Activision warns ‘economic uncertainty’ could hurt gaming surge

The company, whose titles include Call of Duty and World of Warcraft, expects earnings of $3.05 a share this year, excluding some items. That’s up from $2.60 previously and well above the $2.78 predicted by Wall Street.

Activision shares fell as much as 3.4% in extended trading on Tuesday. (REUTERS)

Activision Blizzard Inc. shares slipped in late trading after Chief Executive Officer Bobby Kotick warned that the shaky economy could hurt the video-game maker's pandemic-fueled boom.

“Economic uncertainty could have an impact on our near-term results,” but the company is still poised for long-term growth, Kotick said in a statement.

The remarks overshadowed second-quarter results that handily beat estimates. Activision also boosted its forecast after benefiting from record levels of engagement and a customer base that's eclipsed 400 million, putting it in the leagues of the world's biggest media companies.

Investors have been trying to figure out how long the industrywide gaming rally will last. As lockdowns ease in many regions, some people are putting down their controllers and heading outside. The rise in unemployment, meanwhile, will leave consumers with less money to spend on nonessential activities like gaming.

Activision shares fell as much as 3.4% in extended trading on Tuesday. The company had been up 45% this year, as was rival Take-Two Interactive Software Inc. Electronic Arts Inc. climbed 36%.

Even as he warned of potential headwinds, Kotick pointed to the size of Activision's user base as a sign of strength going forward.

“If you look at the audience, we are over 400 million players,” Kotick said in an interview. “Our network of players is now bigger than Snapchat, Twitter -- almost anything other than Facebook and YouTube and WeChat.”

Activision's stature compared with other media and entertainment companies goes overlooked, he said.

“We are over double the number of Netflix subscribers,” he said. “It's a bigger audience than almost anything.”

By Olga Kharif