Electronic Arts Inc.
10/31/2025 | Press release | Distributed by Public on 10/31/2025 14:10
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. We use words such as "anticipate", "believe", "expect", "intend", "estimate", "plan", "predict", "seek", "goal", "will", "may", "likely", "should", "could", "continue", "potential" (and the negative of any of these terms), "future" and similar expressions to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, trends in our business, projections of markets relevant to our business, the Merger (as defined herein), uncertain events and assumptions and other characterizations of future events or circumstances are forward-looking statements. Forward-looking statements consist of, among other things, statements related to our business, operations and financial results, industry prospects, our future financial performance, and our business plans and objectives, and may include certain assumptions that underlie the forward-looking statements. These forward-looking statements are not guarantees of future performance and reflect management's current expectations. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that might cause or contribute to such differences include those discussed in Part II, Item 1A of this Quarterly Report under the heading "Risk Factors", as well as in other documents we have filed with the Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K for the fiscal year ended March 31, 2025. We assume no obligation to revise or update any forward-looking statement for any reason, except as required by law.
OVERVIEW
The following overview is a high-level discussion of our operating results, as well as some of the trends and drivers that affect our business. Management believes that an understanding of these trends and drivers provides important context for our results for the three months ended September 30, 2025, as well as our future prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Form 10-Q, including in the remainder of "Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A")," "Risk Factors," and the Condensed Consolidated Financial Statements and related Notes. Additional information can be found in the "Business" section of our Annual Report on Form 10-K for the fiscal year ended March 31, 2025 as filed with the SEC on May 13, 2025 and in other documents we have filed with the SEC.
Proposed Merger
On September 28, 2025, we entered into a Merger Agreement pursuant to and subject to the terms and conditions of which we will be acquired by the Consortium. For further details on this proposed transaction, see Note 15of the Condensed Consolidated Financial Statements and "Part II-Item 1A. Risk Factors" contained elsewhere in this Form 10-Q.
About Electronic Arts
Electronic Arts is a global leader in digital interactive entertainment. We develop, market, publish and deliver games, content and services that can be experienced on game consoles, PCs, and mobile devices. We create innovative games and experiences that deliver high-quality interactive entertainment and drive engagement across our global network of hundreds of millions of players. Through our live services offerings, we offer high-quality experiences designed to provide value to players and extend and enhance gameplay. These live services include extra content, subscription offerings and other revenue generated in addition to the sale of our full games. We are focusing on building games and experiences that grow the global online communities around our key franchises; deepening engagement through connecting interactive storytelling to key intellectual property; and harnessing our communities to grow in, around, and beyond our games.
Financial Results
Our key financial results for our fiscal quarter ended September 30, 2025 were as follows:
•Total net revenue was $1,839 million, down 9 percent year-over-year.
•Live services and other net revenue was $1,221 million, down 7 percent year-over-year.
•Gross margin was 75.9 percent, down 2 percentage points year-over-year.
•Operating expenses were $1,196 million, up 1 percent year-over-year.
•Operating income was $200 million, down 48 percent year-over-year.
•Net income was $137 million with diluted earnings per share of $0.54.
•Net cash provided by operating activities was $130 million, down 44 percent year-over-year.
•Total cash, cash equivalents and short-term investments were $1,260 million.
•We returned $423 million to stockholders through our capital return programs, which include repurchasing 2.3 million shares for approximately $375 million and paying $48 million through our quarterly cash dividend program.
Trends in Our Business
Live Services Business. We offer our players high-quality experiences designed to provide value to players and to extend and enhance gameplay. These live services include extra content, subscription offerings and other revenue generated in addition to the sale of our full games and free-to-play games. Our net revenue attributable to live services and other was $5,345 million, $5,492 million, and $5,535 million for the trailing twelve months ended September 30, 2025, 2024, and 2023, respectively, and we expect that live services net revenue will continue to be material to our business. Within live services and other, net revenue attributable to extra content was $4,199 million, $4,393 million, and $4,374 million for the trailing twelve months ended September 30, 2025, 2024, and 2023, respectively. Growth in live services net revenue, including extra content may not be linear due to the competitive landscape, consumer buying patterns, and other factors. Our most popular live services are the extra content in the Ultimate Teammode associated with our sports franchises. Ultimate Teamallows players to collect current and former players in order to build and compete as a personalized team. Live services net revenue generated from extra content purchased within Ultimate Team, a substantial portion of which was derived from FC Ultimate Team, is material to our business.
Digital Delivery of Games. In our industry, players increasingly purchase games digitally as opposed to purchasing physical discs. While this trend, as applied to our business, may not be linear due to a mix of products during a fiscal year, consumer buying patterns and other factors, over time we expect players to continue to purchase a higher proportion of our games digitally. As a result, we expect net revenue attributable to digital full game downloads to increase over time and net revenue attributable to sales of packaged goods to decrease.
