On January 23, Electronic Arts saw its shares drop over 15%, primarily due to a surprising decrease in spending on its flagship soccer franchise, a cornerstone of its gaming lineup.
The company released its latest soccer game, "FC 25," in September, part of a successful series. Unlike its predecessors, however, "FC 25" failed to impress, impacting revenue in EA's key live services segment.
Critics and players expressed disappointment with the game's lack of new features and advancements in areas like in-game physics and goal-scoring mechanics, according to analysts at Jefferies.
Following the negative feedback, EA rolled out a significant update in January that received positive reactions from players, but the initial setback prompted the company to revise its annual revenue forecast and predict a mid-single-digit drop in live-service bookings.
An additional factor in the forecast adjustment was the weak performance of its role-playing game "Dragon Age: The Veilguard," launched in October, as gamers favored established titles amidst economic uncertainty.
This change in projections contrasted sharply with EA's optimism just in October, relying on the success of its American Football games, "Madden NFL" and "College Football."
The company's market value stood to decrease by almost $6 billion from $37.3 billion if the losses persisted, with its stock trading at about 17 times its 12-month forward earnings estimates, compared to Take Two Interactive's 27.72.
EA generates revenue from game sales and player spending within games, particularly through services like "Ultimate Team," where players can use in-game currency to acquire team players for online competitions.
"EA FC" typically racks up roughly $2 billion in sales annually, with live-service revenue accounting for $800 million, per Michael Pachter of Wedbush Securities.
The franchise’s previous installment, "FC 24," was a best-seller in 2023, succeeding the FIFA rebranding to "FC" after ending a long-standing partnership with FIFA in 2022, as reported by Circana data.
"Ultimate Team has become a crucial driver of EA's interactive media bookings growth. Any stagnation there translates into significant pressure on EA to find alternatives," noted analysts at MoffettNathanson.