Activision Blizzard released their financial disclosure for the first quarter of 2023, and they released it a day early for that matter. The results showed ABK revenues surpassing expectations, even if Blizzard's monthly active users dropped a whole 40% compared to last quarter.
For Activision Blizzard as a whole, revenues were up 25% compared to Q1 2022, with Q1 2023 seeing net revenues of $2.38 billion compared to the $1.77 billion in 2022.
"For the quarter ended March 31, 2023, Activision Blizzard’s net revenues presented in accordance with GAAP were $2.38 billion, as compared with $1.77 billion for the first quarter of 2022. GAAP net revenues from digital channels were $2.16 billion. GAAP operating margin was 34%. GAAP earnings per diluted share was $0.93, as compared with $0.50 for the first quarter of 2022. On a non-GAAP basis, Activision Blizzard’s operating margin was 40% and earnings per diluted share was $1.09, as compared with $0.64 for the first quarter of 2022."
This news of ABK surpassing expectations was likely released early to combat the negative effect the UK blocking the Microsoft acquisition this morning would have on the stock price. Activision Blizzard addresses this update to the acquisition in the Financial Disclosure report, calling the findings from the UK's Competition and Markets Authority, or CMA, "disproportionate, irrational and inconsistent with evidence."
"On April 26, 2023, the United Kingdom Competition and Markets Authority ("CMA") announced a decision to block the merger, stating that competition concerns arose in relation to cloud gaming and that Microsoft’s remedies addressing any concerns in cloud gaming were not sufficient. Activision Blizzard considers that the CMA’s decision is disproportionate, irrational and inconsistent with the evidence. Microsoft has announced its decision to appeal the CMA’s ruling, and Activision Blizzard intends to fully support Microsoft’s efforts on this appeal. Activision Blizzard continues to believe that the deal is pro-competitive, will bring Activision Blizzard content to more gamers, and will result in substantial benefits to consumers and developers in the UK and globally. The parties continue to fully engage with other regulators reviewing the transaction to obtain any required regulatory approvals."
Activision's revenues grew by 28% year-over-year, according to the disclosure, led by the studio's flagship Call of Duty franchise. Activision claims that game sales for CoD were "significantly higher than the year-ago quarter." Activision also touches on in-game purchases increasing YoY in Call of Duty and Call of Duty Mobile, while also reminding investors of the upcoming Crash Team Rumble set to release in June.
Blizzard itself saw a 62% increase in revenue YoY despite dropping 40% of its monthly active users since Q4 2022. Blizzard credits Warcraft, Overwatch , and Diablo for driving that growth, though Overwatch 2 saw a drop in engagement versus the last quarter, where the free-to-play version launched to great success.
Interestingly absent is any mention of the current issues facing Chinese players eager to jump back into World of Warcraft and other Blizzard titles, especially as Blizzard's contract with NetEase ran out during Q1 2023. Then again, because the contract didn't end until the end of January, we might not see this figure represented until Q2 results are released. However, the wording on Blizzard's segment about retention in Warcraft, specifically citing higher retention in the West could be seen as a nod to this.
"Following the November release of the DragonflightTM expansion for the Modern game, our World of Warcraft team is delivering more content faster than ever before, and subscriber retention in the West is higher than at the equivalent stage of recent Modern expansions. "
Blizzard is also expecting growth with the launch of Diablo IV in a month, stating that the March public testing saw "very high engagement."
However, despite the increased retention in World of Warcraft, or the higher engagement hours for Overwatch 2 as well as season 3 of OW2 in February, MAUs dropped 40% versus last quarter. While it's an improvement YoY versus Q1 2022 which only saw 22 million monthly active users, Q4 2022 saw Blizzard reach back to 45 million bolstered by both Overwatch 2 and World of Warcraft Dragonflight launching that quarter. However, since then Q1 2023 dropped back down to mid-2022 levels at just 27 million monthly active users.
Activision Blizzard on the whole saw a decline both compared to last quarter (389 million MAUs in Q4 '22 versus 368 million MAUs this past quarter) but also compared to Q1 2022 (372M MAUs). You can read the full financial report on the Activision Blizzard investor site.