Our net revenue attributable to digital full game downloads was $1,478 million, $1,343 million, and $1,262 million during fiscal years 2025, 2024, and 2023, respectively; while our net revenue attributable to packaged goods sales was $524 million, $672 million, and $675 million in fiscal years 2025, 2024, and 2023, respectively. In addition, as measured based on total units sold on Microsoft's Xbox One and Xbox Series X and Sony's PlayStation 4 and 5 rather than by net revenue, we estimate that 78 percent, 73 percent, and 68 percent of our total units sold during fiscal years 2025, 2024, and 2023, were sold digitally. Digital full game units are based on sales information provided by Microsoft and Sony; packaged goods units sold through are estimated by obtaining data from significant retail and distribution partners in North America, Europe and Asia, and applying internal sales estimates with respect to retail partners from which we do not obtain data. We believe that these percentages are reasonable estimates of the proportion of our games that are digitally downloaded in relation to our total number of units sold for the applicable period of measurement.
Increases in consumer adoption of digital purchase of games combined with increases in our live services revenue generally results in expansion of our gross margin, as costs associated with selling a game digitally are generally less than selling the same game through traditional retail and distribution channels.
Increased Competition. Competition in our business is intense. Our competitors range from established interactive entertainment companies to emerging start-ups. In addition, we compete with large, diversified companies that have strengthened their interactive entertainment capabilities. Our competitors have access to certain resources such as larger budgets, tools, technologies, or IP portfolios that can lead to greater consumer success and shift player time and engagement away from our products and services. In addition, our leading position within the interactive entertainment industry makes us a prime target for recruiting our executives, as well as key creative and technical talent, resulting in retention challenges and increased cost to retain and incentivize our key people.
Concentration of Sales Among the Most Popular Games. In our industry, we see a large portion of games sales concentrated on the most popular titles. Similarly, a significant portion of our revenue has been derived from games based on a few popular titles, such as EA SPORTS FC, EA SPORTS College Football, EA SPORTS Madden NFL, Apex Legends, Battlefield, and The Sims. In particular, we have historically derived a significant portion of our net revenue from our global football franchise, the annualized version of which is consistently one of the best-selling games in the marketplace.
Net Bookings. In order to improve transparency into our business, we disclose an operating performance metric, net bookings. Net bookings is defined as the net amount of products and services sold digitally or sold-in physically in the period. Net bookings is calculated by adding total net revenue to the change in deferred net revenue for online-enabled games.
The following is a calculation of our total net bookings for the periods presented:
|
Three Months Ended September 30, |
Six Months Ended September 30, |
||||||||||||||||||||||
|
(In millions) |
2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Net revenue | $ | 1,839 | $ | 2,025 | $ | 3,510 | $ | 3,685 | |||||||||||||||
| Change in deferred net revenue (online-enabled games) | (21) | 54 | (394) | (344) | |||||||||||||||||||
| Net bookings | $ | 1,818 | $ | 2,079 | $ | 3,116 | $ | 3,341 | |||||||||||||||
Net bookings were $1,818 million for the three months ended September 30, 2025, primarily driven by sales related to our global football, American football, and The Sims franchises. Net bookings decreased $261 million, or 13 percent, as compared to the three months ended September 30, 2024, primarily due to a year-over-year decrease in sales from EA SPORTS College Football and our global football franchise, partially offset by an increase in sales from Split Fictionand EA SPORTS Madden NFL.Live services and other net bookings were $1,118 million for the three months ended September 30, 2025, and decreased $129 million, or 10 percent, as compared to the three months ended September 30, 2024. The decrease in live services and other net bookings was primarily due to decreased sales of extra content from Ultimate Teamwithin our global football franchise and EA SPORTS College Football,partially offset by increased sales of extra content from Apex Legends. Full game net bookings were $700 million for the three months ended September 30, 2025, and decreased $132 million, or 16 percent, as compared to the three months ended September 30, 2024, primarily due to a year-over-year decline from EA SPORTS College Football, partially offset by Split Fiction and EA SPORTS Madden NFL.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, and revenue and expenses during the reporting periods. The policies discussed below are considered by management to be critical because they are not only important to the portrayal of our financial condition and results of operations, but also because application and interpretation of these policies requires both management judgment and estimates of matters that are inherently uncertain and unknown. As a result, actual results may differ materially from our estimates.
Revenue Recognition
We derive revenue principally from sales of our games, and related extra content and services that can be experienced on game consoles, PCs, and mobile devices. Our product and service offerings include, but are not limited to, the following:
•full games with both online and offline functionality ("Games with Services"), which generally includes (1) the initial game delivered digitally or via physical disc at the time of sale and typically provide access to offline core game content ("software license"); (2) updates on a when-and-if-available basis, such as software patches or updates, and/or additional free content to be delivered in the future ("future update rights"); and (3) a hosted connection for online playability ("online hosting");
•full games with online-only functionality which require an Internet connection to access all gameplay and functionality ("Online-Hosted Service Games");
•extra content related to Games with Services and Online-Hosted Service Games which provides access to additional in-game content;
•subscriptions, such as EA Play and EA Play Pro, that generally offer access to a selection of full games, in-game content, online services and other benefits typically for a recurring monthly or annual fee; and
•licensing to third parties to distribute and host our games and content.
We evaluate and recognize revenue by:
•identifying the contract(s) with the customer;
•identifying the performance obligations in the contract;
•determining the transaction price;
•allocating the transaction price to performance obligations in the contract; and
•recognizing revenue as each performance obligation is satisfied through the transfer of a promised good or service to a customer (i.e., "transfer of control").
