Earnings: Zynga Gives Caution, Shares Plunge

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Gaming company Zynga has dropped its earnings report for the second quarter of this year. Though the company posted solid sales, it issued a caution that people are playing its games less as the Covid restrictions are getting eased and people turn their focus towards other activities outside gaming.


The caution Zynga issued apparently didn’t sit well with investors whose trading activities plunged the company’s shares by 18% on Friday. That’s one of the highest one-day drops by Zynga’s historical trading standards.

Details
  • Zynga reported $720mn in revenue in the quarter and a small net income of $28mn. The company surpassed its own previous forecast of having $675mn in sales for the quarter, and then was profitable compared to the same quarter last year when it reported a net loss of $30mn.
  • As usual, most of Zynga’s revenue (97% in Q2) now comes from mobile. It wasn’t initially so as the company began as a maker of social games on the Facebook platform, but when the social gaming fad cooled down, it pushed its way into mobile gaming with a series of acquisitions.
  • For the quarter, revenue from the US was up 58% year-over-year and from foreign markets 62%. It speaks to the fact that Zynga is seeing great growth as the pandemic restrictions have driven people towards more leisure activity like mobile gaming, though those restrictions are being lifted in many places and hence the caution issued by the company.
  • Zynga reported having 41 million daily active users and 205 million monthly active users at the end of Q2.
Forecast
  • Now, Zynga is forecasting to make $665mn in sales in the next quarter — Q3′ 21 — and a net loss of $110mn. Like in this Q2, we’ll wait and see if the company would surpass that forecast by a significant margin.
  • The forecast represents a $162mn increase from Zynga’s actual revenue in Q3 of 2020.

Zynga (NASDAQ: ZNGA) closed trading on Friday at $7.99, with a market cap of $8.7bn.

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