Activision Blizzard (NASDAQ:ATVI) have released their earnings for the quarter ending September 30, 2023, and greater than ever, it was a story of two corporations – Activision and Blizzard. In fact, a lot of the corporate’s newest earnings report and name had been dedicated to the fallout of the explosive discrimination lawsuit leveled towards the corporate earlier this yr, with CEO Bobby Kotick as soon as once more promising make-good measures corresponding to a brand new zero-tolerance harassment coverage and a push to spice up ladies and non-binary folks within the Acti-Blizz workforce by 50 p.c. In the end, the controversy appears to be affecting the 2 halves of the corporate unequally – whereas Activision continues to truck alongside, the way forward for Blizzard is extra unsure than it’s ever been.
Trying on the monetary nitty gritty, Acti-Blizz delivered $2.07 billion in internet income in Q3 (their fiscal yr coincides with the common calendar yr), above the $1.97 billion they had been anticipating. GAAP earnings per share for Q3 had been $0.82, above steering and the $0.72 buyers had been anticipating. This was largely because of the cash-generating combo of Activision’s annual premium Name of Obligation titles and the free-to-play Name of Obligation: Warzone. Regardless of the nice outcomes, Activision Blizzard inventory plunged round 12 p.c in after-hours buying and selling, undoubtedly because of the adverse information from Blizzard.
Blizzard’s Launch Calendar Freezes Over
Blizzard’s monthly-active customers remained flat from Q2 at 26 million, and whereas brass insist Diablo II: Resurrected obtained off an excellent begin, notably in Korea, it’s onerous to say if its success will maintain given the remake’s widely-reported points. Even when Diablo II continues to do effectively, it’s troublesome to get too enthusiastic about Blizzard’s instant future, as additionally they introduced the delay of each Overwatch 2 and Diablo IV into FY2023 (and presumably past).
As now we have labored with new management in Blizzard and throughout the franchises themselves, notably in sure key artistic roles, it has change into obvious that among the Blizzard content material deliberate for subsequent yr will profit from extra growth time to succeed in its full potential. Whereas we’re nonetheless planning to ship a considerable quantity of content material from Blizzard subsequent yr, we at the moment are planning for a later launch for Overwatch 2 and Diablo IV than initially envisaged.
These are two of probably the most eagerly anticipated titles within the business, and our groups have made nice strides in the direction of completion in latest quarters. However we imagine giving the groups some additional time to finish manufacturing and proceed rising their artistic assets to help the titles after launch will be certain that these releases delight and have interaction their communities for a few years into the long run. These choices will push out the monetary uplift that we had anticipated to see subsequent yr. However we’re assured that that is the appropriate plan of action for our folks, our gamers, and the long-term success of our franchises.
Blizzard has additionally already misplaced Jen Oneal, former studio head of Vicarious Visions and one Blizzard’s new co-leaders put in after the departure of earlier president J. Allen Brack. Mike Ybarra will now take over as sole chief of Blizzard. Evidently, Blizzard not with the ability to maintain onto its new feminine chief for greater than three months as stunning allegations of sexual harassment on the studio stay recent in minds of followers and buyers is lower than supreme.
Outlook
For many who haven’t been maintaining, California’s Division of Truthful Employment and Housing (DFEH) has filed swimsuit towards Activision Blizzard, alleging gender-based discrimination and sexual harassment on the Name of Obligation and World of Warcraft writer. Activision Blizzard’s official response to the suit accuses the DFEH of “distorted […] and false” descriptions and insists the image painted is “shouldn’t be the Blizzard office of as we speak.” An open letter objecting to the official response was signed by 1000’s of present and former Acti-Blizz workers, resulting in a employee walkout. Acti-Blizz CEO Bobby Kotick would finally apologize for the corporate’s preliminary response, calling it “tone deaf.” A number of high-ranking Blizzard workers, together with former president J. Allen Brack and Diablo IV and World of Warcraft group leaders have resigned or been fired, main to call adjustments for some characters. The story has even attracted the eye of the US Federal Authorities, with the Securities and Alternate Fee (SEC) opening a “wide-ranging” investigation.
Regardless of the corporate’s present PR nightmare, Activision Blizzard have as soon as once more raised their FY2021 outlook to $8.67 billion, up from $8.52 billion. This autumn’s Name of Obligation: Vanguard has impressed a combined response from followers, however there’s no questioning it is going to be a monetary success. 2023’s Name of Obligation title, rumored to be a gritty Trendy Warfare sequel, is a lock to be even greater.
Activision Blizzard is more and more constructed round a single franchise – Name of Obligation – and its power can carry the corporate via some tough waters. That stated, even CoD can be onerous pressed to make up the distinction ought to Blizzard undergo a complete artistic and industrial collapse. I’m not saying that’s essentially going to occur, however the risk feels removed from zero at this level.
