Published - February 7, 2023 @ 2:27 PM (EET)

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Entering the earnings cycle and coming off a series of high-profile releases, including "Call of Duty: Modern Warfare II" and several other big titles, expectations were high for Activision Blizzard (NASDAQ:ATVI).

After the closing bell on Monday, the video game publisher reported bookings that beat analysts' estimates. In the fourth quarter, net bookings rose 43% to $3.57 billion, compared to revenue expectations of $3.17 billion.

Fourth quarter net income fell from $564 million a year earlier to $403 million.

The better-than-expected results are a bright spot for the industry following the drab earnings releases from its peers, including Electronic Arts (NASDAQ:EA) and Take-Two Interactive Software (NASDAQ:TTWO).

Unlike its gaming rivals, Activision has managed to largely avoid the squeeze of inflation and American households tightening their budgets by keeping the buzz around its news launches through its focus on building strong gaming franchises.

"Modern Warfare II" sold $1 billion within ten days of its late-October launch, delivering the highest opening-quarter sell-through in the franchise's history.

WHY IT MATTERS

With pent-up demand for games, after many anticipated titles were delayed in 2022, the video game industry is set for a rebound this year. In the upcoming months, Activision will release a continuation of Modern Warfare II and Diablo 4, the latest entry in Blizzard's action role-playing game series.

Analyst Nicholas Cauley at global research firm Third Bridge said,

"Our specialists have highlighted a flight to quality by gamers, and that is what Activision Blizzard is experiencing."

For the quarter, Activision said it had 389 million active users. Still, it's a tense time for Activision as the focus for Activision Blizzard remains on its planned $69 billion sale to Microsoft (NASDAQ:MSFT).

In early 2022, Microsoft announced its plans to buy Activision.

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However, the US Federal Trade Commission sued in December to block the transaction, saying the ownership could hurt other players in the gaming market by limiting competitors' access to the company's biggest games.

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Further setting out potential reasons to block the deal, European regulators sent a list of concerns to Microsoft last week. At the same time, the UK Competition and Markets Authority is expected to issue its provisional findings in the coming days.

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