UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 000-17948

ELECTRONIC ARTS INC.

(Exact name of registrant as specified in its charter)

Delaware

94-2838567

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

209 Redwood Shores Parkway

94065

Redwood City

California

(Address of principal executive offices)

(Zip Code)

(650) 628-1500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, $0.01 par value

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange

Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of November ~~5, 2021,~~4, 2022, there were ~~282,808,143~~276,080,234 shares of the Registrant’s Common Stock, par value $0.01 per share, outstanding.

Table of Contents

ELECTRONIC ARTS INC.

FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER 30, ~~2021~~2022

Table of Contents


		Page
Part I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of September 30, ~~2021~~ 2022 and March 31, ~~2021~~2022	3
	Condensed Consolidated Statements of Operations for the Three ~~and~~an d Six Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	4
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended ~~September~~Sept ember 30, ~~2021~~2022 and ~~2020~~2021	6
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	7
	Notes to Condensed Consolidated Financial Statements	8
	Report of Independent Registered Public Accounting Firm	3128
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3229
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4844
Item 4.	Controls and Procedures	5046

Part II - OTHER INFORMATION
Item 1.	Legal Proceedings	5147
Item 1A.	Risk Factors	5147
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6459
Item 3.	Defaults Upon Senior Securities	6459
Item 4.	Mine Safety Disclosures	6459
Item 6.	Exhibits	6459
Exhibit Index		6560
Signature		6662

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.Condensed Consolidated Financial Statements (Unaudited)

ELECTRONIC ARTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


(Unaudited) (In millions, except par value data)	(Unaudited) (In millions, except par value data)	September 30, 2021		March 31, 2021 (a)		(Unaudited) (In millions, except par value data)	September 30, 2022		March 31, 2022 (a)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,630	$	5,260	Cash and cash equivalents	$	1,539	$	2,732
Short-term investments	Short-term investments	342		1,106		Short-term investments	335		330
Receivables, net	Receivables, net	1,031		521		Receivables, net	919		650
Other current assets	Other current assets	387		326		Other current assets	649		439
Total current assets	Total current assets	3,390		7,213		Total current assets	3,442		4,151
Property and equipment, net	Property and equipment, net	516		491		Property and equipment, net	531		550
Goodwill	Goodwill	5,459		2,868		Goodwill	5,375		5,387
Acquisition-related intangibles, net	Acquisition-related intangibles, net	1,080		309		Acquisition-related intangibles, net	811		962
Deferred income taxes, net	Deferred income taxes, net	2,139		2,045		Deferred income taxes, net	2,395		2,243
Other assets	Other assets	435		362		Other assets	525		507
TOTAL ASSETS	TOTAL ASSETS	$	13,019	$	13,288	TOTAL ASSETS	$	13,079	$	13,800

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	136	$	96	Accounts payable	$	136	$	101
Accrued and other current liabilities	Accrued and other current liabilities	1,119		1,341		Accrued and other current liabilities	1,034		1,388
Deferred net revenue (online-enabled games)	Deferred net revenue (online-enabled games)	1,322		1,527		Deferred net revenue (online-enabled games)	1,391		2,024
Total current liabilities	Total current liabilities	2,577		2,964		Total current liabilities	2,561		3,513
Senior notes, net	Senior notes, net	1,877		1,876		Senior notes, net	1,879		1,878
Income tax obligations	Income tax obligations	318		315		Income tax obligations	478		386
Deferred income taxes, net	Deferred income taxes, net	68		43		Deferred income taxes, net	1		1
Other liabilities	Other liabilities	323		250		Other liabilities	362		397
Total liabilities	Total liabilities	5,163		5,448		Total liabilities	5,281		6,175
Commitments and contingencies (See Note 12)		0		0
Commitments and contingencies (See Note 11)						Commitments and contingencies (See Note 11)
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:

