Activision Blizzard (ATVI) enjoyed record financial results in its second quarter, the results of which were released in early August. Not to be outdone, Electronic Arts (EA 0.23%) reported its biggest fiscal first quarter in company history on July 30.

While the coronavirus pandemic adversely affected many businesses, the video game industry prospered as people sheltering at home spent more time gaming. But Motley Fool readers know you invest in good companies, not a trend, so let's examine which of these video game titans is the better long-term investment.

A man plays a video game on his TV.

Image source: Getty Images.

Activision's right moves

Activision Blizzard had a rough year in 2019 with revenue down 13% year over year. The company made changes to focus on its most popular brands, as well as the consumer shift to online and mobile gaming.

This focus enabled its Activision division to see a 270% year-over-year increase in revenue during the second quarter thanks to new additions to its Call of Duty franchise, including a mobile version released last October. The company experienced double-digit year-over-year revenue growth across its other divisions as well, bolstered by shelter-at-home conditions.

This allowed the company to blow away its guidance for the first half of 2020.

Quarter Revenue Prior Outlook
Q2 2020 $1.9 billion $1.7 billion
Q1 2020 $1.8 billion $1.6 billion

Data source: Activision Blizzard.

For the third quarter, Activision expects to generate $1.8 billion in revenue. Given its performance so far this year, it's likely the company will exceed this target.

That's not the only impressive result. Activision's free cash flow ballooned to $755 million from last year's $127 million. That's a jaw-dropping 494% year-over-year increase, allowing the company to easily fund its dividend.

What about EA?

Electronic Arts experienced a 21% year-over-year revenue increase in its fiscal first quarter ended June 30. Consumer behavioral shifts to online entertainment during the pandemic helped, but EA has steadily grown revenue the past two years, and expects 2020 to continue the trend.

Fiscal Year Net Revenue
2021 $5.6 billion (estimated)
2020 $5.5 billion
2019 $5.0 billion

Data source: Electronic Arts.

For its second quarter, Electronic Arts expects to earn $1.1 billion, which it should achieve. That's because EA launched the latest game in its popular Madden NFL series at the end of August, and it immediately became a top seller.

With live sports shut down by the pandemic, EA's sports gaming catalog helped propel the company to a record quarter. EA's FIFA soccer title grew its number of players by over 100% year over year, and Madden saw nearly 140% growth.

While Electronic Arts doesn't offer a dividend, it sports a healthy balance sheet. EA's Q1 total assets of $11.3 billion far surpassed total liabilities of $3.5 billion.

Like Activision, EA also saw its free cash flow swell. It more than doubled last year's $130 million to reach $340 million in Q1. The company is well positioned to breeze through the pandemic and continue its growth trajectory.

The final verdict

The stellar financial performance of these gaming companies was powered in part by the pandemic's impact. Once consumer behavior transitions back to pre-pandemic conduct, where does that leave these companies?

Both will benefit from the upcoming release of next-generation gaming consoles toward the end of 2020. Electronic Arts earned 64% of its Q1 revenue from consoles while consoles generated 34% of Activision's Q2 income.

So which company makes for a better investment? Either is a good choice, but if you had to select one, the edge goes to Activision Blizzard.

Its sales are more diversified, earning healthy sums across all gaming platforms. EA only earned 14% of revenue from mobile gaming compared to Activision's 32%.

Gaming Platform Activision Q2 Revenue EA Q1 Revenue
Console $655 million $932 million
Mobile $622 million $202 million
PC and other $655 million $325 million
Total revenue $1.9 billion $1.5 billion

Data sources: Electronic Arts and Activision Blizzard. Fiscal quarters shown.

This is particularly telling since revenue for the video game industry is projected to hit $92.6 billion this year with mobile revenue making up more than half of that total at $55.3 billion. Activision is doing an excellent job monetizing the mobile side of gaming.

This diversification insulates Activision from impacts beyond its control, for instance, if the next-gen gaming consoles run into delays or production can't meet demand. Activision also delivers a dividend. Add up these factors, and they make Activision the better investment.