Why Electronic Arts Shares Dropped 7% After-Hours Thursday

Electronic Arts Inc EA shares tanked in the after-hours session Thursday as the company missed analyst estimates for the second quarter of the fiscal year 2021 even as it beat management guidance. EA's decision to start paying quarterly dividend amid weak earnings also didn't sit well with the market, Barron's noted earlier.

What Happened: In the first five minutes of the after-hour session, the stock price shed 9% and dropped to $118 a share. EA quarterly net revenues dropped 15% year-over-year at  $1.15 billion while the $0.63 diluted earnings per share for the quarter was 78% lower YoY.

Revenues from the Live Services segment contributed around 75.5% of the revenue share with a boost from the FIFA and Madden franchises and gained 13% compared to the same period one year ago. The balance share in revenue came from Full Game downloads and packaged goods, a 51% drop year-over-year.

In 2020, Electronic Arts has released an aggregate of 125 games and content packs on Stream in the fiscal year and launched four new games in the quarter ended Sept. 30. UFC 4, Star Wars: Squadrons, Rocket Arena, and Madden NFL 21 were the recent launches in Q2 FY21.

Madden NFL 21 players grew 30% YoY, whereas the number of console and PC players for its FIFA 20 game is close to 35 million. Electronic Art’s subscription-based service EA play has crossed the 6.5 million milestone of paid subscribers.

Management Guidance, Share Repurchase, Dividends: The management anticipates the fiscal 2021 revenues of $5.625 billion and full-year diluted earnings per share of $3.15. The management also predicted $1.675 billion in quarterly revenues for the period ending Dec. 31, 2020, with a $0.61 diluted earnings per share.

Over the next two years, Electric Arts will repurchase company shares to the tune of $2.6 billion. The nature of the repurchase is unclear and the company may choose to buy shares from the open market, through negotiations with private investors, or by way of a pre-defined stock trading plan.

The company board has also declared a $0.17 per share in cash quarterly dividend payable on Dec. 23, 2020.

Price Action: EA stock tumbled 7.11% during after-hours and was last seen quoting $119.21.

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