Video game giant Activision Blizzard (NASDAQ:ATVI) will report earnings after the market closes on Tuesday, Feb. 12, and it has a lot of questions to answer. The company's highly-anticipated Call of Duty: Black Ops 4 got off to a pretty underwhelming start last quarter. On the other hand, it controls the popular Overwatch League that's taken esports by storm. Meanwhile, Fortnite looms like a black cloud over its future. 

There's a lot to watch when results come out, but here are the highlights investors should look at. 

Friends playing video games together.

Image source: Getty Images.

Setting expectations

The first bar Activision Blizzard needs to hit is its own guidance. The table below details the revenue, operating margin, and earnings per share guidance given during the third-quarter 2018 earnings call. Falling short of any of these metrics would raise questions about management's ability to predict results. 

Metric GAAP Non-GAAP
Net revenue $2.24 billion $2.24 billion 
Operating margin 21%  29% 
EPS $0.43  $0.64 

Data source: Activision Blizzard Q3 2018 earnings release. GAAP = generally accepted accounting principles.

The good news is that Activision Blizzard usually crushes the guidance that management gives investors, which could push the stock higher. Either way, these metrics will be the first thing investors look at. 

An eye on engagement 

One of the engagement numbers Activision Blizzard reports each quarter is monthly active users (MAUs). This figure gives investors a general idea of how many people use the company's products regularly and how that user number is trending. Over the past year, engagement has fallen slightly in every segment of the business, and investors will be looking for that to turn around in the fourth quarter. 

In Q3 2018, Activision had 46 million MAUs, Blizzard had 37 million, and King drew 262 million users. The launch of Call of Duty: Black Ops 4 and Candy Crush Friends Saga should help with engagement, so watch where each segment is trending versus three months ago. 

Check out the latest Activision Blizzard earnings call transcript.

The elephant in the room

As much as investors will be interested in Activision Blizzard's fourth-quarter results and engagement, what they'll really want to hear about is the impact of Fortnite on the business. When Electronic Arts and Take-Two Interactive reported weaker-than-expected results and guidance last week, Fortnite got a lot of the blame. 

Activision Blizzard's management has tried to brush off the threat Fortnite poses to its business, arguing that the game is bringing in new players to the industry, which will ultimately help the company. But there may be only so many gaming dollars available, and Fortnite is taking a bigger chunk of the industry's revenue than many people expected. 

For some perspective, Wall Street analysts are estimating that Activision Blizzard will generate $7.35 billion in revenue and $2.61 per share in earnings in 2019. If management's guidance falls below that, it'll likely be Fortnite that's to blame. 

Lots of questions for Activision Blizzard

There are a lot of changes going on in the video game industry, with new games, streaming video, esports, and mobile affecting companies big and small. Activision Blizzard has managed these changes extremely well thus far. But with Fortnite's arrival and players trending away from big first-person shooter games like Call of Duty, it'll be interesting to see where the industry is trending and how Activision Blizzard is reacting. We'll find out more next week.