Ubisoft Earnings: A Weak Outlook and Game Delays Overshadow Exceptional Growth

Ubisoft UBI posted an unusually large jump in net bookings during its fiscal second quarter, far exceeding the forecast management provided three months ago. However, management followed up that strong performance with a tepid outlook for the fiscal third quarter, unchanged expectations for the full year, and the announcement that the “large game” it had teased this year will be pushed into fiscal 2025. We are maintaining our EUR 33 fair value estimate, as we remain concerned that management has too much on its plate to handle well.

Net bookings increased 37% year over year to EUR 555 million, far exceeding management’s EUR 350 million forecast. Back-catalog sales jumped 80% to EUR 449 million, the highest level by far since the March 2022 quarter. Management cited the unexpected success of Rainbow Six Siege, which increased bookings by 50% versus a year ago during the first half of the fiscal year on the strength of recent add-on content.

Ubisoft expects net bookings of about EUR 610 million during the fiscal third quarter, about 30% higher than the prior year, excluding a large licensing agreement that closed a year ago. With the release of Assassin’s Creed Mirage on Oct. 5, the expected launch of Avatar: Frontiers of Pandora in December, and the strong momentum in back-catalog sales, this outlook seems conservative. Management claims Mirage has seen similar engagement since its Oct. 5 release as Origins (released in 2017) and Odyssey (2018), implying it hasn’t reached the heights of the last Assassin’s Creed installment, Valhalla (2020, at the height of the pandemic). Management’s bookings outlook implies lower bookings than the same quarter in 2017.

Non-IFRS operating income for the first half of the year rebounded to EUR 44 million from a EUR 139 million loss a year ago. The firm is making progress trimming overhead costs and increasing the efficiency of its development teams.