EA and the Gaming Industry Experienced Slower Growth as Gamers Cut Back on Spending
Electronic Arts forecasts annual bookings below Wall Street estimates. Gamers cutting back on spending due to uncertain economic outlook. EA authorises $5 billion stock buyback plan to offset negative sentiment.
This comes as gamers are cutting back on spending due to an uncertain economic outlook. As a result, the company's shares fell 2.5% in extended trading.
To counter the negative sentiment in the short term, EA has authorised a new three-year stock buyback plan worth $5 billion. This move is aimed at offsetting some of the concerns surrounding the company. However, industry experts believe that game publishers should focus on an upswing once the next console generation is introduced.
The gaming industry as a whole is facing a gloomy outlook, with gamers reducing discretionary spending amidst high inflation. Major players in the industry, including Sony and Take-Two Interactive, have been aggressively cutting costs in response to the economic uncertainty and declining demand for games.
EA itself implemented a restructuring plan in February, which included a 5% reduction in its workforce and a downsizing of office space. Despite these measures, the company's forecast for fiscal year 2025 bookings is in the range of US$7.30 billion to US$7.70 billion, falling short of the average analysts' estimate of $7.76 billion.
In the fourth quarter, EA reported bookings of US$1.67 billion, missing estimates of US$1.77 billion. Analysts have noted that while EA's development pipeline remains strong, there are concerns about the timeline for upcoming titles, such as "Star Wars Jedi: Survivor," which could contribute to long-term growth.
Looking ahead, EA expects bookings for the first quarter to be in the range of $1.15 billion to $1.25 billion, compared to estimates of US$1.44 billion. On an adjusted basis, the company earned $1.37 per share in the fourth quarter, falling short of estimates of US$1.52 per share.
Electronic Arts forecasts annual bookings below Wall Street estimates
Gamers cutting back on spending due to uncertain economic outlook
EA authorises $5 billion stock buyback plan to offset negative sentiment
Source: REUTERS