Activision Blizzard Earnings: What Happened

ATVI monthly active users topped analysts' estimates

Key Takeaways

  • Adjusted EPS was $0.88 vs. the $0.73 analysts expected.
  • Revenue exceeded analyst expectations.
  • Monthly active users was higher than the level estimated by analysts.
  • Activision Blizzard raised its outlook for the year.

What Happened

Activision Blizzard reported Q3 2020 adjusted EPS that beat analysts' expectations. Revenue and monthly active users also exceeded levels estimated by analysts. EPS more than doubled the level posted in the year-ago quarter as revenue grew 52%. Monthly active users also expanded compared to the same quarter a year ago. The company raised its outlook for the rest of the year.

(Below is Investopedia's original earnings preview, published October 27, 2020.)

What to Look For

Activision Blizzard Inc. (ATVI), a provider of video game entertainment, is benefitting from the surge in online traffic triggered by the COVID-19 pandemic as millions of people worldwide work from home or voluntarily shelter in place. In this environment, rising numbers of individuals and entire families are turning to video games as an entertainment option.

Investors will be watching to see whether this trend is continuing to benefit Activision Blizzard when it reports earnings on October 29, 2020 for Q3 2020. Analysts seem to expect nothing but good news. They expect strong gains in adjusted earnings per share (EPS), revenue, and monthly active users (MAU) year over year (YOY). MAU is a key metric for companies that offer online subscription services. It also enables investors to measure increases in the number of users on these companies' platforms over time, a key driver of revenue growth.

Shares of Activision Blizzard were keeping pace with the broader market in the few months leading up to the pandemic-induced stock market crash that began in the latter half of February and bottomed in March. The shares have dramatically outperformed ever since. The company's stock has provided a total return of 48.5% over the past 12 months, well above the S&P 500's total return of 11.9%, as of October 26, 2020.

One Year Total Return for S&P 500 and Activision
Source: TradingView.

The rise of Activision shares from their March bottom has had little relation to the company's earnings performance. Earnings beat estimates by a wide margin in Q1 FY 2020.  The report was announced on May 5, after which the stock began to rise sharply over the following three months. The stock got a brief bump after August 4, when the company announced that it had beat estimates again by a wide margin in Q2 FY 2020. It also posted dramatically stronger EPS and revenue growth during that period.  Despite those results, the stock peaked 2 days after the earnings announcement, on August 6, and since then has drifted downward and sideways.

Activision posted adjusted EPS growth of 53.1% in Q2 FY 2020, ending a string of five consecutive quarters of YOY EPS declines that began in Q1 FY 2019. Revenue grew 38.4%, which also followed five consecutive quarters of declines. The company noted that increased user engagement amid the pandemic led to record-beating results for the quarter.

It was a significant improvement from Q1 FY 2020, which were weak despite beating analysts' estimates. Adjusted EPS and revenue fell 2.5% and 2.0%, respectively, compared to the same three-month period a year ago. While it marked the fifth consecutive quarter of YOY declines for both metrics, the declines were not as steep as the average over the previous four quarters.

Analysts are expecting strong results in Q3 FY 2020. They are forecasting adjusted EPS will grow 90.4% as revenue rises 39.3%. It would be the fastest pace of growth for either metric since at least Q4 FY 2016. For full-year 2020, analysts expect annual adjusted EPS and revenue to rise 34.4% and 17.3%, respectively. That would be the fastest annual pace for both numbers since 2016.

Activision Blizzard
  Estimate for Q3 2020 (FY) Q3 2019 (FY) Q3 2018 (FY)
Adjusted Earnings Per Share ($) 0.73 0.38 0.42
Revenue ($B) 1.8 1.3 1.5
Monthly Active Users (M) 355.2 316.0 345.0

Source: Visible Alpha

As mentioned, investors will also be especially focused on Activision's MAU. The company uses this key metric to measure the overall size of its user base. MAU corresponds to the number of individuals who accessed one of the company's games during a given month. That means that a single individual that accesses two different games in a single month is counted as two users. Also, for some of the company's brands, a user who accesses the same game via different platforms or devices would also be counted as two users.

Activision's MAU fell for 12 consecutive quarters between late 2016 and Q3 FY 2019. Growth finally turned positive in Q4 FY 2019 as MAU rose 14.9% compared to the same quarter a year ago. Growth continued to accelerate over the next two quarters, reaching 30.9% YOY in Q2 FY 2020. Analysts expect MAU to rise at a much slower pace, by 12.4%, in Q3 FY 2020 as the positive effects of the pandemic begin to wane.

Article Sources
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  1. Activision Blizzard Inc. "Activision Blizzard to Release Third Quarter 2020 Financial Results on October 29, 2020."

  2. Visible Alpha. "Financial Data."

  3. Bloomberg. "Activision Blizzard reports 21% growth in net bookings on strong sales amid lockdowns."

  4. Yahoo! Finance. "Activision Blizzard, Inc. (ATVI): Analysis." October 27, 2020.

  5. Bloomberg. "Activision Warns ‘Economic Uncertainty’ Could Hurt Gaming Surge."


  7. Activision Blizzard Inc. "Form 10-K for the fiscal period ended December 31, 2019," Page 34.

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