Full game net revenue increased by 16% to $289 million, primarily driven by new titles like Split Fiction and EA SPORTS College Football 25. This growth helped offset a 2% decrease in live services and other net revenue, which fell to $1,382 million, largely due to decreased sales of extra content for Apex Legends.

The company continues to emphasize digital delivery, noting that 78% of total units sold in fiscal year 2025 were digital, up from 73% in fiscal year 2024. This trend is expected to increase over time and generally results in gross margin expansion.

Management expects capital expenditures to be approximately $225 million in fiscal year 2026, primarily for investments in hardware, software, and real estate. This indicates a continued commitment to infrastructure and development to support future growth initiatives.

Operating expenses increased by 9% year-over-year to $1,121 million, significantly higher than the 1% revenue growth. This indicates a challenge in managing costs relative to top-line expansion, directly contributing to the 26% decline in operating income.

Management completed an annual evaluation of the Estimated Offering Period, resulting in a change for mobile free-to-play and PC/console free-to-play games. This change is expected to shift approximately $81 million in net revenue from fiscal year 2026 into fiscal year 2027.

The company returned $423 million to stockholders during the quarter, including repurchasing 3.0 million shares for approximately $375 million under a new $5.0 billion authorization and paying $48 million in quarterly cash dividends. This demonstrates management's commitment to shareholder returns.

The company highlights intense competition from established and emerging players with larger resources, and a significant portion of revenue is derived from a few popular franchises like EA SPORTS FC and Ultimate Team. Underperformance of a single major title could have a material adverse impact on financial results.

New data privacy laws (global), evolving interpretations of virtual items/currency regulations, and potential social/ethical issues related to AI integration are identified as escalating risks. These could lead to increased compliance costs, legal liability, and reputational harm.

The business is subject to external factors like worsening economic conditions, political instability, inflation, and geopolitical events (e.g., trade restrictions). These conditions can negatively impact discretionary consumer spending and operating costs, affecting overall financial performance.

The proportion of full games sold digitally reached 78% in fiscal year 2025, up from 73% in fiscal year 2024. This digital shift generally expands gross margins and reinforces the company's position in a market increasingly favoring digital distribution.

The filing explicitly states that competition is intense, with rivals possessing larger budgets, tools, and IP portfolios. EA's leading position makes it a prime target for recruiting key talent, leading to retention challenges and increased costs to retain personnel.

A significant percentage of digital net revenue is attributable to sales through major partners like Sony, Microsoft, Apple, and Google. These partners have significant control over distribution, terms, and fee structures, posing a risk if their policies change or their businesses deteriorate.

Gross margin decreased by 1 percentage point year-over-year to 83.3%. This was partly due to a $16 million increase in cost of revenue, primarily driven by sales performance from royalty-bearing titles like Split Fiction and the global football franchise, despite some offsets from decreased online hosting fees.

Research and development expenses increased by 12%, or $77 million, to $706 million. This rise was primarily due to a $46 million increase in personnel-related expenses and a $19 million increase in studio-related contracted services, indicating continued investment in product creation.

Net cash provided by operating activities saw a substantial decrease of $103 million, largely attributable to higher cash payments for royalties and personnel-related costs. This indicates a less efficient conversion of revenue into operational cash compared to the prior year.

Research and development expenses rose by 12% to $706 million, reflecting a sustained investment in studios, contracted services, and talent. This indicates the company's commitment to creating innovative games and experiences.

The company is integrating artificial intelligence tools and technologies into its business and development processes. However, it also acknowledges the risk of social and ethical issues, legal/reputational harm, and potential loss of consumer confidence if AI is not managed appropriately.

The company's products and services rely on the continuing operation and availability of its own and external service providers' information technology systems, including third-party cloud computing services. This dependency introduces risks related to outages, disruptions, and security breaches.

The company authorized a new $5.0 billion share repurchase program in May 2024 and repurchased 3.0 million shares for approximately $375 million during the quarter. This significant capital return demonstrates management's confidence in the company's valuation and future cash generation.

EA paid $48 million through its quarterly cash dividend program during the quarter, maintaining a consistent return of capital to shareholders. This complements the share repurchase program in enhancing shareholder value.

Cash and cash equivalents decreased by $618 million, from $2,136 million as of March 31, 2025, to $1,518 million as of June 30, 2025. This reduction is partly due to substantial capital returns and increased cash used in financing activities.

The provided 10-Q filing does not contain explicit sections or detailed disclosures on specific environmental, social, or governance (ESG) initiatives, commitments, or progress metrics. Information regarding sustainability efforts, carbon reduction targets, or social responsibility programs is not presented.

The company acknowledges that the integration of artificial intelligence tools and technologies into its business might present social and ethical issues. If not managed appropriately, this could result in legal and reputational harm, and cause consumers to lose confidence in its business and brands.

Management emphasizes that attracting, training, motivating, and retaining executive, technical, creative, marketing, and other talent is critical to success. The competitive market for skilled workers and potential labor disruptions from unionization are noted as risks impacting the business.

The company acknowledges that worsening economic conditions, political instability, inflation, and slower growth can negatively impact discretionary consumer spending. These factors are beyond management's control and pose a risk to revenue and operating results.

New U.S. tax legislation (One Big Beautiful Bill Act) and global minimum taxes (Pillar II) are expected to impact the company's effective tax rate and cash taxes in future fiscal years. The company is evaluating the impact of these complex and evolving tax laws.

International net revenue comprised 59% of total net revenue for fiscal year 2025, making it a fundamental part of the business. However, the strengthening U.S. dollar and volatility in foreign currency exchange rates negatively impact reported international net revenue, despite hedging efforts.