Stuart Canfield
Chief Financial Officer at Electronic Arts
Thank you, Andrew, and hello, everyone. To echo Andrew's remarks, Q3 was not the quarter we expected, but despite the impact to our near-term results, our long-term outlook remains unchanged. Our teams remain focused on player feedback, continually adapting our games and services to reflect evolving player preferences in addition to refining our portfolio to deliver sustainable growth. Today, we're announcing our plans for a $1 billion accelerated stock repurchase in addition to our current $375 million per quarter program, bringing total stock repurchases to $2.5 billion within the first year of our $5 billion authorization. This action reinforces our strategy and commitment to returning capital to stockholders. It also demonstrates our confidence in our long-term growth outlook, supported by our strong balance sheet and cash-flow generation. We remain committed to advancing our strategic initiatives while effectively balancing business investment with returning capital to stockholders.
Now turning to the quarter. In Q3, net bookings was $2.2 billion, down 6% year-over-year. Dragon Age the VailGuard underperformed, highesting the competitive dynamics of the single-player RPG market and FC25 started strong but softened through the holiday period. We saw minimal impact from FX within the quarter. Within total net bookings, full-game was $633 million, down 3% year-over-year and Life and other was $1.58 billion, down 8% year-over-year. On a trailing 12-month basis, live services are 74% of our business. Let me start with. Historically, blockbuster storytelling has been the primary way our industry bought beloved IP to players. The game's financial performance highlights the evolving industry landscape and reinforces the importance of our actions to reallocate resources towards our most significant and highest potential opportunities.
Now, I'd like to provide further insights into the quarterly dynamics in global football that Andrew shared earlier. Following two consecutive fiscal years of double-digit net bookings growth, our global football franchise saw a mid-single-digit decline year-over-year in Q3. The softer-than-expected results in HD was only partially offset by continued growth in FCMobile. The HD underperformance was a result of two key factors. Firstly, softer acquisition, which led to lower-than-expected full-game sales of FC25. Despite having 40 million players across our catalog of HD titles, our December promotional events to drive conversion fell short of expectations and historical rates as players remain engaged with prior versions of the game.
Secondly, as Andrew mentioned, we saw faster than usual engagement churn in a competitive cohort as the quarter progressed. Despite having positive key metrics early in the quarter, this player group's engagement was down high-single-digits, mirroring our net bookings decline. While we regularly manage these factors within live service, their combination had a compounding effect. Faster than usual engagement churn, coupled with lower acquisition credit pressure on lower funnel performance. Our live service model's greatest strength is our ability to experiment, tweak, respond and deliver changes for our players.
Our January 16th gameplay update launched ahead of our marquee team of the Year event is a prime example of this adaptability. Since the gameplay release, we have seen a significant turnaround in momentum with competitive cohorts trending towards prior year levels with net bookings up year-over-year during the event. We remain confident in the sustainable long-term growth of Global Football as we continue to refine the experience, expand engagement opportunities and build toward an even brighter future for the franchise.
Within Global Football for Q3, FC Mobile saw double-digit increase in new players, engagement and monetization year-over-year. FC online was up slightly as strong promotional content drove monetization. The expansion of our American football community has continued to see strength with weekly active users and total unique spenders up double-digit year-over-year in the quarter. In Apex Legends, net bookings were down year-over-year in the quarter, but performed in-line with our expectations. The Simmons franchise delivered year-over-year net bookings growth in Q3 as we continue to broaden the franchise by delivering focused updates and new player experiences that deeply engage and captivate our community. During the quarter, we launched two new created kits in the Sims 4 and the launch of the MySims Cozy Bundle outperformed our expectations. With MySims bundle, we saw over 50% of those who purchased the game were new to EA as we expanded our offerings on the Switch platform.
