Investors pushed Electronic Arts (NASDAQ:EA) stock returns well above the market in 2019 as the video game developer eased a few of shareholders' biggest worries. With the hit launch of Apex Legends, EA showed that it could adjust to shifting gamer preferences for new playing models. The company's established franchises fared well, too, with its sports brands helping capitalize on the stampede toward digital spending.

The fiscal third quarter (which ended on Dec. 31, 2019) is responsible for nearly 40% of EA's annual net bookings, though, and in its recent earnings report, the company showed that its positive momentum carried into that key selling period. With this big picture in mind, let's look at the latest operating results.

Two kids playing console games.

Image source: Getty Images.

Robust growth

Net bookings, EA's core growth metric, jumped 23% year over year to modestly outpace management's targets. Among the key standout franchises was Star Wars Jedi: Fallen Order, which is now on pace to sell around 10 million units in fiscal 2020 compared with executives' original forecast range of six million to eight million. Madden NFL 20 also posted a strong showing, setting a brand record for sales volumes even as pricing rose versus the prior year's iteration.

EA credited its live-services channel with powering much of its digital growth with contributions from Apex Legends, FIFA, and Madden all helping push digital sales up to 77% of the business from 74% a year ago. "Nothing illustrates the changing nature of our business model like the growth of our live services," CFO Blake Jorgensen said in a conference call.

On the downside, EA's mobile division continued to struggle, falling 6% for the quarter and 17% over the past 12 months. Management is hoping a packed pipeline of new releases will help turn that business around going forward.

Financial wins and outlook

EA notched several financial wins in the period with gross profit margin rising and operating expenses growing slowly. As a result, pre-tax income is surging, reaching $1 billion over the past nine months compared with $800 million in the year-ago period.

Executives were even more pleased with the tech stock's cash flow as operating cash hit a record $1.9 billion in calendar 2019. That figure is on track to rise total $1.7 billion in fiscal 2020, up from $1.5 billion the previous year.

The solid holiday season performance gave management confidence to lift a few core financial outlook targets. EA now sees revenue hitting $5.48 billion rather than the $5.41 billion it had predicted in late October. Cash flow and adjusted earnings targets each got significant upgrades, too.

Looking further out, the company expects more modest growth in fiscal 2021 as the industry transitions to the next generation of gaming consoles. Healthy demand for digitally-delivered content and a release calendar of roughly eight major titles will support the business through that transitional period.

After that, EA is predicting that growth will accelerate in fiscal 2022 when it plans to release a new next-gen installment of the Battlefield franchise. The good news is that EA's diverse portfolio means that investors won't have to put too much faith in any single title when judging whether the company can keep up its impressive growth.