Press Release Details

Reports Q1 FY11 Non-GAAP Net Revenue and EPS Ahead of Expectations
Reaffirms Full-Year Non-GAAP EPS and Net Revenue Guidance
Q1 Non-GAAP Digital Revenue was $188 Million
2010 FIFA World Cup South Africa Sells-In 3 Million Units to Date
Madden NFL 11, with Breakthrough "GameFlow" Feature, Launches August 10

REDWOOD CITY, Calif., Aug 03, 2010 (BUSINESS WIRE) -- Electronic Arts Inc. (NASDAQ: ERTS) today announced preliminary financial results for its first fiscal quarter ended June 30, 2010.

"We had a solid first quarter, exceeding expectations both top and bottom line," said John Riccitiello, Chief Executive Officer. "Top quality titles like 2010 FIFA World Cup South Africa, innovative digital offerings for titles like Battlefield: Bad Company 2 and Scrabble on the Apple iPad are driving the business."

"EA is well-positioned for the year ahead and reaffirms its FY11 non-GAAP guidance," said Eric Brown, Chief Financial Officer. "Digital revenue is expected to grow approximately 30% year over year, to $750 million in the fiscal year."

Q1 FY11 Financial Highlights:

Non-GAAP net revenue of $539 million exceeded guidance of $460 million to $500 million. Non-GAAP EPS of ($0.24) exceeded guidance of ($0.35) to ($0.40). As expected, non-GAAP net revenue in Q1 fiscal 11 was lower compared to Q1 fiscal 10 due to a reduced title slate, which went from 10 major titles in Q1 fiscal 10 to six in Q1 fiscal 11. This was somewhat offset by strong digital revenue growth.

Trailing Twelve Month (TTM) Financial Highlights:

Q1 FY11 Digital Metrics:

Selected Quarterly Operating Highlights and Metrics:

• EA is the #1 publisher on high definition consoles with 22% segment share calendar year-to-date, four points higher than the same period a year ago.
• In North America and Europe, the high definition console software market is growing strongly with the combined PlayStation(R)3 and Xbox 360(R) segments up 21% calendar year-to-date. The PlayStation 3 software market is up 40% calendar year-to-date.
• EA is the #1 PC publisher, with 33% segment share at retail calendar year-to-date and strong growth in digital downloads of full-game software.
• For the quarter, EA had three of the top 15 selling games in Western markets. 2010 FIFA World Cup South Africa(TM) was #4, Battlefield: Bad Company(TM) 2 was #7 and FIFA 10 was #12.
• At E3, EA won more nominations (15) and awards (four) than any other publisher. Winners included: Need for Speed(TM) Hot Pursuit for Best Racing Game; NBA Jam for Best Sports Game; Star Wars(R) The Old Republic(TM) for Best Role Playing Game; and Rock Band(R) 3 (with MTV/Harmonix) for Best Social Game.
• Madden NFL 11 will debut with GameFlow, an innovation which makes the game more accessible to casual players. GameFlow offers simpler play choices and a quicker path to the action, without compromising the deep playbook that makes Madden so popular with hardcore players.
• In Korea, FIFA Online 2 reached five million registered players, over three million unique players enjoyed the game in July alone and concurrent users peaked at over 200,000. June and July were FIFA Online 2's highest-grossing revenue months ever and it remains a top-three game in Korea.
• EA was the #1 publisher across all platforms on the Apple App Store in the June quarter. EA had nine of the top ten games when the iPhone(TM) 4 launched in June.

Business Outlook as of August 3, 2010

The following forward-looking statements, as well as those made above, reflect expectations as of August 3, 2010. Electronic Arts assumes no obligation to update these statements. Results may be materially different and are affected by many factors, including: product development delays; competition in the industry; the health of the economy in the U.S. and abroad and the related impact on discretionary consumer spending; changes in anticipated costs; expected savings and impact on EA's operations of the Company's cost reduction plan; consumer demand for console hardware and the ability of the console manufacturers to produce an adequate supply of consoles to meet that demand; changes in foreign exchange rates; the financial impact of potential future acquisitions by EA; the popular appeal of EA's products; EA's effective tax rate; and other factors detailed in this release and in EA's annual and quarterly SEC filings.

