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Activision Blizzard posts gains for second quarter

Console sales dip despite strong launch for Crash Bandicoot collection; revenue from retail channels recedes [UPDATE: ATVI very encouraged by Destiny 2]

Activision Blizzard continues to ride the strength of its Call of Duty, Destiny, and Blizzard businesses to growth. The company today reported results for the quarter ended June 30, showing top- and bottom-line year-over-year gains.

For the second quarter, GAAP net revenues were up 14% to $1.63 billion, while earnings per share jumped 60% to $0.32. Both numbers were well above the company's historically conservative projections. (Activision Blizzard has beat its outlook for revenue and earnings per share in 25 of the last 26 quarters, with the only exception being a miss on Q4 2015 non-GAAP net revenues.)

The company didn't attribute its results to any particular product, with CEO Bobby Kotick's comments merely noting that it was "another strong quarter for Activision Blizzard" and a record revenue total for the company's first half.

As far as new releases, the Crash Bandicoot N. Sane Trilogy sold well, with the company proclaiming the budget-priced ($40) game the top-selling title worldwide in June based on unit sales. The new Hearthstone expansion Journey to Un'Goro also drove that game to record monthly active user numbers.

As for Destiny 2, the recent beta on consoles had more participants than the 2014 beta for the original game. The sequel also already has more preorders than its predecessor, with another month to go before its September 6 debut on consoles.

In terms of larger trends, the quarter also showed a shift in the company's revenues away from consoles and physical retailers. Activision Blizzard saw console revenues drop 13% year-over-year to $568 million, the only segment to see a revenue decline of any kind. Meanwhile, PC revenues jumped 24% to $508 million. The trend looks slightly different when comparing the first half of Activision Blizzard's current fiscal year to the previous year's first half. In that case, console revenues are only down 16% from the comparable period, but every other segment (PC, Mobile/ancillary, and Other/MLG) was up by at least 30%.

It's not just a matter of where the money's coming from; there's also a change in how Activision Blizzard is getting it. The company broke down its net revenues by distribution channel, showing that money from retail channels was down 30% for the quarter, and 38% for the half. Meanwhile, revenues from digital online channels were up 15% and 30% for the quarter and half, respectively.

Activision Blizzard also issued guidance for the current quarter that appears to set it up well to once again beat expectations. Despite the launch this quarter of Destiny 2, Activision Blizzard has forecast revenues down 12% to $1.39 billion, with earnings per share down 65% to $.09.

Update: To further fan the hype flames for Destiny 2, Activision Publishing boss Eric Hirshberg commented on the earnings call that his team has gotten "almost universally positive" feedback on the beta from both fans and the press. He added that the much-anticipated game also has the "#1 position on Nielsen's unaided awareness and next choice purchase intent." Those facts combined with already solid preorders has Activision salivating over prospective sales.

"While no one of those data points is ever predictive in a vacuum, we found that when you have all three of those trending positively, it's usually a very good thing," Hirshberg said. And to make the game appeal even more broadly and more globally, Hirshberg noted that Bungie has added more languages and localizations and is tweaking the gameplay and feature set to make it more accessible in general.

Beyond Destiny 2's upcoming launch, Hirshberg reminded everyone on the call that post-launch content is just as important if not more so. "We've completely changed our approach to tapping that [post-launch content] by widening our stable of AAA developers so that we can keep up with demand," he remarked. "It's a high-class problem but we haven't been able to do that in the past... I think fans agree with the importance of that, which is evidenced by the fact that such an overwhelmingly high percentage of the preorders thus far are for one of our elevated SKUs which include the season pass and follow-on content. "

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