Certain of our full game and/or extra content are sold to resellers with a contingency that the full game and/or extra content cannot be resold prior to a specific date ("Street Date Contingency"). We recognize revenue for transactions that have a Street Date Contingency when the Street Date Contingency is removed and the full game and/or extra content can be resold by the reseller. For digital full game and/or extra content downloads sold to customers, we recognize revenue when the full game and/or extra content is made available for download to the customer.
Online-Enabled Games
Games with Services. Our sales of Games with Services are evaluated to determine whether the software license, future update rights and the online hosting are distinct and separable. Sales of Games with Services are generally determined to have three distinct performance obligations: software license, future update rights, and the online hosting.
Since we do not sell the performance obligations on a stand-alone basis, we consider market conditions and other observable inputs to estimate the stand-alone selling price for each performance obligation. For Games with Services, generally 75 percent of the sales price is allocated to the software license performance obligation and recognized at a point in time when control of the license has been transferred to the customer. The remaining 25 percent is allocated to the future update rights and the online hosting performance obligations and recognized ratably as the service is provided (over the Estimated Offering Period).
Online-Hosted Service Games. Sales of our Online-Hosted Service Games are determined to have one distinct performance obligation: the online hosting service. We recognize revenue from these arrangements ratably as the service is provided (over the Estimated Offering Period).
Extra Content. Revenue received from sales of downloadable content are derived primarily from the sale of virtual currencies and digital in-game content that are designed to extend and enhance players' game experience. Sales of extra content are accounted for in a manner consistent with the treatment for our Games with Services and Online-Hosted Service Games as discussed above, depending upon whether or not the extra content has offline functionality. That is, if the extra content has offline functionality, then the extra content is accounted for similarly to Games with Services (generally determined to have three distinct performance obligations: software license, future update rights, and the online hosting). If the extra content does not have offline functionality, then the extra content is determined to have one distinct performance obligation: the online-hosted service.
Subscriptions
Sales of our subscriptions are determined to have one performance obligation: the online hosting. We recognize revenue from these arrangements ratably over the subscription term as the performance obligation is satisfied.
Licensing Revenue
We utilize third-party licensees to distribute and host our games and content in accordance with license agreements, for which the licensees typically pay us a fixed minimum guarantee and/or sales-based royalties. These arrangements typically include multiple performance obligations, such as a time-based license of software and future update rights. We recognize as revenue a portion of the minimum guarantee when we transfer control of the license of software (generally upon commercial launch) and the remaining portion ratably over the contractual term in which we provide the licensee with future update rights. Any sales-based royalties are generally recognized as the related sales occur by the licensee.
Significant Judgments around Revenue Arrangements
Identifying performance obligations.Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct, (i.e., the customer can benefit from the goods or services either on its own or together with other resources that are readily available), and are distinct in the context of the contract (i.e., it is separately identifiable from other goods or services in the contract). To the extent a contract includes multiple promises, we must apply judgment to determine whether those promises are separate and distinct performance obligations. If these criteria are not met, the promises are accounted for as a combined performance obligation.
Determining the transaction price. The transaction price is determined based on the consideration that we will be entitled to receive in exchange for transferring our goods and services to the customer. Determining the transaction price often requires judgment, based on an assessment of contractual terms and business practices. It further includes review of variable consideration such as discounts, sales returns, price protection, and rebates, which is estimated at the time of the transaction. In addition, the transaction price does not include an estimate of the variable consideration related to sales-based royalties. Sales-based royalties are recognized as the sales occur.
Allocating the transaction price. Allocating the transaction price requires that we determine an estimate of the relative stand-alone selling price for each distinct performance obligation. Determining the relative stand-alone selling price is inherently subjective, especially in situations where we do not sell the performance obligation on a stand-alone basis (which occurs in the majority of our transactions). In those situations, we determine the relative stand-alone selling price based on various observable inputs using all information that is reasonably available. Examples of observable inputs and information include: historical internal pricing data, cost plus margin analysis, pre-release versus post-release costs, and pricing data from competitors to the extent the data is available. The results of our analysis resulted in a specific percentage of the transaction price being allocated to each performance obligation.
Determining the Estimated Offering Period.The offering period is the period in which we offer to provide the future update rights and/or online hosting for the game and related extra content sold. Because the offering period is not an explicitly defined period, we must make an estimate of the offering period for the service-related performance obligations (i.e., future update rights and/or online hosting). Determining the Estimated Offering Period is inherently subjective and is subject to regular revision. Generally, we consider the average period of time customers are online when estimating the offering period. We also consider the estimated period of time between the date a game unit is sold to a reseller and the date the reseller sells the game
unit to the customer (i.e., time in channel). Based on these two factors, we then consider the method of distribution. For example, games and extra content sold at retail would have a composite offering period equal to the online gameplay period plus time in channel as opposed to digitally-distributed games and extra content which are delivered immediately via digital download and therefore, the offering period is estimated to be only the online gameplay period.
