Latest Developments:
In 2Q25, Electronic Arts (EA) generated $2.03 billion in revenues, marking a 5.8% YoY growth. The company's strong performance in its full games segment drove the revenue growth, with key titles like Madden and EA Sports FC 25. While gross and operating margins improved, net margin declined due to higher SG&A expenses. EA is focused on its live services segment, which provides a recurring revenue stream through in-game purchases and seasonal content, further boosting margin expansion.

Investment Case:
EA's portfolio, including major franchises such as Madden, Dragon Age, and The Sims, positions the company well for continued growth. Strategic initiatives such as the EA Sports App and upcoming game releases like Battlefield and Dragon Age are expected to fuel growth. EA's focus on enhancing its live services should lead to higher player retention and increased in-game spending, further driving margins. Despite a recent 9.76% YTD surge, EA's valuation suggests further upside potential of 13.80%, with a potential upside of 59% if growth accelerates.

Company's Valuation:
A DCF model based on conservative estimates suggests EA's implied share price is $171.88, offering a 13.8% upside. More aggressive estimates, considering improved revenue growth and reduced spending, suggest a potential share price of $240.29, indicating a 59% upside.

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