Bobby Kotick, CEO of Activision Blizzard, shared, “Our games are the result of passion and excellence. This comes from an environment that fosters inspiration, creativity, and an unwavering commitment to develop and support our talent. Our employees’ dedication and teamwork are at the heart of an extraordinary workplace that enables the magic embodied in our games. We look forward to continuing to release epic entertainment in service of our global community of players as a part of Microsoft, one of the world’s most admired companies. We continue to expect that our transaction will close in Microsoft’s current fiscal year ending June 2023.”

Financial Metrics

For the quarter ended September 30, 2022, Activision Blizzard’s net revenues presented in accordance with GAAP were $1.78 billion, as compared with $2.07 billion for the third quarter of 2021. GAAP net revenues from digital channels were $1.61 billion. GAAP operating margin was 27%. GAAP earnings per diluted share was $0.55, as compared with $0.82 for the third quarter of 2021. On a non-GAAP basis, Activision Blizzard’s operating margin was 34% and earnings per diluted share was $0.68, as compared with $0.89 for the third quarter of 2021.

Activision Blizzard generated $257 million in operating cash flow for the quarter as compared with $521 million for the third quarter of 2021.

Please refer to the tables at the back of this press release for a reconciliation of the company’s GAAP and non-GAAP results.

Operating Metrics

For the quarter ended September 30, 2022, Activision Blizzard’s net bookingsB were $1.83 billion, as compared with $1.88 billion for the third quarter of 2021. In-game net bookingsC were $1.36 billion, as compared with $1.20 billion for the third quarter of 2021.

For the quarter ended September 30, 2022, overall Activision Blizzard Monthly Active Users (MAUs)D were 368 million.

Microsoft transaction

As announced on January 18, 2022, Microsoft plans to acquire Activision Blizzard for $95.00 per share in an all-cash transaction. The transaction is subject to customary closing conditions and completion of regulatory review. The transaction, which is expected to close in Microsoft’s fiscal year ending June 30, 2023, has been approved by the boards of directors of both Activision Blizzard and Microsoft and by Activision Blizzard’s stockholders.

Conference Call and Earnings Presentation

In light of the proposed transaction with Microsoft, and as is customary during the pendency of an acquisition, Activision Blizzard will not be hosting a conference call, issuing an earnings presentation, or providing detailed quantitative financial guidance in conjunction with its third quarter 2022 earnings release. For further detail and discussion of our financial performance please refer to our quarterly report on Form 10-Q for the quarter ended September 30, 2022.

Selected Business Highlights

Successful content initiatives for key intellectual properties have positioned the company for a return to strong growth. Our expanded development teams are executing well as they deliver a wide range of compelling content across our portfolio. Following its October 28 launch, Call of Duty®: Modern WarfareTM II has broken records as the fastest-selling title in the history of the Call of Duty franchise. At Blizzard, the October 4 free-to-play launch of Overwatch® 2 has driven community engagement to new highs. These results build on the recent strong launch for Diablo® Immortal™ and a substantial content rollout underway for World of Warcraft®. At King, the Candy Crush™ franchise again delivered a record performance.

While the company remains cognizant of risks including those related to the labor market and economic conditions, we expect to expand our global audience, deepen community engagement, and deliver renewed growth in player investment in the fourth quarter and beyond. The company expects fourth quarter GAAP revenue to be 5% lower year-over-year or better. Net bookings and total segment operating income are each expected to grow at least 20% year-over-year.

Third quarter net bookings declined 3% year-over-year on a reported basis, and were slightly higher year-over-year on a constant currency basisE. The company continued to deliver strong results on the strategically important mobile platform, with mobile net bookings growing over 20% year-over-year to approximately $1.0B. Third quarter segment operating income increased versus the second quarter for each of Activision, Blizzard and King.

Activision

• Since its October 28 launch, Call of Duty: Modern Warfare II has set new records for our largest franchise, becoming the fastest premium Call of Duty release to cross $1 billion in sell-through. Sales have been robust across all platforms, including on PC, where unit sell-through to date is approximately twice the level of recent strong titles in the series. Modern Warfare II has set new franchise engagement records for a premium Call of Duty release, with hours played in the first 10 days more than 40% above the prior franchise record.

• On November 16, alongside the first season of in-game content for Modern Warfare II, Activision will release Call of Duty: Warzone™ 2.0. This all-new, free-to-play Call of Duty experience encompasses a wide array of learnings gained from the highly successful original Warzone. Tightly integrated with the premium game, Warzone 2.0 extends the Modern Warfare universe while bringing compelling new sandbox experiences to the franchise from day one, with further exciting content planned for the coming months.

• In the third quarter, Activision also unveiled Call of Duty: Warzone MobileTM, planned for full release in 2023. Internally developed on the same engine as Modern Warfare II and Warzone 2.0, the game will offer our community compelling battle royale gameplay on mobile as well as shared social features and cross-progression with the console and PC experiences. Over 20 million people have already pre-registered for the game on Google Play.