Additionally, we consider results from prior analyses, known and expected online gameplay trends, as well as disclosed service periods for competitors' games in determining the Estimated Offering Period for future sales. We believe this provides a reasonable depiction of the transfer of future update rights and online hosting to our customers, as it is the best representation of the time period during which our games and extra content are experienced. We recognize revenue for future update rights and online hosting performance obligations ratably on a straight-line basis over this period as there is a consistent pattern of delivery for these performance obligations. Revenue for service-related performance obligations for digitally-distributed games and extra content is recognized over an estimated eight-month period beginning in the month of sale, and revenue for service-related performance obligations for games and extra content sold through retail is recognized over an estimated ten-month period beginning in the month of sale. Prior to July 1, 2025, revenue for service-related performance obligations related to our mobile free-to-play and PC and console free-to-play games was recognized generally over eight and twelve-month periods, respectively, beginning in the month of sale.
During the three months ended September 30, 2025, we completed our annual evaluation of the Estimated Offering Period, and as a result, for sales beginning July 1, 2025, the revenue that we recognize for service-related performance obligation related to our mobile free-to-play and PC and console free-to-play games is recognized generally over an eleven-month period beginning in the month of sale. This change in Estimated Offering Period did not impact the amount of net bookings or the operating cash flows that we report. We expect that this change will move the recognition of approximately $78 million in net revenue from fiscal year 2026 into fiscal year 2027. During the three and six months ended September 30, 2025, this change to our Estimated Offering Period resulted in an estimated decrease in net revenue of $8 million and net income of $6 million, and a decrease of $0.02 diluted earnings per share.
Principal Agent Considerations
We evaluate sales to end customers of our full games and related content via third-party storefronts, including digital storefronts such as Microsoft's Xbox Store, Sony's PlayStation Store, Apple App Store, and Google Play Store, in order to determine whether or not we are acting as the principal in the sale to the end customer, which we consider in determining if revenue should be reported gross or net of fees retained by the third-party storefront. An entity is the principal if it controls a good or service before it is transferred to the end customer. Key indicators that we evaluate in determining gross versus net treatment include but are not limited to the following:
•the underlying contract terms and conditions between the various parties to the transaction;
•which party is primarily responsible for fulfilling the promise to provide the specified good or service to the end customer;
•which party has discretion in establishing the price for the specified good or service; and
•which party has title risk before the specified good or service has been transferred to the end customer.
Based on an evaluation of the above indicators, except as discussed below, we have determined that generally the third party is considered the principal to end customers for the sale of our full games and related content. We therefore report revenue related to these arrangements net of the fees retained by the storefront. However, for sales arrangements via Apple App Store and Google Play Store, EA is considered the principal to the end customer and thus, we report revenue on a gross basis and mobile platform fees are reported within cost of revenue.
Income Taxes
We recognize deferred tax assets and liabilities for both (1) the expected impact of differences between the financial statement amount and the tax basis of assets and liabilities and (2) the expected future tax benefit to be derived from tax losses and tax credit carryforwards. We do not recognize any deferred taxes related to the U.S. taxes on foreign earnings as we recognize these taxes as a period cost.
We record a valuation allowance against deferred tax assets when it is considered more likely than not that all or a portion of our deferred tax assets will not be realized. In making this determination, we are required to give significant weight to evidence that can be objectively verified. It is generally difficult to conclude that a valuation allowance is not needed when there is significant negative evidence, such as cumulative losses in recent years. Forecasts of future taxable income are considered to be less objective than past results. Therefore, cumulative losses weigh heavily in the overall assessment.
In addition to considering forecasts of future taxable income, we are also required to evaluate and quantify other possible sources of taxable income in order to assess the realization of our deferred tax assets, namely the reversal of existing deferred tax liabilities, the carryback of losses and credits as allowed under current tax law, and the implementation of tax planning strategies. Evaluating and quantifying these amounts involves significant judgments. Each source of income must be evaluated based on all positive and negative evidence and this evaluation may involve assumptions about future activity. Certain taxable temporary differences that are not expected to reverse during the carry forward periods permitted by tax law cannot be considered as a source of future taxable income that may be available to realize the benefit of deferred tax assets.
Every quarter, we perform a realizability analysis to evaluate whether it is more likely than not that all or a portion of our deferred tax assets will not be realized. Our Swiss deferred tax asset realizability analysis relies upon future Swiss taxable income, and considers all available sources of Swiss income based on positive and negative evidence. We give more weight to evidence that can be objectively verified. However, estimating future Swiss taxable income requires judgment, specifically related to assumptions about expected growth rates of future Swiss taxable income, which are based primarily on third party market and industry growth data. Actual results that differ materially from those estimates could have a material impact on our valuation allowance assessment. Swiss interest rates have an impact on the valuation allowance and are based on published Swiss guidance, which generally occurs in the fourth quarter of our fiscal year. Any significant changes to such interest rates could result in a material impact to the valuation allowance and to our Condensed Consolidated Financial Statements. We have adjusted our valuation allowance for changes in the published interest rates in the past and we may do so again in the future. Switzerland has a seven-year carryforward period and does not permit the carry back of losses. Actions we take in connection with acquisitions could also impact the utilization of our Swiss deferred tax asset.