Common stock, $0.01 par value. 1,000 shares authorized; 284 and 286 shares issued and outstanding, respectively		3		3
Common stock, $0.01 par value. 1,000 shares authorized; 277 and 280 shares issued and outstanding, respectively						Common stock, $0.01 par value. 1,000 shares authorized; 277 and 280 shares issued and outstanding, respectively	3		3
Additional paid-in capital	Additional paid-in capital	—		—		Additional paid-in capital	—		—
Retained earnings	Retained earnings	7,855		7,887		Retained earnings	7,658		7,607
Accumulated other comprehensive loss		(2)		(50)
Accumulated other comprehensive income (loss)						Accumulated other comprehensive income (loss)	137		15
Total stockholders’ equity	Total stockholders’ equity	7,856		7,840		Total stockholders’ equity	7,798		7,625
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	13,019	$	13,288	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	13,079	$	13,800

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

(a) Derived from audited Consolidated Financial Statements.

Table of Contents

ELECTRONIC ARTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)	(Unaudited)	Three Months Ended September 30,				Six Months Ended September 30,				(Unaudited)	Three Months Ended September 30,				Six Months Ended September 30,
(In millions, except per share data)	(In millions, except per share data)	2021		2020		2021		2020		(In millions, except per share data)	2022		2021		2022		2021
Net revenue	Net revenue	$	1,826	$	1,151	$	3,377	$	2,610	Net revenue	$	1,904	$	1,826	$	3,671	$	3,377
Cost of revenue	Cost of revenue	494		286		809		574		Cost of revenue	462		494		776		809
Gross profit	Gross profit	1,332		865		2,568		2,036		Gross profit	1,442		1,332		2,895		2,568
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	553		421		1,068		859		Research and development	565		553		1,137		1,068
Marketing and sales	Marketing and sales	233		156		423		277		Marketing and sales	233		233		467		423
General and administrative	General and administrative	176		133		345		269		General and administrative	174		176		341		345

Amortization of intangibles		30		6		70		11
Amortization and impairment of intangibles										Amortization and impairment of intangibles	43		30		82		70
Total operating expenses	Total operating expenses	992		716		1,906		1,416		Total operating expenses	1,015		992		2,027		1,906
Operating income	Operating income	340		149		662		620		Operating income	427		340		868		662
Interest and other income (expense), net	Interest and other income (expense), net	(14)		(10)		(28)		(13)		Interest and other income (expense), net	—		(14)		(5)		(28)
Income before provision for (benefit from) income taxes		326		139		634		607
Provision for (benefit from) income taxes		32		(46)		136		57
Income before provision for income taxes										Income before provision for income taxes	427		326		863		634
Provision for income taxes										Provision for income taxes	128		32		253		136
Net income	Net income	$	294	$	185	$	498	$	550	Net income	$	299	$	294	$	610	$	498
Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	1.03	$	0.64	$	1.75	$	1.90	Basic	$	1.08	$	1.03	$	2.19	$	1.75
Diluted	Diluted	$	1.02	$	0.63	$	1.73	$	1.88	Diluted	$	1.07	$	1.02	$	2.18	$	1.73
Number of shares used in computation:	Number of shares used in computation:									Number of shares used in computation:
Basic	Basic	285		289		285		289		Basic	278		285		279		285
Diluted	Diluted	287		293		288		292		Diluted	279		287		280		288

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

Table of Contents

ELECTRONIC ARTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(Unaudited)	(Unaudited)	Three Months Ended September 30,				Six Months Ended September 30,				(Unaudited)	Three Months Ended September 30,				Six Months Ended September 30,
(In millions)	(In millions)	2021		2020		2021		2020		(In millions)	2022		2021		2022		2021
Net income	Net income	$	294	$	185	$	498	$	550	Net income	$	299	$	294	$	610	$	498
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Net gains (losses) on available-for-sale securities	Net gains (losses) on available-for-sale securities	—		(3)		—		8		Net gains (losses) on available-for-sale securities	—		—		(1)		—
Net gains (losses) on derivative instruments	Net gains (losses) on derivative instruments	50		(43)		56		(80)		Net gains (losses) on derivative instruments	109		50		199		56
Foreign currency translation adjustments	Foreign currency translation adjustments	(17)		9		(8)		33		Foreign currency translation adjustments	(43)		(17)		(76)		(8)
Total other comprehensive income (loss), net of tax	Total other comprehensive income (loss), net of tax	33		(37)		48		(39)		Total other comprehensive income (loss), net of tax	66		33		122		48
Total comprehensive income	Total comprehensive income	$	327	$	148	$	546	$	511	Total comprehensive income	$	365	$	327	$	732	$	546

