The coronavirus pandemic is causing millions of people around the world to stay home more often than they would like. The increased time spent indoors is leading to a surge in demand for in-home entertainment. That creates an opportunity for video game company Activision Blizzard (NASDAQ:ATVI) to help millions of consumers with some much-needed distraction from COVID-19. 

Still, challenges remain for the company as the expiration of boosted unemployment benefits will leave consumers with less money to spend on games, and the return of live sports could divert attention away from its products. The company is expected to release its fiscal second-quarter financial results on Tuesday, Aug. 4. Here are a few critical things investors should follow in the report. 

A man playing games on the computer.

Activision Blizzard is helping entertain people during the pandemic. Image source: Getty images. 

Millions of people staying home with Activision Blizzard products one click away

The company is expected to report $1.69 billion in revenue for the quarter, but the company handily topped its revenue guidance of $1.64 billion in the first quarter with an actual top line of $1.79 billion. Given the tailwinds for the video game industry in this latest period, the company could outperform its original outlook once again.

Investors should also track the monthly active users (MAU) metric. In the first quarter, the company had 407 million MAUs, up 18% year over year. Driving this gain was the release of blockbuster title Call of Duty: Modern Warfare in late 2019 and the free-to-play Call of Duty: Warzone in March 2020. The latter reached 60 million MAUs less than two months following its launch. The company ideally leveraged that early momentum for solid MAU growth through the second quarter.

On the bottom line, Activision Blizzard previously guided for non-GAAP earnings per share of $0.64. These days, gamers have the option to purchase most titles digitally, which removes the expense of physical delivery for the company. This was evident in the previous quarter when digital sales made up nearly 90% of the company's bookings. That digital penetration protects Activision Blizzard from brick-and-mortar store closures as well.

A sign that says lets play.

Activision Blizzard is set to release its second-quarter earnings on Tuesday. Image source: Getty images.

Activision Blizzard is ready to meet the opportunity 

One of the major themes during the pandemic has been the surge in demand for in-home entertainment. Unfortunately, when that need was most elevated, major sports leagues were canceled, and film and television studios paused new content creation. That left a void that shareholders of Activision Blizzard are hoping the company helped fill.

Additionally, the digital nature of its business means the company can continue creating fresh new games, which becomes an advantage over other entertainment mediums. Overall, the outlook for this leading video game stock's upcoming report is quite bullish.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.