What happened

Shares of Zynga (NASDAQ:ZNGA) are getting clobbered today, down by 9% as of 12:45 p.m. EST, after the company reported third-quarter earnings. The COVID-19 pandemic has boosted demand for mobile games and helped drive revenue to record levels but it still fell short of analyst expectations.

So what

Revenue in the third quarter jumped to a record $503 million, but Wall Street was looking for $627 million in sales. That led to a net loss of $122.2 million, or $0.11 per share, compared to the consensus estimate of $0.13 per share in adjusted losses. The mobile video game company saw mobile daily active users (DAUs) jump to 31 million, with mobile monthly active users (MAUs) of 83 million. Bookings came in at $628 million.

Young girl playing a game on her smartphone

Image source: Getty Images.

"Execution of our multi-year growth strategy has driven our tremendous results to date and generated positive momentum across our live services and overall business," CEO Frank Gibeau said in a statement. "Extending our strength in live services, we recently launched one of our key franchises Harry Potter: Puzzles & Spells to global fanfare and positive player reviews and closed our acquisition of Rollic on October 1 -- marking our entry into the high-growth, hyper-casual games category."

Now what

Zynga's outlook also came in a little light. Revenue in the fourth quarter is expected to be $570 million, well below the consensus estimate of $653.1 million in sales. Bookings are forecast at $670 million, which should result in a net loss of $92 million and adjusted EBITDA of $35 million. Analysts are modeling for earnings per share of $0.09.

In the wake of the release, Piper Sandler reiterated an overweight rating and adjusted its price target from $13 to $12. Wedbush maintained an outperform rating and increased its valuation estimate from $13.25 to $14.75.

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