• Following a three-year period in which Call of Duty reached well over half a billion players and delivered a step change increase in engagement and player investment, these launches mark the start of a new era intended to take the franchise to new heights. Activision is looking forward to building on its current momentum in 2023, with plans for next year including the most robust Call of Duty live operations to date, the next full premium release in the blockbuster annual series, and even more engaging free-to-play experiences across platforms.

• Activision’s third quarter financial performance was lower year-over-year, primarily reflecting reduced engagement for Call of Duty following the weaker reception for last year’s premium release. In-game net bookings on console and PC again grew sequentially in the third quarter versus the second quarter, contributing to sequential growth in segment operating income. Segment revenue and operating income are expected to return to strong year-over-year growth in the fourth quarter following the successful launch of Modern Warfare II.

Blizzard

• October 4 saw the global launch of Overwatch 2, with a free-to-play model designed to allow more people than ever before to experience the acclaimed team-based action game. Over 35 million people played the game in its first month, including many who were new to Overwatch. The expanded community is engaging deeply, with average daily player numbers for the first month of Overwatch 2 more than double that of its acclaimed predecessor. Player investment is also off to a strong start, positioning the title to be a meaningful contributor to Blizzard’s business in the fourth quarter. Blizzard is looking forward to delivering an ambitious slate of regular seasonal updates for Overwatch 2 that introduce new characters, maps and modes, including the game’s much-anticipated PvE mode planned for 2023.

• In the Warcraft franchise, the September 26 release of World of Warcraft: Wrath of the Lich King® Classic contributed to a strong increase in WoW reach and engagement at the end of the third quarter. On November 28, Blizzard will release World of Warcraft: DragonflightTM, the innovative next expansion for the modern game, as the team increases the cadence of WoW content for the community. Elsewhere in the Warcraft franchise, mobile title Warcraft: Arclight RumbleTM is progressing well through regional testing.

• On mobile, Diablo Immortal expanded its global reach with a strong launch in China in July. The title reached the top of the download charts and has ranked in the top 10 grossing mobile games in China since launch. Around the world, Diablo Immortal is being supported with major new content, features, and events aimed at keeping the community engaged. Meanwhile, work on Diablo IV and its substantial ongoing post-launch content continues to progress very well ahead of its launch planned for 2023.

• Blizzard’s third quarter segment revenue grew double-digits year-over-year against a year ago quarter that included the release of Diablo II: ResurrectedTM. The third quarter benefited from the recent launch of Diablo Immortal, while Warcraft franchise net bookings were stable year-over-year. Segment operating margin was lower year-over-year, due to marketing investment to support the strong release slate and the shift in the mix of business in the quarter.

• Currently, we have licensing agreements with a third party covering the publication of several Blizzard titles in China. These agreements, which contributed approximately 3% of Activision Blizzard’s consolidated net revenues in 2021, expire in January 2023. We are in discussions regarding the renewal of these agreements, but a mutually-satisfactory deal may not be reached. We continue to see substantial long-term growth opportunities for our business in the country. The co-development and publishing of Diablo Immortal is covered by a separate long-term agreement.

King

• King’s in-game net bookings increased 8% year-over-year, driven by the Candy Crush franchise, reflecting ongoing strong execution across live operations and user acquisition. King’s payer numbers again increased by a double-digit percentage year-over-year.

• King continues to introduce more player-versus-player features within Candy Crush, fueling engagement and player investment. Time spent within Candy grew year-over-year for a fifth successive quarter, and Candy Crush was the top-grossing game franchise in the U.S. app stores1 for the 21st quarter in a row.

• King’s third quarter segment revenue grew 6% year-over-year, equivalent to low double-digit growth on a constant currency basisE. Advertising revenue was consistent year-over-year despite a challenging macro environment. King’s third quarter operating margin was lower year-over-year, due to the year ago quarter benefiting from insurance claim proceeds.

• This November marks the 10-year anniversary of Candy Crush SagaTM, the original and largest title in the Candy Crush franchise. Candy Crush enters its second decade in strong health, with over 200 million monthly active users and with player investment at record levels. King’s development, commercial and analytics teams are working on a strong pipeline of content and initiatives expected to delight the community and drive further growth in the coming years.

Balance Sheet

• Cash and short-term investments at the end of the second quarter stood at $10.9 billion, and Activision Blizzard ended the quarter with a net cashF position of approximately $7.3 billion.

About Activision Blizzard

Our mission, to connect and engage the world through epic entertainment has never been more important. Through communities rooted in our video games we enable hundreds of millions of people to experience joy, thrill and achievement. We enable social connections through the lens of fun, and we foster purpose and a sense of accomplishment through healthy competition. Like sport, but with greater accessibility, our players can find purpose and meaning through competitive gaming. Video games, unlike any other social or entertainment media, have the ability to break down the barriers that can inhibit tolerance and understanding. Celebrating differences is at the core of our culture and ensures we can create games for players of diverse backgrounds in the 190 countries our games are played.

As a member of the Fortune 500 and as a component company of the S&P 500, we have an extraordinary track record of delivering superior shareholder returns for over 30 years. Our sustained success has enabled the company to support corporate social responsibility initiatives that are directly tied to our games. As an example, our Call of Duty Endowment has helped find employment for over 100,000 veterans.

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