When Activision Blizzard (NASDAQ:ATVI) reported results earlier this month, the company exceeded expectations by nearly every metric. The generated revenue of $2.41 billion and adjusted earnings per share (EPS) of $1.21 surpassed analysts' consensus estimates of $2.38 billion and $1.17. Yet its robust top and bottom line growth didn't tell the entire story.

On this clip from Motley Fool Live recorded on Feb. 8, "The Wrap" host Jason Hall and Fool.com contributor Danny Vena discuss the recent results and why the steady growth in net bookings should have investors even more excited.

Jason Hall: We all know about Activision. It's one of the dominant companies in the gaming industry and video game industry. Danny, what have we learned this quarter?

Danny Vena: I was surprised that the company did as well as it did. We were all expecting a good quarter out of Activision Blizzard. The pandemic continues, there are a lot of people stuck at home, and when you're stuck at home, you have to find new ways to entertain yourself. There's been an accelerating adoption of video games.

When Activision reported their earnings last Thursday after the market close, that followed by a 10% pop in the stock price on Friday. The reason for that was revenue grew to about $2.4 billion, up about 22% year-over-year, and their adjusted earnings per share was up about 21%. Now both of those numbers beat what analysts were expecting. Additionally, and I think this was key here, operating cash flow grew to $2.25 billion. That means that almost all of their revenue, which was $2.4 billion, their operating cash flow was $2.25 billion. A huge amount of operating cash flow up from $1.83 billion the year before.

Now, those numbers don't tell the entire story. Net bookings, which is an operational metric that the gaming industry uses, that includes payments for digital products and virtual items that they haven't really earned that revenue yet, that grew to just over $3 billion, up about 13%.

Just to give that a little context, if you buy a game online and you're going to, they expect you are going to use that game for the coming two years, and they take the revenue from that digital purchase and divide it up over 24 months, and then they realize a little bit of that revenue every month.

Basically, the company is building this base of revenue that it's going to continue to realize in the coming months and years.

These gains were fueled by the strong sales of the company's core gaming franchises. Unless you've lived in a cave, you've probably heard of Call of Duty, World of Warcraft, Diablo, Candy Crush.

Jason Hall: That's assuming you live in a cave that didn't have internet access, because if your cave had internet access, probably you'd still know about them, right?

Danny Vena: You'd still know about them.

Jason Hall: Yeah, it's really. Go ahead Danny.

Danny Vena: All right. I was going to say, one of the things that I think is going to be a big driver going forward is that the company is in the process of the expanding a lot of these flagship franchises further into free-to-pay mobile games.

Once you get into the free-to-play market, it develops more interest in the game, and then once they get to a certain point, these people that are playing for free might ante up and buy the full paid version of it. There was a lot of stuff to like. They increased their dividend by 15% over last year. They gave something of a conservative forecast, but it was still enough to be what analysts' expectations were.

It was a solid, solid quarter for Activision. This is a company that I've owned for somewhere between five and 10 years. It's just one of those one that sits on autopilot in my portfolio and continues to grind ever higher.

Jason Hall: Yeah. The same, and it's really interesting too. I think it used to be called King Digital, but when they made the acquisition, it was just King. But this is like their first really serious foray into producing mobile content. Because I think we can all go back 4, 5, 6 years when mobile gaming became more and more of a thing, and this free-to-play and game purchases, it wasn't 100% clear how profitable that space was going to be, and even if it was just going to be a neat little trend or if it was going to prove to be like a long-term thing. Danny, correct me if I'm wrong, but that's like a massive number of their active gamers are coming through King in their mobile platform now, right?

Danny Vena: That's true. One of the things that they have found is that once people, I don't remember who it was, somebody pointed out on Twitter, and it was a really good point, that these gaming companies have become very good at making people spend money and not realizing how much money they've spend or what it is that they just spent on.

Jason Hall: Yeah.

Danny Vena: You buy the skin for your character to wear, and they can wear for the next couple of years. That money drops right to the bottom line, really.

Jason Hall: Yeah. Very good incremental margins on that stuff for sure.

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