Activision-Blizzard Q1 2023: ABK revenues are up as Blizzard MAUs fall back down to reality

Activision blinked: Activision-Blizzard wasn’t supposed to release its Q1 2023 financials until tomorrow after the bell, but it’s just done it this morning out of the blue, presumably attempting to ward off the sharp stock drop it experienced this morning after UK regulators moved to block its merge with Microsoft.

So it’s here early, and let’s dig in. Today’s edition sums up Q1’s results, comprising January, February, and March 2023. Let’s break it down, first with ABK and then with Blizzard itself.

Activision-Blizzard on the whole

Activision-Blizzard on the whole saw a solid jump up around 25% in revenue compared to Q1 2022, though revenue was flat when compared to Q4 2022.

“For the quarter ended March 31, 2023, Activision Blizzard’s net revenues presented in accordance with GAAP were $2.38 billion, as compared with $1.77 billion for the first quarter of 2022. GAAP net revenues from digital channels were $2.16 billion. GAAP operating margin was 34%. GAAP earnings per diluted share was $0.93, as compared with $0.50 for the first quarter of 2022. On a non-GAAP basis, Activision Blizzard’s operating margin was 40% and earnings per diluted share was $1.09, as compared with $0.64 for the first quarter of 2022.”

Overall ABK MAUs (monthly active users) decreased from their recent peak of 389M back down to 368M, where they were before the Christmas season. Activision’s growth was pegged to, as usual, Call of Duty, specifically the launch of Call of Duty: Modern Warfare II and strong sales for Call of Duty Mobile. Activision’s own MAUs are also down 2M and 13M since Q1 2022 and Q4 2022, respectively. King – the K in ABK – saw revenue up another 8% compared this this quarter last year, but it lost 7M net players over the last year.

Blizzard Entertainment by itself

Blizzard itself had another solid quarter with revenue up 62% compared to Q1 2022, but we’d have been shocked to hear any other narrative here as Q1 2022 was literally Blizzard’s worst quarter in many, many years (since 2013, in fact). The bar was low, is what we’re saying, but Blizzard cleared it: It’s up $443M compared to Q1 2022’s $274M. However, readers will recall that Blizzard’s Q4 2022 had blasted up to $794M, so this is quite a long fall (44%) since the winter quarter when Blizzard had a new game and two expansions.

World of Warcraft is barely mentioned in the report; the script repeats last quarter’s note that “subscriber retention in the west is higher than at the equivalent stage of recent Modern expansions.” (It’d be hard to say the same for the east, given that the game is literally gone from China right now.) While the report gives credit to Warcraft, Overwatch, and Diablo as “contributing to growth,” it also doesn’t note specific revenue or player boosts for any game. For Diablo IV, it merely says “pre-sales are strong,” which is largely meaningless. Diablo Immortal claims “stable trends across engagement,” and Overwatch 2 seems to have lost players and engagement (“moderated”) since launch, which isn’t unexpected.

That brings us to the subject of MAUs, which is not a great one for Blizzard right now. Last quarter, Blizzard had soared to 45M, the highest player population the company had counted since 2018, when it first began reporting company-wide MAUs. At the time, we noted how weird it was that ABK had buried this news at the bottom of the report instead of trumpeting it, but we speculated that was because it already knew most of those players were free-to-play Overwatch 2 gamers who’d already left. That seems the likely narrative for this quarter’s MAUs number, which has fallen all the way back down to 27M – exactly where the company was in the summer of last year.

We note here that the loss of Blizzard’s Chinese playerbase (excepting Diablo Immortal) won’t be reflected in MAUs until next quarter, as the sunsets were at the end of January, so those players were likely counted in this figure. On the other hand, most of the Diablo IV hoopla also won’t show up until next quarter either.

Our running MAU tally:

38M in Q1 2018
37M in Q2 2018
37M in Q3 2018 (BFA)
35M in Q4 2018 (mass layoffs)
32M in Q1 2019
32M in Q2 2019
33M in Q3 2019 (WoW Classic)
32M in Q4 2019 (Blitzchung)
32M in Q1 2020 (COVID-19)
32M in Q2 2020 (COVID-19)
30M in Q3 2020 (COVID-19)
29M in Q4 2020 (COVID-19, Shadowlands)
27M in Q1 2021
26M in Q2 2021 (TBC Classic, WoW 9.1)
26M in Q3 2021 (D2R, lawsuits)
24M in Q4 2021 (Lawsuits, drought)
22M in Q1 2022 (Lawsuits, drought)
27M in Q2 2022 (Diablo Immortal)
31M in Q3 2022 (DI China, Wrath Classic)
45M in Q4 2022 (Overwatch 2, Dragonflight)
27M in Q1 2023

As always, we note here that Blizzard intentionally reports MAUs this way to obfuscate which games are gaining and losing players, and traditionally it notes whenever a specific game has increased in MAUs. It did not do so this quarter.

Activision-Blizzard hasn’t been “hosting a conference call, issuing an earnings presentation, or providing financial guidance” pending the Microsoft buyout. This essentially means that the company’s investor announcements are now basically just press releases with no analyst interrogation.

Of course, it’s not clear that the buyout will actually happen now, as we alluded to in the introduction, as this morning the UK Competition and Markets Authority moved to block the deal, which we can only assume is why we’re getting this report early, as the company’s stock took a beating this morning on that news. The UK regulators’ decision is specifically addressed in the report.

“As announced on January 18, 2022, Microsoft plans to acquire Activision Blizzard for $95.00 per share in an all-cash transaction. The transaction has been approved by the boards of directors of both Activision Blizzard and Microsoft and by Activision Blizzard’s stockholders. On April 26, 2023, the United Kingdom Competition and Markets Authority (CMA) announced a decision to block the merger, stating that competition concerns arose in relation to cloud gaming and that Microsoft’s remedies addressing any concerns in cloud gaming were not sufficient. Activision Blizzard considers that the CMA’s decision is disproportionate, irrational and inconsistent with the evidence. Microsoft has announced its decision to appeal the CMA’s ruling, and Activision Blizzard intends to fully support Microsoft’s efforts on this appeal. Activision Blizzard continues to believe that the deal is pro-competitive, will bring Activision Blizzard content to more gamers, and will result in substantial benefits to consumers and developers in the UK and globally. The parties continue to fully engage with other regulators reviewing the transaction to obtain any required regulatory approvals.”

Here’s the full recap since 2015:

As longtime readers surely know, Activision-Blizzard, its leadership, and its games have been the subject of much-deserved criticism and scrutiny the last few years following an absolutely absurd list of scandals, including multiple rounds of mass layoffs, the Blitzchung boycott, C-suite payouts, shady stock deals/votes, abusive compensation, labor uprisings, a mass exodus of devs, plummeting playerbases, falling revenues, the ongoing sexual discrimination/harassment lawsuits, federal investigations, fired execs, destruction of evidence, workplace mismanagement, the strike, unionization attempts, unionbusting efforts, allegations against Bobby Kotick, stock drops, management failures, and the Microsoft buyout. On the gaming side, we’ve seen pipeline struggles, canceled BlizzCons, missed cadences, major delays and scope reduction, and of course the massive uproar over Diablo Immortal’s grotesque monetization. As of early 2023, Blizzard itself shuttered all but one of its MMOs in China following a painfully public contract dispute with long-time partner NetEase.