What You Missed This Week in Video Games

“Game On” is The Fly’s weekly recap of the stories powering up or beating down video game stocks.

NEW RELEASES: Among this week’s new releases is Sony‘s (SONY) third-person shooter “Helldivers 2,” which releases for PC and PlayStation 5 on February 8. Also out this week is Square Enix’s (SQNXF) party game “Foamstars,” which releases February 6 for PlayStation 5 and PlayStation 4.

MICROSOFT: Last week, Microsoft (MSFT) reported upbeat Q2 earnings and revenue, with Xbox content and services revenue rising 61% year-over-year during the period following the completion of the Activision Blizzard acquisition. Xbox hardware rose 3% year-over-year in the quarter, bringing the company’s total gaming revenue increase to 49%, mainly boosted by better-than-expected Activision Blizzard revenues. As a result of the deal, gaming is now the third largest business at Microsoft, still far behind office and cloud services and server products and cloud services.

Less than a week after the quarterly report, a number of publications reported that the Xbox maker was considering or even planning to release certain Xbox-exclusive games on other platforms, particularly the PlayStation 5. While Microsoft in the past has released certain titles on multiple platforms, including various “Minecraft” spinoffs and “Ori and the Blind Forest,” typically its biggest AAA games have remained on PC and Xbox consoles. The Verge’s Tom Warren reported that the Xbox maker is planning to release 2023 Xbox Series X/S exclusive “Starfield” on PS5 following the release of the game’s “Shattered Space” expansion later this year. Microsoft has even made additional investment into PS5 development kits to support ongoing development plans, Clarke noted. In addition, Giant Bomb’s Jeff Grubb reported that Microsoft is weighing bringing its “Gears of War” franchise, which has been an Xbox console exclusive since the release of the first title in the series for the Xbox 360 in 2006, for other platforms.

Amid rampant speculation of these reports and what they could mean for Microsoft’s Xbox business going forward, Microsoft Gaming CEO Phil Spencer said in a post on X, formerly Twitter, on Monday, “We’re listening and we hear you. We’ve been planning a business update event for next week, where we look forward to sharing more details with you about our vision for the future of Xbox. Stay tuned.”

EA EARNINGS: Last Wednesday, Electronic Arts (EA) reported lower-than-expected Q3 GAAP earnings per share and net bookings, though net bookings were up 2% year-over-year in constant currency. Looking ahead, the company provided downbeat Q4 earnings and net bookings guidance and narrowed its FY24 net bookings outlook.

“Our incredible teams delivered a strong Q3, entertaining hundreds of millions of people across our portfolio, driving deep engagement and record live services,” said Andrew Wilson, CEO of EA. “We remain focused on growing our biggest franchises and delivering new, innovative games and experiences for our global communities.”

“EA SPORTS FC outperformed expectations again this quarter, delivering 7% year-over-year net bookings growth, as momentum continued through the FC brand transition,” said Stuart Canfield, CFO of EA. “We will continue to build upon the strength within our portfolio, while prioritizing investments in our largest opportunities for multi-year growth.”

Following the report, Morgan Stanley raised the firm’s price target on Electronic Arts to $140 from $130 and keeps an Equal Weight rating on the shares following what the firm calls a “solid” fiscal Q3 report. Continued strength in “FC” and “Madden” offset weakness in “Apex Legends,” which the firm says “remains both a headwind and significant opportunity.” Morgan Stanley views the outlook as balanced until investors can gain greater confidence in the timing and magnitude of the new game pipeline, the analyst added. Goldman Sachs also raised its price target on the stock to $145 from $140, noting that key sports franchises continued to demonstrate “strong” results.

Meanwhile, Baird lowered the firm’s price target on Electronic Arts to $160 from $165 and keeps an Outperform rating on the shares. The firm said results were within the guidance range, although key title “Apex” is still struggling, offsetting solid performances for EA Sports.

NINTENDO EARNINGS: On Tuesday, Nintendo (NTDOY) reported a year-over-year increase in nine-month revenue, operating profit, and profit per share, and raised its FY24 revenue guidance to Y1.63T from Y1.58T. Meanwhile, the company noted that hardware units sold fell 7.8% year-over-year during the nine-month period.

“For hardware, by continuing to convey the appeal of Nintendo Switch, we try not only to put one system in every home, but several in every home, or even one for every person,” the Japanese gaming giant said. “Another objective is to continually release new offerings so more consumers keep playing Nintendo Switch even longer and we can maximize hardware sales. Looking at software, we released Another Code: Recollection in January and plan to follow up with the release of Mario vs. Donkey Kong in February and Princess Peach: Showtime! in March. In addition, Splatoon 3: Expansion Pass – Side Order, the second wave of paid add-on content for Splatoon 3, is scheduled to arrive in February. Other software publishers also plan to release a wide variety of titles, and we will work to invigorate the platform by supplementing existing titles with a continuous stream of new titles and add-on content.”

“Regarding the Nintendo Switch business during the nine months ended December 31, 2023, Super Mario Bros. Wonder, the first entirely new installment in the side-scrolling Super Mario Bros. series in almost 11 years, saw a solid start with sales of 11.96 million units,” the company added. “Sales also grew for other new titles released this fiscal year, with The Legend of Zelda: Tears of the Kingdom selling 20.28 million units and Pikmin 4 selling 3.33 million units. In addition, the April release of The Super Mario Bros. Movie positively impacted sales of Mario related titles, such as Mario Kart 8 Deluxe which recorded sales of 6.79 million units. As a result of these factors, the total number of million-seller titles during this period was 24, including titles from other software publishers.”

OTHER STORIES TO WATCH:

• MoffettNathanson downgraded Take-Two (TTWO) to Neutral from Buy (read more)
• Tencent (TCEHY) is seeking to make a mobile verion of Bandai Namco’s (NCBDY) “Elden Ring,” Reuters reports (read more)
• Sega’s (SGAMY) “Like a Dragon: Infinite Wealth” sold 1M units globally in its first week (read more)
• Sega of America will lay off roughly 10% of its staff, VGC reports (read more)
• Warner Bros. Discovery’s (WBD) “Suicide Squad: Kill the Justice League” was the number one physical seller in the U.K. last week, ahead of Sega’s “Persona 3 Reload,” Gamesindustry.biz reports (read more)
• Sony showcased upcoming PlayStation 5 games “Rise of the Ronin” and “Death Stranding 2” at last week’s State of Play event (read more)