Now moving to our GAAP quarterly results. We delivered Q3 net revenue of $1.88 billion, down 3% year-over-year. Gross margins increased 300 basis-points, largely a result of lower licensing costs. Operating expenses came in below our expectations at $1.05 billion, flat to the prior year. Earnings per share was $1.11, up 4% year-over-year. We delivered operating cash-flow of $1.18 billion for the quarter, down 7% year-over-year. On a trailing 12-month basis, operating cash-flow reached $2.11 billion and free-cash flow reached $1.89 billion as our business continues to be a strong generator of cash. Please see our earnings slides for further cash-flow information. In the 3rd-quarter, we returned $425 million to stockholders through stock repurchases and dividends.
Now turning to guidance. Two weeks ago, we updated our FY '25 guidance. I want to outline the assumptions underpinning our outlook. First, our American football business remains on-track to surpass $1 billion in net bookings for FY '25. Second, we revised our expectations to include lower contributions from Dragon Age to Fail Guard. Third, let me walk-through our assumptions for global football. As mentioned, our global football net bookings in Q3 saw a mid-single-digit decline year-over-year. As we exited Q3, our HD experience saw double-digit declines year-over-year in net bookings during December and the early weeks of January. However, following the January 16 gameplay update and the launch of Team of the Year, we saw strong momentum resulting in a return to year-over-year growth during the event. Despite this positive trend, our FY '25 guidance at the midpoint adopts a prudent approach, anticipating a low double-digit decline in global football franchise net bookings for Q4.
That said, we remain optimistic about the potential for continued momentum given Team of the Year's performance, the start of our Future event and other upcoming events and updates this quarter. Our approach is measured as our teams learn from Q3 and continue to bring updates to the game, monitor player feedback and deliver experiences that sustain engagement. And fourth, beyond global football, our core live services assumptions remain largely unchanged. These changes to our underlying assumptions have shaped our revised guidance range, which we shared on January 22. As a reminder, we expect FY '25 net bookings to be $7 billion to $7.15 billion, down 6% to down 4% year-over-year.
Turning to our FY '25 GAAP outlook. We are lowering net revenue guidance to $7.25 billion to $7.4 billion. We expect the cost of revenue to be $1.48 billion to $1.49 billion. We now expect operating expenses to be approximately $4.38 billion to $4.39 billion, up 1% year-over-year. As a result, we expect GAAP operating margin to be 19.2% to 20.5%. We expect non-GAAP operating margin to be 30.5% to 31.6%. The impact from change in deferred net revenue is expected to be approximately negative 250 to negative 240 basis-points. This results in a revised earnings per share of $3.90 to $4.25. We are also adjusting our operating cash-flow guidance to $1.8 billion to $1.9 billion.
Capital expenditures are still expected to be $225 million, resulting in free-cash flow guidance of $1.575 billion to $1.675 billion. As a reminder, we had a one-time cash tax benefit of $150 million in the prior year. If rates remain unchanged from today, we expect minimal impact to net bookings from FX. For more information on the impact of FX movements, please refer to our earnings slides. Turning to Q4, we expect net bookings of $1.44 billion to $1.594 billion, down 13% to down 4% year-over-year, largely driven by declines in global football and Apex legends, partially offset by the release of split fiction. We expect net revenue of $1.682 billion to $1.832 billion, cost of revenue to be $305 million to $315 million and operating expenses of approximately $1.112 billion to $1.122 billion, resulting in earnings per share of $0.65 to $1.
Now before I hand-off to Andrew, I want to take a moment to discuss our long-term financial framework, which we shared last year. Our multi-year outlook is designed to provide the flexibility needed to effectively manage two critical drivers of success: game development timelines and market dynamics. With a strong run-up of new experiences, including EA Sports, College Football 26, Battlefield and Skate, we are positioned to return to growth in FY '26. Beyond FY '26, we will continue to expand our current franchises, while also bringing blockbuster storytelling to-market. Additionally, we will make measured progress beyond our games as we continue to scale our EA Sports app, advertising and sponsorship opportunities. Altogether, we believe these initiatives will drive both top-line growth and margin expansion through FY '27 and into the future as we outlined at our September Investor Day. We look-forward to providing further updates on FY '26 in May and remain focused on disciplined execution, prioritized capital allocation and strategic investments that drive value for our players, employees and stockholders.
Now, I'll hand back to Andrew.