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

Table of Contents

ELECTRONIC ARTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)
Common Stock
Additional Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (loss) Total
Stockholders’
Equity
(In millions, except per share data) Shares Amount
Balances as of March 31, 2021 286,465 $ 3 $ — $ 7,887 $ (50) $ 7,840
Total comprehensive income — — — 204 15 219
Stock-based compensation — — 125 — — 125
Awards assumed upon acquisition — — 23 — — 23
Issuance of common stock 1,209 — (105) — — (105)
Repurchase and retirement of common stock (2,292) — (43) (282) — (325)
Cash dividends declared ($0.17 per common share) — — — (49) — (49)
Balances as of June 30, 2021 285,382 $ 3 $ — $ 7,760 $ (35) $ 7,728
Total comprehensive income — — — 294 33 327
Stock-based compensation — — 149 — — 149
Issuance of common stock 602 — 25 — — 25
Repurchase and retirement of common stock (2,318) — (174) (151) — (325)
Cash dividends declared ($0.17 per common share) — — — (48) — (48)
Balances as of September 30, 2021 283,666 $ 3 $ — $ 7,855 $ (2) $ 7,856
(Unaudited)
Common Stock
Additional Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (loss) Total
Stockholders’
Equity
(In millions, except per share data) Shares Amount
Balances as of March 31, 2020 288,413 $ 3 $ — $ 7,508 $ (50) $ 7,461
Total comprehensive income — — — 365 (2) 363
Stock-based compensation — — 102 —�� — 102
Issuance of common stock 1,088 — (66) — — (66)
Repurchase and retirement of common stock (747) — (36) (42) — (78)
Balances as of June 30, 2020 288,754 $ 3 $ — $ 7,831 $ (52) $ 7,782
Total comprehensive income — — — 185 (37) 148
Stock-based compensation — — 113 — — 113
Issuance of common stock 868 — 32 — — 32
Repurchase and retirement of common stock — — — — — —
Balances as of September 30, 2020 289,622 $ 3 $ 145 $ 8,016 $ (89) $ 8,075


(Unaudited)	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (loss)		Total Stockholders’ Equity
(In millions, except share data in thousands)	Shares	Amount
Balances as of March 31, 2022	280,051	$	3	$	—	$	7,607	$	15	$	7,625
Total comprehensive income	—	—		—		311		56		367
Stock-based compensation	—	—		125		—		—		125
Issuance of common stock	1,413	—		(103)		—		—		(103)
Repurchase and retirement of common stock	(2,512)	—		(22)		(298)		—		(320)
Cash dividends declared ($0.19 per common share)	—	—		—		(53)		—		(53)
Balances as of June 30, 2022	278,952	$	3	$	—	$	7,567	$	71	$	7,641
Total comprehensive income	—	—		—		299		66		365
Stock-based compensation	—	—		140		—		—		140
Issuance of common stock	641	—		30		—		—		30
Repurchase and retirement of common stock	(2,569)	—		(170)		(155)		—		(325)
Cash dividends declared ($0.19 per common share)	—	—		—		(53)		—		(53)
Balances as of September 30, 2022	277,024	$	3	$	—	$	7,658	$	137	$	7,798