Second Quarter Fiscal Year 2011 Expectations - Ending September 30, 2010

• GAAP net revenue is expected to be approximately $600 to $650 million.
• Non-GAAP net revenue is expected to be approximately $775 to $825 million.
• GAAP diluted loss per share is expected to be approximately ($0.90) to ($0.80).
• Non-GAAP diluted loss per share is expected to be approximately ($0.15) to ($0.10).
• For purposes of calculating second quarter fiscal year 2011 loss per share, the Company estimates a share count of 329 million.
• Expected non-GAAP net income excludes the following items from expected GAAP net income:
  • Non-GAAP net revenue is expected to be approximately $175 million higher than GAAP net revenue due to the impact of the change in deferred net revenue (packaged goods and digital content);
  • Approximately $45 million of estimated stock-based compensation;
  • Approximately $18 million of acquisition-related expenses;
  • Approximately $5 million of restructuring charges;
  • Approximately $28 million from net gains on sale of strategic investments; and
  • $13 to $30 million in the difference between the Company's GAAP and non-GAAP tax expenses.

Fiscal Year 2011 Expectations - Ending March 31, 2011

EA is affirming its full year FY11 non-GAAP guidance for both net revenue and earnings per share.

• GAAP net revenue is expected to be approximately $3.35 to $3.60 billion and non-GAAP net revenue is expected to be approximately $3.65 to $3.90 billion, both consistent with the Company's previously provided guidance.

• GAAP operating expense is expected to be approximately $2.25 billion and non-GAAP operating expense is expected to be approximately $2 billion.
• GAAP diluted loss per share is expected to be approximately ($0.70) to ($1.00), an improvement from prior expectations of ($0.85) to ($1.15), due primarily to gains on sales of strategic investments and a reduction in forecasted stock compensation expense.
• Non-GAAP diluted earnings per share are expected to be approximately $0.50 to $0.70.
• For purposes of calculating fiscal year 2011 earnings/(loss) per share, the Company estimates a share count of 330 million for loss per share computations and 334 million for earnings per share computations.
• Expected non-GAAP net income excludes the following items from expected GAAP net loss:
  • Non-GAAP net revenue is expected to be approximately $300 million higher than GAAP revenue due to the impact of the change in deferred net revenue (packaged goods and digital content);
  • Approximately $180 million of estimated stock-based compensation;
  • Approximately $70 million of acquisition-related expenses;
  • $10 to $15 million of restructuring charges;
  • Approximately $23 million from net gains on sale of strategic investments; and
  • ($45) to ($71) million in the difference between the Company's GAAP and non-GAAP tax expenses.

• The fiscal year 2011 net revenue phasing is expected to be allocated as follows for the rest of the fiscal year as a percent of total annual net revenue. The difference between GAAP and non-GAAP quarterly net revenue phasing is due to the change in deferred revenue (packaged goods and digital content):

Fiscal Year 2011 Key Titles by Label and Platform

Note: (1) Distribution Title, (2) Co-Published Title

The Key Titles Schedule for fiscal year 2011 is current as of August 3^rd, 2010 and is subject to change. Electronic Arts assumes no obligation to update this schedule.

Conference Call and Supporting Documents

Electronic Arts will host a conference call today at 2:00 pm PT (5:00 pm ET) to review its results for the first quarter and ended June 30, 2010 and its outlook for the future. During the course of the call, Electronic Arts may also disclose material developments affecting its business and/or financial performance. Listeners may access the conference call live through the following dial-in number: (877) 418-3422, access code 89053696, or via webcast at http://investor.ea.com.

EA will also post a slide presentation that accompanies the call at http://investor.ea.com.

A dial-in replay of the conference call will be provided until August 10, 2010 at (706) 645-9291, access code 89053696. A webcast archive of the conference call will be available for one year at http://investor.ea.com.