As part of the process of preparing our Condensed Consolidated Financial Statements, we are required to estimate our income taxes in each jurisdiction in which we operate prior to the completion and filing of tax returns for such periods. This process requires estimating both our geographic mix of income and our uncertain tax positions in each jurisdiction where we operate. These estimates require us to make judgments about the likely application of the tax law to our situation, as well as with respect to other matters, such as anticipating the positions that we will take on tax returns prior to preparing the returns and the outcomes of disputes with tax authorities. The ultimate resolution of these issues may take extended periods of time due to examinations by tax authorities and statutes of limitations. In addition, changes in our business, including acquisitions, changes in our international corporate structure, changes in the geographic location of business functions or assets, changes in the geographic mix and amount of income, as well as changes in our agreements with tax authorities, valuation allowances, applicable accounting rules, applicable tax laws and regulations, rulings and interpretations thereof, developments in tax audit and other matters, and variations in the estimated and actual level of annual pre-tax income can affect the overall effective tax rate.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
The information under the subheading "Other Recently Issued Accounting Standards" in Note 1 - Description of Business and Basis of Presentationto the Condensed Consolidated Financial Statements in this Form 10-Q is incorporated by reference into this Item 2.
RESULTS OF OPERATIONS
Our fiscal year is reported on a 52- or 53-week period that ends on the Saturday nearest March 31. Our results of operations for the fiscal year ending March 31, 2026 contains 52 weeks and ends on March 28, 2026. Our results of operations for the fiscal year ended March 31, 2025 contained 52 weeks and ended on March 29, 2025. Our results of operations for the three and six months ended September 30, 2025 contained 13 weeks and 26 weeks, respectively, and ended on September 27, 2025. Our results of operations for the three and six months ended September 30, 2024 contained 13 weeks and 26 weeks, respectively, and ended on September 28, 2024. For simplicity of disclosure, all fiscal periods are referred to as ending on a calendar month end.
Net Revenue
Net revenue consists of sales generated from (1) full games sold as digital downloads or as packaged goods and designed for play on game consoles and PCs, (2) live services which primarily includes sales of extra content for console, PC, and mobile games, (3) subscriptions that generally offer access to a selection of full games, in-game content, online services and other benefits, and (4) licensing our games to third parties to distribute and host our games and content.
Net Revenue Quarterly Analysis
Net Revenue
Net revenue for the three months ended September 30, 2025 was $1,839 million, primarily driven by sales related to our global football, American football, and The Sims franchises. Net revenue for the three months ended September 30, 2025 decreased $186 million as compared to the three months ended September 30, 2024. This decrease was driven by a $251 million decrease in net revenue primarily due to our American football franchises and decreased sales of extra content for Apex Legends, partially offset by a $65 million increase in net revenue primarily due to Split Fiction.
Net Revenue by Composition
Our net revenue by composition for the three months ended September 30, 2025 and 2024 was as follows (in millions):
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||
| Net revenue: | |||||||||||||||||||||||
| Full game downloads | $ | 401 | $ | 475 | $ | (74) | (16) | % | |||||||||||||||
| Packaged goods | 217 | 241 | (24) | (10) | % | ||||||||||||||||||
| Full game | $ | 618 | $ | 716 | $ | (98) | (14) | % | |||||||||||||||
| Live services and other | $ | 1,221 | $ | 1,309 | $ | (88) | (7) | % | |||||||||||||||
| Total net revenue | $ | 1,839 | $ | 2,025 | $ | (186) | (9) | % | |||||||||||||||
Full Game Net Revenue
Full game net revenue includes full game downloads and packaged goods. Full game downloads primarily include revenue from digital sales of full games on console, PC, and certain licensing revenue. Packaged goods primarily include revenue from full games that are sold physically through distribution arrangements, mass market retailers, and specialty stores.
For the three months ended September 30, 2025, full game net revenue was $618 million, primarily driven by EA SPORTS FC 26, EA SPORTS College Football 26, and EA SPORTS Madden NFL 26. Full game net revenue for the three months ended September 30, 2025 decreased $98 million, or 14 percent, as compared to the three months ended September 30, 2024, primarily due to a year-over-year decline in EA SPORTS College Football, partially offset by Split Fictionand EA SPORTS Madden NFL.
Live Services and Other Net Revenue
Live services and other net revenue primarily includes revenue from sales of extra content for console, PC, and mobile games, certain licensing revenue, subscriptions, and advertising.
For the three months ended September 30, 2025, live services and other net revenue was $1,221 million, primarily driven by sales of extra content for our global football, American football, and The Sims franchises. Live services and other net revenue for the three months ended September 30, 2025 decreased $88 million, or 7 percent, as compared to the three months ended September 30, 2024. This decrease was primarily driven by decreased sales of extra content forApex Legends, from Ultimate team within EA SPORTS Madden NFL, and our mobile catalog portfolio, partially offset by increased sales of extra content from Ultimate Teamwithin EA SPORTS College Football.
Net Revenue Year-to-Date Analysis
Net Revenue
Net revenue for the six months ended September 30, 2025 was $3,510 million, primarily driven by sales related to our global football, American football, and The Sims franchises. Net revenue for the six months ended September 30, 2025 decreased $175 million as compared to the six months ended September 30, 2024. This decrease was driven by a $322 million decrease in net revenue primarily due to sales of extra content for Apex Legends and a decrease in net revenue from our American football franchises, partially offset by a $147 million increase in net revenue primarily driven bySplit Fiction.
