Electronic Arts (NASDAQ:EA) shares fell in after-hours trading on Thursday following the release of the company's fiscal-first-quarter earnings report. Although Electronic Arts beat analyst expectations for the current quarter, its outlook for the second quarter and full year proved disappointing. Let's dig in to Electronic Arts' report.

A strong quarter despite an empty release schedule
As a video game publisher, Electronic Arts depends on the sale of its games to drive its financial performance. But the majority of Electronic Arts' titles are released in the fall and winter; in the first quarter, Electronic Arts published no new games of note.

Still, it earned an adjusted $0.15 per share on adjusted net revenue of $693 million. Analysts had expected Electronic Arts to earn just $0.03 on revenue of around $652 million. Management cited demand for games released in prior periods, as well as revenue related to its digital services.

Packaged goods -- physical CDs -- generated just 23% of Electronic Arts' adjusted net revenue in the first quarter, down from 38% in the same quarter last year. Full-game downloads rose to 12% from 9%, while DLC (downloadable content) grew to 37% from 27% in the first quarter of fiscal year 2015. Subscription-related revenue remained stable at 10%, and mobile revenue grew to 18% from 16% in the same quarter last year.

Given the lack of new titles in the first quarter, Electronic Arts focused on its upcoming slate. At the Electronic Entertainment Expo (E3) in June, Electronic Arts' upcoming games won a combined 132 awards. Although these rewards mean little in terms of financial performance, they serve to underscore the relative strength of the company's pipeline.

But EA's outlook falls short
Thursday's sell-off was likely fueled by Electronic Arts' outlook. Although it raised its full-year guidance, it still fell short of what analysts had been anticipating.

In fiscal year 2016, which ends in March 2016, Electronic Arts expects to earn an adjusted $2.85 per share on adjusted net revenue of $4.450 billion. Analysts had projected $2.87 per share on revenue of around $4.48 billion. More significant is Electronic Arts' second-quarter outlook. In that quarter, Electronic Arts expects to earn an adjusted $0.40 per share on adjusted net revenue of $1.075 billion. Analysts had expected quite a bit more -- $0.67 on revenue of $1.12 billion.

If recent history is any indication, Electronic Arts' guidance is likely extremely conservative. Electronic Arts' results exceeded management's expectations in every single quarter of its fiscal year 2015. In the fourth quarter, for example, Electronic Arts had guided for adjusted earnings of $0.22 per share on adjusted net revenue of $830 million. In reality, Electronic Arts earned an adjusted $0.39 on adjusted net revenue of $896 million. 

In recent quarters, Electronic Arts has been one of the best-performing tech stocks. Shares of the video game giant are up better than 100% in the last 12 months. The rally has been fueled by a steady stream of better-than-expected earnings reports -- in January, and again in May, shares surged following the release of quarterly results that exceeded expectations.

EA Chart

EA data by YCharts.

Demand for next-generation consoles has been strong, and Electronic Arts' multiple has risen along with its stock. With a trailing price-to-earnings ratio near 26, investors appear to be expecting strong growth.

The sell-off is a minor speed bump for longer-term shareholders, but not particularly surprising. Electronic Arts' business continues to perform, but given its valuation, any doubts about its future prospects will likely weigh on its shares.