Non-GAAP Financial Measures

To supplement the Company's unaudited condensed consolidated financial statements presented in accordance with GAAP, Electronic Arts uses certain non-GAAP measures of financial performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP. The non-GAAP financial measures used by Electronic Arts include: non-GAAP net revenue, non-GAAP gross profit, non-GAAP operating income (loss), non-GAAP net income (loss) and historical and estimated non-GAAP diluted earnings (loss) per share. These non-GAAP financial measures exclude the following items, as applicable in a given reporting period, from the Company's unaudited condensed consolidated statements of operations:

• Acquisition-related expenses
• Change in deferred net revenue (packaged goods and digital content)
• Loss on lease obligation and facilities acquisition
• Loss on licensed intellectual property commitment
• Loss (gain) on strategic investments
• Restructuring charges
• Stock-based compensation
• Income tax adjustments

Electronic Arts may consider whether other significant non-recurring items that arise in the future should also be excluded in calculating the non-GAAP financial measures it uses.

Electronic Arts believes that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding the Company's performance by excluding certain items that may not be indicative of the Company's core business, operating results or future outlook. Electronic Arts' management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing the Company's operating results both as a consolidated entity and at the business unit level, as well as when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate comparisons of the Company's performance to prior periods.

In addition to the reasons stated above, which are generally applicable to each of the items Electronic Arts excludes from its non-GAAP financial measures, the Company believes it is appropriate to exclude certain items for the following reasons:

Acquisition-Related Expenses. GAAP requires expenses to be recognized for various types of events associated with a business acquisition. These events include, expensing acquired intangible assets, including acquired in-process technology, post-closing adjustments associated with changes in the estimated amount of contingent consideration to be paid in an acquisition, and the impairment of accounting goodwill created as a result of an acquisition when future events indicated there has a decline in its value. When analyzing the operating performance of an acquired entity, Electronic Arts' management focuses on the total return provided by the investment (i.e., operating profit generated from the acquired entity as compared to the purchase price paid including the final amounts paid for contingent consideration) without taking into consideration any allocations made for accounting purposes. Because the final purchase price paid for an acquisition necessarily reflects the accounting value assigned to both contingent consideration and to the intangible assets (including acquired in-process technology and goodwill), when analyzing the operating performance of an acquisition in subsequent periods, the Company's management excludes the GAAP impact of any adjustments to the fair value of these acquisition-related balances to its financial results. Electronic Arts believes that such an approach is useful in understanding the long-term return provided by an acquisition and that investors benefit from a supplemental non-GAAP financial measure that excludes the accounting expense.

Change in Deferred Net Revenue (Packaged Goods and Digital Content). Electronic Arts is not able to objectively determine the fair value of the online service included in certain of its packaged goods and digital content. As a result, the Company recognizes the revenue from the sale of these games and content over the estimated online service period. In other transactions, at the date we sell the software product we have an obligation to provide incremental unspecified digital content in the future without an additional fee. In these cases, we account for the sale of the software product as a multiple element arrangement and recognize the revenue on a straight-line basis over the estimated life of the game. Internally, Electronic Arts' management excludes the impact of the change in deferred net revenue related to packaged goods games and digital content in its non-GAAP financial measures when evaluating the Company's operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. The Company believes that excluding the impact of the change in deferred net revenue from its operating results is important to (1) facilitate comparisons to prior periods during which the Company was able to objectively determine the fair value of the online service and not delay the recognition of significant amounts of net revenue related to online-enabled packaged goods and (2) understanding our operations because all related costs are expensed as incurred instead of deferred and recognized ratably.

