EA Q2 2026 Earnings: Declining Performance Amidst Proposed Merger

Electronic Arts (EA), the video game behemoth behind franchises like EA SPORTS FC and Apex Legends, recently released its financial results for the second quarter of its 2026 fiscal year. The report, detailed in its latest 10-Q filing with the SEC, reveals a period of declining financial performance set against the backdrop of a significant, company-altering event: a proposed merger. Let's dive into the numbers and what they mean.

A Tough Quarter for the Top and Bottom Lines

EA's financial performance showed a notable downturn compared to the same period last year. For the three months ending September 30, 2025, the company reported:

• Net Revenue: $1.84 billion, a decrease of 9% from $2.03 billion in the prior year.
• Operating Income: $200 million, a steep 48% drop from $384 million.
• Net Income: $137 million, falling by more than half from last year's $294 million.

The revenue decline was broad-based. The crucial "Live Services and Other" category, which includes in-game purchases, subscriptions, and other digital content, fell 7% to $1.22 billion. While this segment still represents two-thirds of EA's total revenue, a contraction here is a significant headwind. Full game sales, combining digital downloads and physical copies, were also down 14% to $618 million.

While revenue shrank, operating expenses remained largely flat at $1.2 billion, putting significant pressure on profitability and leading to the sharp drop in net income.

To visualize how EA's revenue flowed through its costs and expenses to its final profit this quarter, the following diagram breaks down the income statement.

Cash Flow and Shareholder Returns

A look at the company's cash flow over the last six months highlights its capital allocation priorities. While EA generated $147 million in cash from its operations, it spent nearly $1 billion on financing activities. This was driven primarily by $750 million in common stock repurchases and $96 million in dividend payments. This aggressive return of capital to shareholders contributed to a nearly $1 billion reduction in the company's cash and cash equivalents over the six-month period, which stood at $1.15 billion at the end of the quarter.

The Looming Merger

Perhaps the most critical piece of information in the entire filing is the disclosure of a proposed merger. According to the "Subsequent Events" note, an "Agreement and Plan of Merger" was signed on September 28, 2025.

If this deal is completed, EA's common stock will be delisted from the NASDAQ stock exchange and deregistered, meaning it will no longer be a publicly traded company. The filing's risk factors section underscores the gravity of this event, noting that if the merger fails to close or is delayed, the company could face "financial and operational disruptions" and its stock price could decline.

For investors, this pending transaction overshadows the quarterly results. While the financial downturn is a concern, the company's future as a public entity is now the central question. The focus for the market will undoubtedly shift from quarterly performance metrics to the progress and potential completion of this transformative deal.