Activision Blizzard delivers profit -- and caution

The game maker behind the Call of Duty franchise logs a record fiscal fourth quarter, but says the strong US dollar will weigh on overseas sales.

Nick Statt Former Staff Reporter / News
Nick Statt was a staff reporter for CNET News covering Microsoft, gaming, and technology you sometimes wear. He previously wrote for ReadWrite, was a news associate at the social-news app Flipboard, and his work has appeared in Popular Science and Newsweek. When not complaining about Bay Area bagel quality, he can be found spending a questionable amount of time contemplating his relationship with video games.
Nick Statt
3 min read

Call of Duty: Advanced Warfare, released only in November, became the best-selling game of last year, helping Activision Blizzard beat Wall Street profit expectations Thursday. Activision Blizzard

Activision Blizzard had a happy holiday season, but the company advised investors Thursday that it won't be able to repeat history next time around.

In its fiscal fourth quarter earnings report, the company said sales rose 11 percent and profit jumped 50 percent in 2014, driven by the strength of its latest release in the Call of Duty military shooter franchise, which was the best-selling game of the year.

While Call of Duty is showing signs of age -- the latest installment failed to best 2012's Black Ops 2 -- Activision is moving forward with new franchises like Destiny, an ambitious sci-fi game that became the best-selling new title ever when it launched last September.

Despite those successes and its record quarter, Activision's stock dove more than 7 percent in after-hours trading. The company was forced to lower its sales and profit forecasts for fiscal 2015 well below Wall Street estimates, citing harm to overseas sales due to weakened foreign currencies. The company's stock has remained mostly steady this year, though it peaked at an all-time high of $24 a share back in early September ahead of Destiny's release.

A bright spot for Activision going forward is its success in selling games and game add-ons over the Internet, now a huge profit driver for game companies that can sell a new title for $60 and continue to sell software packages for as much as $30 well after release. In the holiday quarter, Activision said sales delivered over the Internet rose 94 percent from the same time a year ago, to $685 million or almost a third of total sales. For the full year, Activision's online revenue represented almost a half of all total sales.

This shift follows an industry trend with other large game makers, like Electronic Arts and Take-Two Interactive, which have both seen consistent boosts to sales over the Internet in its latest quarter. These companies are beginning to see success in the games industry as less a matter of selling the most units and more a question of how to get gamers to play a single game for longer -- and spending real money in the virtual worlds as well.

Overall, Activision said sales in the quarter ending December 31 were $2.21 billion, down slightly from $2.27 billion in the year-ago period, after adjustments for deferred revenue and other items. The company's profit came in at 94 cents a share, up from 79 cents a share a year ago.

Analysts had expected the company to report on average a gain of 88 cents on sales of $2.24 billion, according to surveys by Thomson Reuters.

For the first fiscal quarter ending March 31, Activision anticipates profit of 5 cents a share on sales of $640 million, after adjustments. Analysts on average estimate fiscal first-quarter earnings of 18 cents a share on sales of $778 million, according to surveys by Thomson Reuters.

For its next upcoming fiscal year, Activision put its sales guidance at $4.4 billion, well under 2014's $4.8 billion due to the upcoming foreign currency issue, and said its annual earnings forecast per share will be $1.18.