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Earnings Results: ‘Call of Duty’ juices Activision Blizzard earnings, stock price

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Activision Blizzard Inc.’s stock rallied in the extended session Tuesday after quarterly results and forecasts topped Wall Street expectations, driven by the company’s “Call of Duty” franchise, a model the videogame publisher hopes to apply to its other games.

Activision Blizzard
ATVI,
-2.70%

 shares surged 6% after hours, following a 2.7% decline in the regular session to close at $88.69. The Santa Monica, Calif.-based company said “Call of Duty” drove a 72% year-over-year gain in quarterly revenue to $891 million in its Activision segment.

“Our strategy centers around our long-held view that wholly owned entertainment franchises offer the opportunity for limitless innovation,” Bobby Kotick, Activision Blizzard’s chief executive, said on Tuesday’s earnings conference call. “‘Call of Duty’ is the template we’re applying to our proven franchise as well as our new potential franchise as we attempt to grow our audiences to 1 billion players.”

“Call of Duty” serves the traditional console and PC market with its “Black Ops — Cold War” and “Modern Warfare” titles, and the franchise has a free-to-play “Warzone” battle-royale option similar to Epic Games’ “Fortnite,” with all of those options available on mobile platforms.

“We believe our franchises absolutely have to be accessible wherever the players are and that obviously includes mobile, not only in developed countries but even more so in developing countries,” Activision Blizzard President and Chief Operating Officer Daniel Alegre said on the call. “And mobile is just the ultimate driver of reach with almost 3 billion smartphones worldwide and that’s forecasted to increase to 4 billion in the next five years.”

Read: Gamers spent billions more on videogames during the pandemic, but what happens now?

The company reported first-quarter net income of $619 million, or 79 cents a share, compared with $505 million, or 65 cents a share, in the year-ago period. Analysts surveyed by FactSet had forecast earnings of 67 cents a share.

Revenue rose to $2.28 billion from $1.79 billion in the year-ago quarter, while bookings grew to $2.07 billion from $1.52 billion last year. Bookings represent the value of digital products and services sold during a quarter, but part of the revenue from those purchases is often recognized in future quarters.

Adjusted earnings, which exclude share-based compensation expenses and other items, rose to 98 cents a share from 76 cents a share in the year-ago period.

Analysts had forecast adjusted earnings of 70 cents a share on revenue of $1.78 billion and bookings of $1.8 billion.

Blizzard-segment revenue grew 7% to $438 million, while King-segment revenue rose 22% to $609 million. The company’s Blizzard segment publishes the “World of Warcraft” franchise, along with the “Overwatch” and “Diablo” franchises. The company’s King segment, which it acquired five years ago, features “Candy Crush” as its lead game.

Going forward, Activision Blizzard expects adjusted earnings of 81 cents a share on revenue of $2.14 billion and bookings of $1.85 billion for the second quarter, and $3.42 a share on revenue of $8.37 billion and bookings of $8.6 billion for the year.

Analysts estimate earnings of 75 cents a share on revenue of $1.81 billion and bookings of $1.85 billion for the quarter, and earnings of $3.67 a share on revenue of $8.53 billion and bookings of $8.57 billion for the year.

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