Electronic Arts : First Quarter 2026 Transcript

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EA.OQ - Q1 2026 Electronic Arts Inc Earnings Call

EVENT DATE/TIME: JULY 29, 2025 / 9:00PM GMT

OVERVIEW:

Company Summary

Good afternoon. My name is Sarah, and I will be your conference operator at this today. At this time, I would like to welcome everyone to the Electronic Arts first-quarter fiscal year 2026 conference call. I would now like to send the conference over to Mr. Andrew Uerkwitz, Vice President, Investor Relations. Please go ahead.

Thank you. Welcome to EA's first-quarter fiscal year 2026 earnings call. With me today are Andrew Wilson, our CEO; and Stuart Canfield, our CFO. Please note that our SEC filings and our earnings release are available at ir.ea.com. In addition, we have posted detailed earnings slides to accompany our prepared remarks.

Lastly, after the call, we will post our prepared remarks, an audio replay of this call and a transcript. With regards to our calendar, our second-quarter fiscal year 2026 earnings call is scheduled for October 28, 2025. As a reminder, we post the schedule of upcoming earnings calls for the fiscal year on our IR website.

This presentation and our comments include forward-looking statements regarding future events and the future financial performance of the company. Actual events and results may differ materially from our expectations.

We refer you to our most recent Form 10-Q for a discussion of risks that could cause actual results to differ materially from those discussed today. Electronic Arts makes these statements as of today, July 29, 2025, and disclaims any duty to update them.

During this call, the financial metrics, with the exception of free cash flow and non-GAAP operating margin, will be presented on a GAAP basis. All comparisons made in the course of this call are against the same period in the prior year unless otherwise stated. Now, I'll turn the call over to Andrew Wilson.

Good afternoon everyone and thank you for joining us. I want to start by acknowledging the incredible creativity, dedication, and drive of our global teams. Thanks to their outstanding work, we delivered a strong first quarter to start FY26, landing above the high end of our guidance.

This quarter's performance highlights EA's unique position in the industry, the immense creativity of our teams, unmatched production capabilities, world class IP, and the breadth of our global player network. These differentiators power execution strength across geographies, platforms, genres, and business models as we continue to demonstrate the durability and momentum of our business.

When we look at our portfolio of massive (technical difficulty) communities from Global Football to American Football to The Sims, we are seeing our core communities of players more deeply engaged and staying with us for longer. This is the result of deliberate sustained focus. Years of commitment to our biggest opportunities are now compounding as we scale our communities and expand our reach.

Looking ahead, we are entering the most exciting release cycle in EA's history, scaling our massive online communities and pushing the boundaries of interactive entertainment. This year brings the highly anticipated launch of Battlefield 6 and continued innovation across EA Sports with FC, Madden NFL, and NHL. We will continue to expand The Sims iconic franchise and launch skate as the foundation of a new creator-driven platform rooted in street culture.

Today, EA is delivering incredible games and experiences that set us apart. And looking ahead, I couldn't be more excited as our teams continue to shape the future of interactive entertainment.

Now let me walk you through our first quarter. Our EA Sports business continues to be a pillar of strength, fueled by innovation, authenticity, and deep fan connection. In Global Football, player engagement remains strong, with net bookings up year over year, with FC Online up double digits and FC Mobile having a record quarter.

Community events like Team of the Season, Immortals, and Shapeshifters created high-impact engagement across HD and mobile. FC Mobile led engagement with over 50 million installs and DAU growth year over year, underscoring our ability to scale live content effectively and grow globally across platforms.

A highlight this quarter was the integration of select matches from Apple's MLS Season Pass into FC Mobile, bridging a real-world football with interactive entertainment. This success across Global Football is an ongoing result of our focus of listening and responding to our players.

As we turn to FC 26, we are leaning into this community-centric approach as a key driver of the title's pre-launch campaign. This approach been well received by our core player base, and early indicators are very positive leading up to a worldwide launch on September 26.

