Activision Blizzard (ATVI) is heading into the holiday shopping season with some huge advantages, including its biggest base of engaged players to date. That was the main takeaway from the video game publisher's third-quarter report, which in late October revealed strong selling momentum and improving earnings power ahead of its next major Call of Duty franchise release.

In a conference call following that report, CEO Bobby Kotick and his team explained why they see that brand helping push sales to over $2 billion in Q4, setting Activision up for a strong finish to a record fiscal year -- despite some potential headwinds.

Let's look at some highlights from that presentation.

A strong business

There are few entertainment franchises that generate over $1 billion in annual net bookings. And today, we operate three of them: Call of Duty, World of Warcraft and Candy Crush. And each has clear opportunity for sustained growth.
-- Kotick

Activision notched some big wins with the Call of Duty franchise, which is benefiting from a flood of content across new geographies like China, new platforms like mobile, and new paying structures like the free-to-play Warzone. These offerings allowed CoD to reach a record audience size of over 100 million monthly players in Q3, which is great news heading into the next tentpole release in the franchise in mid-November.

Two young adults playing a console game.

Image source: Getty Images.

But executives see their successes with that brand as laying a good roadmap for growth in other properties. "Call of Duty is the first community benefit from our pursuit of this [comprehensive] franchise-based strategy," Kotick explained.

Good investment returns

We're seeing a clear return on our increased investment in creative and commercial talent, and we intend to continue scaling our capabilities across our six key franchises: Call of Duty, Candy Crush, World of Warcraft, Hearthstone, Diablo and Overwatch.
-- COO Daniel Alegre

Activision's strategy is having an impact on profitability even though many of its newest gamers are playing in free titles like Candy Crush and Warzone. Operating margin hit a record high at the King Digital segment and jumped for both the Activision and Blizzard divisions to set a new Q3 record for the company.

Profits are being lifted by advertising, by the growing audience size across its biggest brands, and by spending on in-game content and premium products like Call of Duty: Modern Warfare. Management says these successes show that extra spending in support of key franchises is working.

Too much of a good thing?

[I]n the short term, we wish to remain prudent in our assumptions regarding the consumer spending environment, the console transition and the pace of player migration from deeply engaging existing content.
-- CFO Dennis Durkin

Activision lifted its full-year outlook following the surprisingly strong Q3 outing, but management said there's no shortage of risks to the short-term growth forecast. These include the next-gen console transition and potentially stubborn recessions in key markets like the U.S. and Europe.

Ironically, the company might also struggle to convince users to move up to its newest releases including Black Ops: Cold War, given that gamers are so engaged with prior titles right now.

That issue would be just a temporary pressure on early sales following big launches in November, though, and executives have every reason to expect rising audience sizes, engagement levels, and monetization opportunities across Activision's biggest franchises in 2021.