Loss on Lease Obligation and Facilities Acquisition. During the second quarter of fiscal 2010, Electronic Arts completed the acquisition of its headquarters facilities in Redwood City, California pursuant to the terms of the loan financing agreements underlying the build-to-suit leases for the facilities. These leases expired in July 2009, and had previously been accounted for as operating leases. The total amount paid under the terms of the leases was $247 million, of which $233 million related to the purchase price of the facilities and $14 million was for the loss on our lease obligation. In addition, Electronic Arts recorded a tax benefit of approximately $31 million, consisting of approximately $6 million related to the loss on our lease obligation, and a $25 million reduction in our valuation allowance due to the acquisition. As a result of this lease obligation and facility acquisition, on an after-tax basis, Electronic Arts incurred a positive net income effect of $17 million. Electronic Arts' management excluded the effect of this transaction when evaluating the Company's operating performance and when assessing the performance of its management team during this period and will continue to do so, when it plans, forecasts and analyzes future periods.

Loss on Licensed Intellectual Property Commitment. During the fourth quarter of fiscal 2009, Electronic Arts amended an agreement with a content licensor. This amendment resulted in the termination of our rights to use the licensor's intellectual property in certain products and we incurred a related estimated loss of $38 million. This significant non-recurring loss is excluded from our non-GAAP financial measures in order to provide comparability between periods. Further, the Company excluded this loss when evaluating its operating performance and the performance of its management team during this period and will continue to do so when it plans, forecasts and analyzes future periods.

Loss (Gain) on Strategic Investments. From time to time, the Company makes strategic investments. Electronic Arts' management excludes the impact of any losses and gains on such investments when evaluating the Company's operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. In addition, the Company believes that excluding the impact of such losses and gains on these investments from its operating results is important to facilitate comparisons to prior periods.

Restructuring Charges. Although Electronic Arts has engaged in various restructuring activities in the past, each has been a discrete, extraordinary event based on a unique set of business objectives. Each of these restructurings has been unlike its predecessors in terms of its operational implementation, business impact and scope. As such, the Company believes it is appropriate to exclude restructuring charges from its non-GAAP financial measures.

Stock-Based Compensation. When evaluating the performance of its individual business units, the Company does not consider stock-based compensation charges. Likewise, the Company's management teams exclude stock-based compensation expense from their short and long-term operating plans. In contrast, the Company's management teams are held accountable for cash-based compensation and such amounts are included in their operating plans. Further, when considering the impact of equity award grants, Electronic Arts places a greater emphasis on overall shareholder dilution rather than the accounting charges associated with such grants.

Video game platforms have historically had a life cycle of four to six years, which causes the video game software market to be cyclical. The Company's management analyzes its business and operating performance in the context of these business cycles, comparing Electronic Arts' performance at similar stages of different cycles. For comparability purposes, Electronic Arts believes it is useful to provide a non-GAAP financial measure that excludes stock-based compensation in order to better understand the long-term performance of its core business.

Income Tax Adjustments. The Company uses a fixed, long-term projected tax rate of 28 percent internally to evaluate its operating performance, to forecast, plan and analyze future periods, and to assess the performance of its management team. Accordingly, the Company has applied the same 28 percent tax rate to its non-GAAP financial results.

In the financial tables below, Electronic Arts has provided a reconciliation of the most comparable GAAP financial measure to the historical non-GAAP financial measures used in this press release.

Forward-Looking Statements

Some statements set forth in this release, including the estimates relating to EA's fiscal year 2011 guidance information under the heading "Business Outlook", and the fiscal year 2011 key title slate, contain forward-looking statements that are subject to change. Statements including words such as "anticipate", "believe", "estimate" or "expect" and statements in the future tense are forward-looking statements. These forward-looking statements are preliminary estimates and expectations based on current information and are subject to business and economic risks and uncertainties that could cause actual events or actual future results to differ materially from the expectations set forth in the forward-looking statements.

