Activision Blizzard Inc. on Thursday turned in a sluggish report card for the fourth quarter, though it expects significantly stronger results in 2016 as it digests mobile-game maker King Digital Entertainment PLC.

Activision, which publishes videogame franchises such as "Call of Duty" and "Warcraft," expects adjusted revenue of $6.25 billion and per-share profit of $1.75 for 2016, well above the $4.62 billion in adjusted revenue and $1.32 in per-share profit earned in 2015.

The company expected adjusted revenue in the holiday quarter to be flat at $2.15 billion since it released a similar slate of games a year earlier, including a fresh "Call of Duty" installment and a major expansion to its new "Destiny" franchise. Instead, adjusted revenue fell roughly 4% to $2.12 billion.

Adjusted profit dropped to 83 cents a share, down from 94 cents a year ago. Analysts had forecast 86 cents, while the company expected 82 cents. Videogame companies focus on adjusted results because under U.S. accounting rules, revenue for online-enabled games is deferred as long as new content is being added.

Casual games such as "Skylanders SuperChargers" and "Guitar Hero Live" didn't hold their own, Activision said, nodding to increasing competition in the toys-to-life genre. Store shelves were filled this Christmas with an "Infinity" game from Walt Disney Co. featuring "Star Wars" characters and a new entrant from Lego A/S called "Dimensions" that included Batman and Gandalf.

Activision also blamed casual players' shift to mobile devices. The company has taken steps to expand beyond its core business of console gaming, including a $5.9 billion acquisition of King Digital, which makes "Candy Crush Saga," one of the world's most successful mobile apps.

The deal, which is expected to be completed later this month, gives Activision a stronger foothold in the fast-growing mobile-games business. Once completed, Activision said it would have 500 million monthly active users, up from 80 million.

But Activision will face a challenge in growing the mobile game company beyond its "Candy Crush" fame. For the fourth quarter, King on Thursday reported revenue, profit and a user base that were lower than a year earlier. King, which released no new franchise games in 2015, said spending by players in newer games was increasing, but not enough to offset a drop in spending on older games, particularly "Candy Crush Saga."

In December, Activision paid $46 million to buy Major League Gaming, a well-known producer and broadcaster of videogame competitions, as it fleshes out a new "e-sports" division. It also is building out a film and television studio.

Rising demand for content delivered over the Internet helped boost digital sales to a high for the holiday period, Activision said. Adjusted digital revenue reached a record $780 million, accounting for a record 37% of total adjusted revenue and up 14% from a year earlier. Rivals Electronic Arts Inc. and Take-Two Interactive Software Inc. also reported strong digital revenue in their earnings, a boon for margins as full-game downloads, expansion packs and other digital goods don't require packaging, shipping and other costs associated with games on discs.

Under generally accepted accounting principles, Activision reported fourth-quarter revenue of $1.35 billion and a profit of 21 cents a share, down from $1.58 billion and 49 cents a share a year earlier.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

 

(END) Dow Jones Newswires

February 11, 2016 16:45 ET (21:45 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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