Electronic Arts Inc (NASDAQ:EA, ETR:ERT)’s announcement of job cuts aligns with a wider trend in the industry to double down on producing larger and more immersive games, analysts say.
Some 670 roles, or 5% of EA’s workforce, are set to be cut under the move, which Wedbush said would aid its refocus on such (AAA) games that take longer to complete and attract more cash.
“At a high level though, the changes that were announced on Wednesday mesh with the reality of an increasingly AAA-centric marketplace,” the bank said in a note.
“They provide us with additional comfort around EA’s ability to deliver its profit expansion ambitions for 2025.”
Cuts come as part of a wider plan by EA to align its studios into two organisations, EA Entertainment and EA SPORTS, Wedbush noted.
As part of this, EA will likely reduce focus on certain smaller franchises, such as its baseball and golf titles on the sports side and mobile offerings on the entertainment side, Wedbush said.
EA announced its Star Wars first-person shooter game would be cancelled under the restructuring meanwhile, which Wedbush anticipated would prelude a shift toward its Star Wars Jedi franchise.
In terms of AAA games, Wedbush added: "Fortunately, EA has several of those [...] experiences within its portfolio."
EA SPORTS FC and EA SPORTS Madden NFL are among recent promising releases, it said, with titles such as Apex Legends, Battlefield and Star Wars also offering options.
Wedbush reiterated net bookings forecasts of $7.6 billion for $7.9 billion for 2024 and 2025 respectively, alongside coinciding earnings per share guidance of US$7.12 and US$7.60.
The broker also held an Outperform rating with a share price target of US$162 - up 15% on Wednesday’s close.