Our FC strategy is the blueprint for building and growing massive online communities across our EA Sports franchises and beyond. By seamlessly integrating content across console, PC, and mobile, we're not only engaging core players but also scaling to new geographies and fan bases. It's grounded in expanding how fans play, create, watch, and connect, bringing them closer to the sports they love through deeply immersive, socially driven experiences.

Building on our collaboration with Apple through F1 The Movie, we merged cinematic content with our interactive F1 experience. This partnership amplified excitement and extended the reach of EA Sports F1 25. Coupled with innovative gameplay advancements from refined physics and handling to an enhanced career mode, the title delivered a 27% year-over-year increase in net bookings.

Our partnerships in both FC and F1 offered fans new ways to connect with these global sports, strengthening cultural relevance, deepening emotional connection, and showcasing how the fusion of real-world sports action, blockbuster storytelling, and immersive gameplay drives growth and engagement.

In Q1, our American football ecosystem continued to demonstrate strength with sustained engagement and year-round momentum across Madden NFL and College Football. Building on that foundation, the high-quality launch of College Football 26 marked an exciting next step, earning strong

reviews and enthusiastic reception from the community while delivering authenticity, immersion, and innovative gameplay to a passionate community of players.

Following an extraordinary 2025 title reintroduction fueled by a decade of pent-up demand, we expect College Football to settle into a more normal demand curve while establishing its place as a core franchise in our portfolio and across the industry. While it's early, College Football 26 is delivering strong competitive cohort retention. As a result, we are seeing deeper engagement in Ultimate Team versus prior year life-to-date.

This momentum sets the stage for the next Madden NFL launching worldwide August 14, powered by a new AI-driven system trained on NFL game data. Madden NFL 26 delivers adaptive QB and coaching strategies, enhanced gameplay through an expanded physics engine, and deeper, more authentic experiences across fan-favorite modes and stadium atmospheres. As the real-world seasons start, we will continue to build a connected year-round experience that celebrates the full spectrum of American football fandom.

Our long-term partnerships across our College, NFL, FC, F1, UFC, and NHL franchises are some of the most valuable in sports entertainment, and we're continuing to unlock their ever-growing potential. These iconic sports look to EA SPORTS to more deeply and directly connect fans with their favorite teams and athletes through new ways to play, create, watch, and connect across our experiences.

Whether it's bringing real-world content into our games, amplifying highlights through creator tools, or building new social touchpoints around the biggest moments in sport, these partnerships are our powerful engine for deeper engagement and cultural connection.

EA SPORTS' growth doesn't just reflect the world of sports, it's helping to shape it. Through mobile expansion, creative tools, and deepening fandom, we are building massive online communities across what we believe will become the most valuable sports business in the world.

Beyond sports, our broader entertainment portfolio remains a key growth driver for EA, driven by blockbuster IP, creative excellence, and vibrant communities. Apex Legends performed well across the quarter. Q1 saw sequential growth and engagement driven by strong player retention.

The current season, Prodigy, also marked a notable rise in player satisfaction driven in part by the positive reception of new Legend Sparrow, whose popularity spans all skill levels across the community. We expect momentum to continue as the team operates with agility and focus on what matters most to the community, evolving gameplay, listening to players, and strengthening the core experience that defines Apex as a best-in-class live service.

Our next season, Apex Legends: Showdown, is launching next week with an all-new way to play. Looking ahead, we remain firmly on track to launch Skate and Battlefield 6 this year.

We've reached over a million registered players for the Skate playtest as we prepare for launch. Following the incredible player response to the Battlefield 6 reveal trailer last week, we are just days away from ushering in a new era for the franchise.

This Thursday, fans can tune in live for a massive multiplayer showcase, our most ambitious reveal yet, featuring epic maps and modes and a behind-the-scenes look with developers. Immediately following, top content creators around the world will stream the first-ever Battlefield 6 gameplay from live events in Los Angeles, Berlin, Paris, and London, with a special event in Hong Kong the following weekend.

Battlefield 6 has been built to supercharge a passionate community and ignite a new generation of fans. From day one, we've been deeply focused on delivering the experience players have been asking for, iconic all-out warfare, innovative destruction, unmatched scale, and more.