Net Revenue by Composition
Our net revenue by composition for the six months ended September 30, 2025 and 2024 was as follows (in millions):
| Six Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||
| Net revenue: | |||||||||||||||||||||||
| Full game downloads | $ | 634 | $ | 665 | $ | (31) | (5) | % | |||||||||||||||
| Packaged goods | 273 | 301 | (28) | (9) | % | ||||||||||||||||||
| Full game | $ | 907 | $ | 966 | $ | (59) | (6) | % | |||||||||||||||
| Live services and other | $ | 2,603 | $ | 2,719 | $ | (116) | (4) | % | |||||||||||||||
| Total net revenue | $ | 3,510 | $ | 3,685 | $ | (175) | (5) | % | |||||||||||||||
Full Game Net Revenue
For the six months ended September 30, 2025, full game net revenue was $907 million, primarily driven by EA SPORTS FC 26, EA SPORTS FC 25, EA SPORTS College Football 26, Split Fiction, and EA SPORTS Madden NFL 26. Full game net revenue for the six months ended September 30, 2025 decreased $59 million, or 6 percent, as compared to the six months ended September 30, 2024, primarily due to a year-over-year decline in EA SPORTS College Football, partially offset by Split Fiction.
Live Services and Other Net Revenue
For the six months ended September 30, 2025, live services and other net revenue was $2,603 million, primarily driven by sales of extra content for our global football, American football, and The Sims franchises. Live services and other net revenue for the six months ended September 30, 2025 decreased $116 million, or 4 percent, as compared to the six months ended September 30, 2024. This decrease was primarily driven by decreased sales of extra content forApex Legends and Ultimate Teamwithin EA SPORTS Madden NFL, partially offset by an increase in net revenue primarily due to sales of extra content from Ultimate Teamwithin EA SPORTS College Football.
Cost of Revenue Quarterly Analysis
Cost of revenue consists of (1) certain royalty expenses for sports organizations, movie studios, independent software developers, and others (2) mobile platform fees associated with our mobile revenue (for transactions in which we are acting as the principal in the sale to the end customer), (3) data center, bandwidth and server costs associated with hosting our online games and websites, (4) inventory costs, including manufacturing royalties, (5) payment processing fees, (6) amortization and impairments of certain intangible assets, and (7) personnel-related costs.
Cost of revenue for the three months ended September 30, 2025 and 2024 was as follows (in millions):
|
September 30, 2025 |
% of Net Revenue |
September 30, 2024 |
% of Net Revenue | % Change | Change as a % of Net Revenue | |||||||||||||||||||||||||||
| $ | 443 | 24 | % | $ | 456 | 23 | % | (3) | % | 1 | % | |||||||||||||||||||||
Cost of Revenue
Cost of revenue decreased by $13 million during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, primarily due to a year-over-year decrease in product related costs from EA SPORTS College Football and sales performance from royalty bearing titles.
Cost of Revenue Year-to-Date Analysis
Cost of revenue for the six months ended September 30, 2025 and 2024 was as follows (in millions):
|
September 30, 2025 |
% of Net Revenue |
September 30, 2024 |
% of Net Revenue | % Change | Change as a % of Net Revenue | |||||||||||||||||||||||||||
| $ | 722 | 21 | % | $ | 719 | 20 | % | - | % | 1 | % | |||||||||||||||||||||
Cost of Revenue
Cost of revenue increased by $3 million during the six months ended September 30, 2025, as compared to the six months ended September 30, 2024, primarily due to the mix of sales from royalty-bearing titles and impacts from foreign exchange, partially offset by a decrease in online hosting and platform fees and a decrease in product related costs from EA SPORTS College Football.
Research and Development
Research and development expenses consist of expenses incurred by our production studios for personnel-related costs, related overhead costs, external third-party development costs, contracted services, and depreciation. Research and development expenses for our online products include expenses incurred by our studios consisting of direct development and related overhead costs in connection with the development and production of our online games. Research and development expenses also include expenses associated with our digital platform, software licenses and maintenance, and management overhead.
Research and development expenses for the three and six months ended September 30, 2025 and 2024 were as follows (in millions):
|
September 30, 2025 |
% of Net Revenue |
September 30, 2024 |
% of Net Revenue |
$ Change | % Change | ||||||||||||||||||||||||||||||
| Three months ended | $ | 686 | 37 | % | $ | 648 | 32 | % | $ | 38 | 6 | % | |||||||||||||||||||||||
| Six months ended | $ | 1,392 | 40 | % | $ | 1,277 | 35 | % | $ | 115 | 9 | % | |||||||||||||||||||||||
Research and development expenses increased by $38 million, or 6 percent, during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. This increase was primarily due to a $22 million increase in digital infrastructure costs, primarily driven by the Battlefield 6 open beta, and a $17 million increase in studio-related contracted services.
Research and development expenses increased by $115 million, or 9 percent, during the six months ended September 30, 2025, as compared to the six months ended September 30, 2024. This increase was primarily due to a $52 million increase in personnel-related expenses as part of our continued investment in our studios, a $36 million increase in studio-related contracted services, and a $28 million increase in digital infrastructure costs.
Marketing and Sales
Marketing and sales expenses consist of advertising, marketing and promotional expenses, personnel-related costs, and related overhead costs.
