Game On: Nintendo cuts FY25 sales view amid decline in H1 sales

“Game On” is The Fly’s weekly recap of the stories powering up or beating down video game stocks.

NEW RELEASES: This week’s biggest new release is Nintendo’s (NTDOY) role-playing game “Mario & Luigi: Brothership,” the first original entry in the long-running series in nearly a decade. The game launches exclusively for Switch on November 7.

NINTENDO RESULTS: On Tuesday, Nintendo reported results for the first six months of the year, with 1H earnings per share and revenue both coming in lower year-over-year. Commenting on the results, the company said, “Regarding the Nintendo Switch business during the first half of this fiscal year, Paper Mario Thousand-Year Door, released in May, sold 1.94M units, Luigi’s Mansion 2 HD, released in June, sold 1.57M units, and The Legend of Zelda: Echoes of Wisdom, released in September, got off to a good start posting sales of 2.58M units. In addition, we saw stable sales in titles released through the end of the previous fiscal year, with Mario Kart 8 Deluxe selling 2.31M units. As a result of these factors, the total number of million-seller titles during this period reached nine, including titles from other software publishers. Hardware sales totaled 4.72M units, and software sales totaled 70.28M units. Hardware and software sales in the first half of last fiscal year were substantially driven by the May 2023 release of The Legend of Zelda: Tears of the Kingdom, so compared to then, hardware sales were down 31.0% and software sales were down 27.6% year-on-year. Turning to our digital business for our dedicated video game platform, digital sales totaled 159.9V yen, down 26.5% year- on-year, mainly due to a decrease in sales of Nintendo Switch downloadable versions of packaged software.”

Looking ahead, the company lowered its FY25 net sales view to Y1.28T from Y1.35T, citing the lower-than-expected hardware and software unit sales for the first half of the year. In addition, Nintendo lowered its FY25 Switch hardware sales view to 12.5M from 13.5M units and cut its software unit sales view to 160M from 165M. Of note, the company said that it has other titles planned for release in the fiscal year that could factor into results, including the upcoming “Mario & Luigi” game and “Donkey Kong Country Returns HD.”

UBISOFT RESULTS: Ubisoft (UBSFY) also reported results for the first half of the year last week, with 1H IFRS-15 sales falling 19.6% year-over-year and net bookings dropped 21.9%. Net bookings for Q2 stood at EUR352.3M, in line with revised guidance. Excluding partnerships, back-catalog was up 12% year-on-year, Ubisoft noted. Looking ahead, the company said it expects Q3 net bookings of roughly EUR380M and reiterated its FY2024-2025 net bookings guidance of roughly EUR1.95B.

Of note, Ubisoft said that its cost reduction plan, that has the objective of protecting our production and creation capacity while being more selective in our investments and simplifying the organization, is well on track. With the continued tight control on recruitments as well as targeted restructurings, the total number of employees worldwide stood at 18,666 at the end of September 2024, compared to 19,410 at the end of September 2023. This represents a decrease of more than 2,000 over 24 months. The 1H FY2024-25 fixed cost base stood at around EUR770M, down EUR46M and 6% year-on-year. This represents a EUR106M reduction versus 1H FY23 meaning that on an annualized basis, the company has already achieved more than EUR200M savings, including a favorable foreign exchange impact.

Commenting on the results, CEO and co-founder Yves Guillemot said, “Despite recent setbacks, we are continuing to deeply transform Ubisoft in order to restore the level of creativity and innovation that built Ubisoft’s success while delivering stronger execution and predictability. Even if our first-half performance fell short of our initial expectations, the double-digit growth of our back catalog excluding partnerships reaffirms the quality, uniqueness and value embedded in our brand portfolio and the strength of our Live services. This highlights our potential to deliver more recurring revenue, sustainable growth, and long-term value for our stakeholders. To succeed, we must redouble our focus on execution and reinforce a player-centric mindset in everything we do. For example, we are improving the quality of Star Wars Outlaws, including actively addressing player feedback through title updates as we get ready for the Steam launch, the first story pack, and the upcoming holiday season. We are also taking the additional time to ensure that the upcoming very ambitious opus in our flagship franchise, Assassin’s Creed Shadows, is a highly polished, exceptional experience on day one and that it resonates strongly with players.”

EA RESULTS: Meanwhile, Electronic Arts (EA) reported lower-than-expected GAAP earnings per share for Q2 but reported a beat in Q2 net bookings. Of note, the company highlighted that its American Football games are on track to exceed $1B in net bookings for FY25, with total hours played in Q2 up over 140% year-over-year. Looking ahead, the company provided conservative earnings guidance but largely in-line net bookings guidance for Q3 and raised its net bookings outlook for FY25.

“EA delivered another strong quarter with record Q2 net bookings, driven by our incredible teams, broad portfolio and technology leadership,” said Andrew Wilson, CEO of EA. “The momentum in our business reinforces our strategic vision to deliver innovative experiences and interactive entertainment that deepens and expands engagement across our global communities.” “Q2 was another successful quarter for EA, exceeding the high end of our guidance range. As a result, we are also raising our FY25 outlook,” said Stuart Canfield, CFO of EA. “We remain confident in our ability to drive long-term value creation through increased scale, driving top-line growth, improved margins, and greater cash flow as shared at our Investor Day.”

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‘CALL OF DUTY’ NUMBERS: Following the release of “Call of Duty: Black Ops 6” on October 25, Circana analyst Mat Piscatella (MSFT) players and 18% of U.S. active PlayStation 5 (SONY) players launched “Call of Duty HQ.” On October 28, just days after the launch of “Call of Duty: Black Ops 6,” 52% of active XBS players and 34% of active PS5 players did so. Both were all-time highs for “Call of Duty HQ.” Prior to the launch of “Call of Duty: Black Ops 6,” the previous high for U.S. daily active player engagement for “Call of Duty HQ” on Xbox Series came on August 31st, 2024, while for PS5 it was September 7th, 2024, Piscatella added. The Fly notes that “Black Ops 6” is the first “Call of Duty” game to release following the completion of Microsoft’s acquisition of Activision Blizzard, and was the first game in the series to launch on Xbox Game Pass on day one of availability.

Meanwhile, Gamesindustry.biz’s Sophie McEvoy reported that, during the company’s quarterly earnings call, Microsoft CEO Satya Nadella said that the release of Activision’s “Call of Duty: Black Ops 6,” which both marks the first new “Call of Duty” game released since Microsoft acquired Activision Blizzard and the first “Call of Duty” title to release on Game Pass day one, broke records for day one players and Game Pass subscribers. “For players who play through Game Pass, the subscription revenue is recognised over time,” said CFO Amy Hood. “The game requires an online connection to play so even for players who purchase the standalone game, revenue recognition will also occur ratably over time.” The game also saw unit sales on PlayStation and Steam rise by 60% year-over-year, the author noted.

MORE VIDEO GAME NEWS:

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• Roblox (RBLX) provided a “beat and raise” report for Q3
• Sony shut down video game studios Neon Koi and “Concord” maker Firewalk
• ESPN (DIS) will launch a game inside Epic’s “Fortnite,” IGN reports
• Take-Two (TTWO) is in discussions to sell its Chartboost adtech unit, Insider says
• Jakks Pacific (JAKK) announced the release of its Nintendo products this fall