With the global launch ahead, Battlefield 6 is poised to become a cornerstone of our vision for dynamic, continually expanding experiences where community engagement shapes the future of play. Our company vision and strategy is in full flight, focused, dynamic, and built for scale.

We're delivering across our first strategic pillar of building massive online communities, Global Football and American Football, blockbuster shooters, and creator-powered ecosystems. These aren't just growth areas. They are massive online communities at scale, powering our business today and

accelerating our ambition to build in, around, and beyond our games. This is EA, connected, creator-led, and defining the future of interactive entertainment. With that, I'll turn it over to Stuart for a closer look at our financial performance.

Thanks Andrew, and good afternoon, everyone. We delivered a great start to FY26 with Q1 results ahead of our expectations. Our outperformance reflects continued execution across our portfolio, highlighted by our Global Football, Star Wars, and Apex Legends franchises. With strong momentum and a compelling slate of upcoming launches, we are well positioned to deliver against our FY26 outlook and long-term margin framework.

In Q1, we delivered net bookings of $1.3 billion, up 3%, exceeding the high end of our guidance range. We saw strong contributions from Split Fiction and Global Football and better-than-expected performance from catalog and Apex Legends.

Full game net bookings were $214 million, up 27%, led by ongoing momentum from Split Fiction and a resurgence in Star Wars Battlefront II. Live services net bookings were $1.08 billion, down 1%. Excluding Apex Legends, whose impact was 2 points better than we'd originally expected, live services grew in the low single digits, underscoring the resilience and ongoing growth of our core franchises led by Global Football.

Now, turning to key franchise performances in the quarter. Global Football grew net bookings mid-single digits year over year with Q4 momentum carrying into the quarter. Results exceeded our expectations, highlighted by healthy engagement through live events and new player mechanics. Our teams continue to evolve the experiences in our largest franchise through new features, community-focused content, and offerings like Premium Pass as we deliver long-term value for our players.

FC Mobile outperformed expectations again this quarter, with localized campaigns and growing web store adoption, fueling momentum through our Team of the Season event. As Andrew noted, FC Mobile continues to expand our reach across new geographies while driving feature innovation and deeper engagement.

For example, in Q1, we began work to unify Southeast Asia under a single SKU, streamlining operations while advancing our strategy to deliver hyperlocalized content at scale. As we look across Global Football, with growth across HD, FC Mobile, and FC Online, we are confident in our ability to drive durable growth in our largest franchise.

Apex Legends delivered encouraging momentum in Q1. Net bookings were flat sequentially, driven by strong operational execution, content innovation, and the successful introduction of Legend Locker. Engagement trends improved significantly, fueled by strong retention, particularly among new and casual players, establishing a solid foundation for Q2 and the upcoming Season 26.

Moving to our GAAP results, we delivered net revenue of $1.67 billion, up 1%. The cost of revenue was $279 million, resulting in a gross margin of 83.3%, down 90 basis points due to strong performance from royalty-bearing titles such as Split Fiction.

Operating expenses were $1.12 billion, up 9%, primarily driven by increased people costs as we make focused strategic investments to fuel our growth priorities and near-term launches. As a result, earnings per share was $0.79.

For Q1, operating cash flow was $17 million. On a trailing twelve-month basis, it was $1.98 billion and free cash flow was $1.75 billion. We returned

$423 million to shareholders during the quarter through buybacks and dividends. Please see our earnings slides for further cash flow information.

Now, let me walk through outlook. We're building on a solid foundation from Q1, carrying positive momentum into Q2. We are well positioned for an exciting back half of FY26, which is underpinned by upcoming launches within EA SPORTS and growing anticipation around Battlefield 6.

For Q2, we expect net bookings to be $1.8 billion to $1.9 billion, down 13% to down 9%. This includes a 4-point headwind related to phasing of the EA SPORTS FC Deluxe Edition content, which will largely be recognized in Q3. Our deliberate change in approach is part of our community-centric strategy to deliver more value for players over a longer period of time.