Marketing and sales expenses for the three and six months ended September 30, 2025 and 2024 were as follows (in millions):
|
September 30, 2025 |
% of Net Revenue |
September 30, 2024 |
% of Net Revenue |
$ Change | % Change | ||||||||||||||||||||||||||||||
| Three months ended | $ | 304 | 17 | % | $ | 272 | 13 | % | $ | 32 | 12 | % | |||||||||||||||||||||||
| Six months ended | $ | 518 | 15 | % | $ | 477 | 13 | % | $ | 41 | 9 | % | |||||||||||||||||||||||
Marketing and sales expenses increased by $32 million, or 12 percent, during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. This increase was primarily due to higher advertising and marketing spending related to pre-release activities for Battlefield 6and skate., partially offset by reduced spending for Apex Legends.
Marketing and sales expenses increased by $41 million, or 9 percent, during the six months ended September 30, 2025, as compared to the six months ended September 30, 2024. This increase was primarily due to higher advertising and marketing spending related to pre-release activities for Battlefield 6and for our American football franchises, partially offset by reduced spending for Apex Legends.
General and Administrative
General and administrative expenses consist of personnel and related expenses of executive and administrative staff, corporate functions such as finance, legal, human resources, and information technology ("IT"), related overhead costs, fees for professional services, and allowances for doubtful accounts.
General and administrative expenses for the three and six months ended September 30, 2025 and 2024 were as follows (in millions):
|
September 30, 2025 |
% of Net Revenue |
September 30, 2024 |
% of Net Revenue |
$ Change | % Change | ||||||||||||||||||||||||||||||
| Three months ended | $ | 189 | 10 | % | $ | 197 | 10 | % | $ | (8) | (4) | % | |||||||||||||||||||||||
| Six months ended | $ | 373 | 11 | % | $ | 377 | 10 | % | $ | (4) | (1) | % | |||||||||||||||||||||||
General and administrative expenses decreased by $8 million, or 4 percent, during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. This decrease was primarily due to a $4 million decrease in contracted services and a $2 million decrease in personnel-related costs.
General and administrative expenses decreased by $4 million, or 1 percent, during the six months ended September 30, 2025, as compared to the six months ended September 30, 2024. This decrease was primarily due to a $6 million decrease in contracted services, partially offset by a $4 million increase in personnel-related costs.
Income Taxes
On July 4, 2025, the United States enacted OBBB which extended or modified certain corporate tax provisions under the 2017 TCJA. The changes resulting from the tax provisions of OBBB are not expected to have a material impact on our results of operations.
Provision for income taxes for the three and six months ended September 30, 2025 and 2024 were as follows (in millions):
| September 30, 2025 | Effective Tax Rate | September 30, 2024 | Effective Tax Rate | $ Change | |||||||||||||||||||||||||
| Three months ended | $ | 60 | 30 | % | $ | 105 | 26 | % | $ | (45) | |||||||||||||||||||
| Six months ended | $ | 132 | 28 | % | $ | 219 | 28 | % | $ | (87) | |||||||||||||||||||
The provision for income taxes for the three and six months ended September 30, 2025 is based on our projected annual effective tax rate for fiscal year 2026, adjusted for specific items that are required to be recognized in the period in which they
are incurred. The increase in the three month effective tax rate year-over-year is primarily due to one-time tax benefits recorded in the prior year related to a legislative update and tax refund claim.
The European Union and other countries, including Switzerland, have enacted, or have committed to enact global minimum taxes, commonly referred to as Pillar II, as proposed by the Organization for Economic Cooperation and Development ("OECD"), effective with our fiscal year 2025. Pillar II in the relevant countries where we operate did not have a material impact on our tax provision for the three or six months ended September 30, 2025. On June 28, 2025, the G7 countries announced an agreement on the potential application of Pillar II to U.S.-parented multinationals. We will monitor legislative guidance to evaluate potential Pillar II impacts as they become available.
LIQUIDITY AND CAPITAL RESOURCES
| (In millions) |
As of
September 30, 2025
|
As of
March 31, 2025
|
Increase/(Decrease) |
||||||||||||||
| Cash and cash equivalents | $ | 1,148 | $ | 2,136 | $ | (988) | |||||||||||
| Short-term investments | 112 | 112 | - | ||||||||||||||
| Total | $ | 1,260 | $ | 2,248 | $ | (988) | |||||||||||
| Percentage of total assets | 11 | % | 18 | % | |||||||||||||
|
Six Months Ended September 30, |
|||||||||||||||||
| (In millions) | 2025 | 2024 | Change | ||||||||||||||
| Net cash provided by operating activities | $ | 147 | $ | 354 | $ | (207) | |||||||||||
| Net cash used in investing activities | (157) | (115) | (42) | ||||||||||||||
| Net cash used in financing activities | (997) | (948) | (49) | ||||||||||||||
| Effect of foreign exchange on cash and cash equivalents | 19 | 6 | 13 | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | (988) | $ | (703) | $ | (285) | |||||||||||
Changes in Cash Flow
Operating Activities.Net cash provided by operating activities decreased by $207 million during the six months ended September 30, 2025, as compared to the six months ended September 30, 2024, primarily driven by lower cash collections from sales, higher personnel-related payments, and lower cash inflows from hedging activities, partially offset by lower cash payments for income taxes.
