Activision Blizzard (ATVI) has been one of the prime beneficiaries of the change in consumers' attention during the COVID-19 pandemic. With a deadly virus spreading worldwide, folks found a safe and entertaining way to pass the time playing video games. 

Activision Blizzard, home to some iconic titles such as Call of Duty and World of Warcraft, experienced a surge of customers and sales throughout 2020. Now, as more away-from-home entertainment options are reopening to people, keeping players engaged will be tougher. That's why, when the company reports first-quarter results on Tuesday, May 4, the one metric current and potential investors in Activision Blizzard will want to know is the latest total of monthly active users (MAUs).

A neon light display that reads "lets play"

Image source: Getty Images.

Can Activision Blizzard keep gamers engaged?

The company reported having 397 million MAUs in the fourth quarter. That was an increase of 7 million from the previous quarter, but still down from the peak of 428 million reached in June of 2020. That demonstrates the challenge it's going to have in keeping players engaged as folks start to have more entertainment options open to them.

Activision Blizzard breaks out its user totals across three gaming segments: King, home to the popular game Candy Crush (240 million); Activision, home to the Call of Duty franchise (128 million); and Blizzard, home to World of Warcraft (29 million).

Expanding its reach to more players is an important goal for management. In a presentation accompanying the fourth-quarter earnings release, it said, "We are accelerating our path to reach a billion people as we apply the Call of Duty framework across our other franchises, including premium content, free-to-play access to all consumers, expansion to mobile, and continuous regular delivery of in-game content."

All that user growth drives digital sales, which account for an increasing share of overall revenue at Activision Blizzard. In the fourth quarter, digital sales were 78% of the overall total, up from 72% in the previous year. Similarly, digital sales made up 82% of overall sales for 2020, up from 76% in 2019.

As you might imagine, digital revenue is more profitable compared to the physical copies of games that Activision Blizzard has to package and ship to consumers or retailers. So it's no surprise that the company is focusing its efforts on expanding this part of the business. And it will be the metric you're going to want to know when the company reports first-quarter results next week. 

What this could mean for investors 

Analysts on Wall Street expect Activision Blizzard to report revenue of $1.78 billion and earnings per share of $0.70, which would be increases of 16.8% and 20.6%, respectively, from last year. The EPS expectation on Wall Street is ahead of the $0.59 that management guided for in the current quarter.

The video game company's share prices are flat year to date and are trading at about 25 times forward earnings. Investors who believe management can execute the plan to reach 1 billion people should add Activision to their watch list.