Some of the factors which could cause the Company's results to differ materially from its expectations include the following: sales of the Company's titles; the general health of the U.S. and global economy and the related impact on discretionary consumer spending; fluctuations in foreign exchange rates; consumer spending trends; the Company's ability to manage expenses; the competition in the interactive entertainment industry; the effectiveness of the Company's sales and marketing programs; timely development and release of Electronic Arts' products; the consumer demand for, and the availability of an adequate supply of console hardware units (including the Xbox 360^(R) video game and entertainment system, the PlayStation^(R)3 computer entertainment system and the Wii(TM)); the Company's ability to predict consumer preferences among competing hardware platforms; the financial impact of the Playfish acquisition and potential future acquisitions by EA; the Company's ability to realize the anticipated benefits of acquisitions; the seasonal and cyclical nature of the interactive game segment; the Company's ability to attract and retain key personnel; changes in the Company's effective tax rates; the performance of strategic investments; the impact of certain accounting requirements, such as the Company's ability to estimate and recognize goodwill impairment charges and determine deferred tax valuation allowances; adoption of new accounting regulations and standards; potential regulation of the Company's products in key territories; developments in the law regarding protection of the Company's products; the Company's ability to secure licenses to valuable entertainment properties on favorable terms; the stability of the Company's key customers, and other factors described in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2010.

These forward-looking statements are current as of August 3, 2010. Electronic Arts assumes no obligation and does not intend to update these forward-looking statements. In addition, the preliminary financial results set forth in this release are estimates based on information currently available to Electronic Arts.

While Electronic Arts believes these estimates are meaningful, they could differ from the actual amounts that Electronic Arts ultimately reports in its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2010. Electronic Arts assumes no obligation and does not intend to update these estimates prior to filing its Form 10-Q for the fiscal quarter ended June 30, 2010.

About Electronic Arts

Electronic Arts Inc. (EA), headquartered in Redwood City, California, is a leading global interactive entertainment software company. Founded in 1982, the Company develops, publishes, and distributes interactive software worldwide for video game systems, personal computers, wireless devices and the Internet. Electronic Arts markets its products under four brand names: EA SPORTS^TM, EA^TM, EA Mobile^TM and POGO^TM. In fiscal 2010, EA posted GAAP net revenue of $3.7 billion and had 27 titles that sold more than one million units. EA's homepage and online game site is www.ea.com. More information about EA's products and full text of press releases can be found on the Internet at http://info.ea.com.

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EA, EA SPORTS, EA Mobile, POGO, Dead Space, EA SPORTS Active, Medal of Honor, MySims, MySims SkyHeroes, Need for Speed, Skate, Create, Darkspore and The Sims are trademarks of Electronic Arts Inc. Dragon Age is a trademark of EA International (Studio and Publishing) Ltd. Battlefield: Bad Company is a trademark of EA Digital Illusions CE AB. FAMILY GAME NIGHT, LITTLEST PET SHOP, SCRABBLE and MONOPOLY are trademarks of Hasbro and used with permission. Crysis is a registered trademark of Crytek. Harry Potter is a trademark of Warner Bros. Entertainment Inc. APB All Points Bulletin is a trademark of Realtime Worlds Inc. and its affiliated companies. Star Wars and related properties are trademarks in the United States and/or in other countries of Lucasfilm Ltd. and/or its affiliates. © 2009 Lucasfilm Entertainment Company Ltd. or Lucasfilm Ltd. All rights reserved. Harmonix, Rock Band, Rock Band 2, Rock Band 3, Rock Band Network and all related titles and logos are trademarks of Harmonix Music Systems, Inc., an MTV Networks company. Rock Band, Rock Band 2, Rock Band 3, Rock Band Network developed by Harmonix Music Systems, Inc. MTV: Music Television, MTV Games and all related titles and logos are trademarks of MTV Networks, a division of Viacom. Bulletstorm is a trademark or registered trademark of People Can Fly in the United States of America and elsewhere. John Madden, NFL, NBA, NCAA, 2010 FIFA World Cup South Africa, FIFA, Tiger Woods, PGA TOUR and NHL are trademarks or other intellectual property of their respective owners and used with permission. Xbox 360 is a trademark of the Microsoft group of companies and is used under license from Microsoft. "PlayStation" is a registered trademark of Sony Computer Entertainment Inc. Wii is a trademark of Nintendo. iPad is a trademark of Apple Inc. iPhone is a trademark of Apple Inc., registered in the U.S. and other countries. All other trademarks are the property of their respective owners.