Activision Blizzard sales fall on weak Call of Duty release

Activision Blizzard Inc., the largest U.S. video game publisher, reported revenue that beat analysts’ estimates, but adjusted revenue fell 15% year over year, reflecting a weak launch of Call of Duty last fall and a weak year for the gaming industry as a whole.

Activision, just launched by Microsoft Corp. had adjusted sales of $1.64 billion in the second quarter, compared to the median analyst forecast of $1.6 billion. Adjusted sales exclude deferred sales from online purchases. Adjusted earnings per share came in at 47 cents, nearly 50% lower year-over-year and slightly below analysts’ estimates, according to data compiled by Bloomberg.

Last fall’s Call of Duty Vanguard, which Activision said wasn’t performing as well as expected, impacted the company’s fiscal year. The game received negative reviews and faced stiff competition from new entries in the popular Halo and Battlefield series.

In the second quarter, Activision’s Blizzard division released Diablo Immortal, a new mobile entry in the action series. Activision’s Chinese partner NetEase Inc. delayed the launch of Diablo Immortal in the world’s largest mobile app market by about a month because it needed additional time. It was finally released on July 25th. Activision did not announce sales figures for the new Diablo game on Monday.

The video game industry has had a sluggish year as it grapples with hardware supply chain issues affecting consoles, inflation and a lack of big hits. Interest in gambling has also cooled as stay-at-home orders have been lifted during the pandemic and people have resumed outside interests and activities. Spending in the video game industry is expected to fall by 8.7% this year, according to a report by analytics firm NPD Group.

Activision said it expects revenue and earnings per share “to remain lower year-over-year in the second half.” Shares were up less than 1% in extended trading to $80.45.

Call of Duty Modern Warfare II, a new entry in the series, will be released on October 28th. But the series will then skip to 2023, Bloomberg has reported. Activision will instead release add-ons for Modern Warfare and other Call of Duty-related content. The next mainline game in the series from Treyarch studio is planned for 2024. Call of Duty is Activision’s biggest video game series and the titles regularly top the annual sales charts. They have sold more than 400 million units since the series began in 2003.

Activision said it will also release Blizzard games Overwatch 2 in Early Access on October 4 and Dragonflight, a new expansion for the online game World of Warcraft, later this year. Diablo IV will be released next year, the company said.

The Santa Monica, California-based publisher increased its developer count by 25% year-over-year, in part due to acquisitions of Boston-based games company Proletariat, which will help with World of Warcraft expansions, and Sweden-based KI -Company Peltarion. However, she said she “remains aware of the risks, including those related to the labor market and economic conditions”.

Microsoft announced the acquisition of Activision in January. The Xbox maker came in while shares of Activision had suffered from an ongoing sexual misconduct scandal over the past year. Activision’s stock is up about 20% since the January announcement, though it’s still trading well below the asking price of $95 per share, indicating market uncertainty about the deal going through. Lina Khan, the newly appointed head of the Federal Trade Commission, has indicated that she intends to take a tough stance against technology mergers. Activision has announced the transaction will close during Microsoft’s fiscal year ending June 2023.