube, which has accumulated 444,000 thumbs down, compared to just 16,000 thumbs up. 

Another issue confronting investors is uncertainty regarding the success of Call of Duty: Black Ops 4. While review aggregation site Metacritic lists a Metascore of 85, the user scores are significantly less generous, averaging 4.4 out of 10. This leaves some wondering if one of Activision's flagship franchises may be getting a little long in the tooth. 

What the quarter may hold

For the upcoming third quarter, Activision is forecasting revenue of $1.49 billion, down 7.9% year over year, while guiding for earnings per share of $0.16, a decline of 36% compared to the prior-year quarter.

To put this in the perspective of Wall Street's broader expectations, analysts' consensus estimates are calling for revenue of $1.66 billion, down 12.5% year over year, and earnings per share of $0.50, a decline of nearly 17% compared to the prior-year quarter. The stock took a hit after last quarter's earnings report, likely due to the discrepancy between the company's forecast and analysts' expectations.

It's important to note that Activision has a long history of issuing conservative guidance, then delivering better results. That may be the case here as well. What the company has to say about demand for Call of Duty: Black Ops 4 and its response to the criticism regarding Diablo Immortal may end up having as much impact on the stock price as the financial metrics do. Over the longer term, Activision's record speaks for itself, and the company will likely be just fine.