Investing Activities. Net cash used in investing activities increased by $42 million during the six months ended September 30, 2025, as compared to the six months ended September 30, 2024, primarily driven by lower proceeds from maturities and sales of short-term investments and acquisition-related payments, partially offset by reduced purchases of short-term and other investments.
Financing Activities.Net cash used in financing activities increased by $49 million during the six months ended September 30, 2025, as compared to the six months ended September 30, 2024, primarily due to a $38 million increase in cash paid to taxing authorities in connection with withholding taxes for stock-based compensation.
Short-term Investments
Due to our mix of fixed and variable rate securities, our short-term investment portfolio is susceptible to changes in short-term interest rates. As of September 30, 2025, our short-term investments had net unrealized gains of less than $1 million or less than 1 percent of total short-term investments. From time to time, we may liquidate some or all of our short-term investments to fund operational needs or other activities, such as capital expenditures, business acquisitions or debt repayment obligations.
Senior Notes
In February 2021, we issued $750 million aggregate principal amount of the 2031 Notes and $750 million aggregate principal amount of the 2051 Notes. The effective interest rate is 1.98% for the 2031 Notes and 3.04% for the 2051 Notes. Interest is payable semiannually in arrears, on February 15 and August 15 of each year.
In February 2016, we issued $400 million aggregate principal amount of the 2026 Notes. The effective interest rate is 4.97% for the 2026 Notes. Interest is payable semiannually in arrears, on March 1 and September 1 of each year.
See Note 10 - Financing Arrangements to the Condensed Consolidated Financial Statements in this Form 10-Q as it relates to our Senior Notes, which is incorporated by reference into this Item 2.
Credit Facility
On March 22, 2023, we entered into a $500 million unsecured revolving credit facility (the "Credit Facility") with a syndicate of banks. The Credit Facility terminates on March 22, 2028 unless the maturity is extended in accordance with its terms. As of September 30, 2025, no amounts were outstanding. The Credit Facility contains an option to arrange with existing lenders and/or new lenders to provide up to an aggregate of $500 million in additional commitments for revolving loans. Proceeds of loans made under the Credit Facility may be used for general corporate purposes.See Note 10 - Financing Arrangementsto the Condensed Consolidated Financial Statements in this Form 10-Q as it relates to our Credit Facility, which is incorporated by reference into this Item 2.
Financial Condition
Our material cash requirements, including commitments for capital expenditure, as of September 30, 2025 are set forth in our Note 11 - Commitments and Contingenciesto the Condensed Consolidated Financial Statements in this Form 10-Q, which is incorporated by reference into this Item 2. We believe that our cash, cash equivalents, short-term investments, cash generated from operations and available financing facilities will be sufficient to meet these material cash requirements, which include licensing intellectual property from sports organizations and players associations used in our EA SPORTS titles and third-party content, debt repayment obligations, and to fund our operating requirements for the next 12 months and beyond. Our operating requirements include working capital requirements, capital expenditures, our capital return programs, and potentially, future acquisitions or strategic investments. We may choose at any time to raise additional capital to repay debt, strengthen our financial position, facilitate expansion, repurchase our stock, pursue strategic acquisitions and investments, and/or to take advantage of business opportunities as they arise. There can be no assurance, however, that such additional capital will be available to us on favorable terms, if at all, or that it will not result in substantial dilution to our existing stockholders.
During the six months ended September 30, 2025, we returned $846 million to stockholders through our capital return programs, which include repurchasing 5.3 million shares for approximately $750 million and paying $96 million through our quarterly cash dividend program.
Our foreign subsidiaries are generally subject to U.S. tax, and to the extent earnings from these subsidiaries can be repatriated without a material tax cost, such earnings will not be indefinitely reinvested. As of September 30, 2025, approximately $737 million of our cash and cash equivalents were domiciled in foreign tax jurisdictions. All of our foreign cash is available for repatriation without a material tax cost.
We have a "shelf" registration statement on Form S-3 on file with the SEC. This shelf registration statement, which includes a base prospectus, allows us at any time to offer any combination of securities described in the prospectus in one or more offerings. Unless otherwise specified in a prospectus supplement accompanying the base prospectus, we would use the net proceeds from the sale of any securities offered pursuant to the shelf registration statement for general corporate purposes, which may include funding for working capital, financing capital expenditures, research and development, marketing and distribution efforts, and if opportunities arise, for acquisitions or strategic alliances. Pending such uses, we may invest the net proceeds in interest-bearing securities. In addition, we may conduct concurrent or other financings at any time.
Our ability to maintain sufficient liquidity could be affected by various risks and uncertainties including, but not limited to, customer demand and acceptance of our products, our ability to collect our accounts receivable as they become due, successfully achieving our product release schedules and attaining our forecasted sales objectives, economic conditions in the United States and abroad, the impact of acquisitions and other strategic transactions in which we may engage, the impact of competition, the seasonal and cyclical nature of our business and operating results, and the other risks described in the "Risk Factors" section, included in Part II, Item 1A of this report.
As of September 30, 2025, we did not have any off-balance sheet arrangements.
Electronic Arts Inc. published this content on October 31, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 31, 2025 at 20:10 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]