(Unaudited)	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (loss)		Total Stockholders’ Equity
(In millions, except share data in thousands)	Shares	Amount
Balances as of March 31, 2021	286,465	$	3	$	—	$	7,887	$	(50)	$	7,840
Total comprehensive income	—	—		—		204		15		219
Stock-based compensation	—	—		125		—		—		125
Awards assumed upon acquisition	—	—		23		—		—		23
Issuance of common stock	1,209	—		(105)		—		—		(105)
Repurchase and retirement of common stock	(2,292)	—		(43)		(282)		—		(325)
Cash dividends declared ($0.17 per common share)	—	—		—		(49)		—		(49)
Balances as of June 30, 2021	285,382	$	3	$	—	$	7,760	$	(35)	$	7,728
Total comprehensive income	—	—		—		294		33		327
Stock-based compensation	—	—		149		—		—		149
Issuance of common stock	602	—		25		—		—		25
Repurchase and retirement of common stock	(2,318)	—		(174)		(151)		—		(325)
Cash dividends declared ($0.17 per common share)	—	—		—		(48)		—		(48)
Balances as of September 30, 2021	283,666	$	3	$	—	$	7,855	$	(2)	$	7,856

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

Table of Contents

ELECTRONIC ARTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)	(Unaudited)	Six Months Ended September 30,				(Unaudited)	Six Months Ended September 30,
(In millions)	(In millions)	2021		2020		(In millions)	2022		2021
OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net income	Net income	$	498	$	550	Net income	$	610	$	498
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion		199		77
Adjustments to reconcile net income to net cash used in operating activities:						Adjustments to reconcile net income to net cash used in operating activities:
Depreciation, amortization, accretion and impairment						Depreciation, amortization, accretion and impairment	241		199
Stock-based compensation	Stock-based compensation	274		215		Stock-based compensation	265		274
Change in assets and liabilities:	Change in assets and liabilities:					Change in assets and liabilities:
Receivables, net	Receivables, net	(446)		39		Receivables, net	(276)		(446)
Other assets	Other assets	(51)		(113)		Other assets	(25)		(51)
Accounts payable	Accounts payable	42		106		Accounts payable	53		42
Accrued and other liabilities	Accrued and other liabilities	(250)		(96)		Accrued and other liabilities	(269)		(250)
Deferred income taxes, net	Deferred income taxes, net	(140)		(32)		Deferred income taxes, net	(156)		(140)
Deferred net revenue (online-enabled games)	Deferred net revenue (online-enabled games)	(205)		(307)		Deferred net revenue (online-enabled games)	(633)		(205)
Net cash provided by (used in) operating activities		(79)		439
Net cash used in operating activities						Net cash used in operating activities	(190)		(79)
INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES
Capital expenditures	Capital expenditures	(87)		(63)		Capital expenditures	(112)		(87)
Proceeds from maturities and sales of short-term investments	Proceeds from maturities and sales of short-term investments	1,128		1,418		Proceeds from maturities and sales of short-term investments	166		1,128
Purchase of short-term investments	Purchase of short-term investments	(369)		(1,416)		Purchase of short-term investments	(173)		(369)
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(3,394)		—		Acquisitions, net of cash acquired	—		(3,394)
Net cash used in investing activities	Net cash used in investing activities	(2,722)		(61)		Net cash used in investing activities	(119)		(2,722)
FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Proceeds from issuance of common stock	Proceeds from issuance of common stock	41		43		Proceeds from issuance of common stock	44		41
Cash dividends paid	Cash dividends paid	(97)		—		Cash dividends paid	(106)		(97)
Cash paid to taxing authorities for shares withheld from employees	Cash paid to taxing authorities for shares withheld from employees	(121)		(77)		Cash paid to taxing authorities for shares withheld from employees	(117)		(121)
Repurchase and retirement of common stock	Repurchase and retirement of common stock	(650)		(78)		Repurchase and retirement of common stock	(645)		(650)
Net cash used in financing activities	Net cash used in financing activities	(827)		(112)		Net cash used in financing activities	(824)		(827)
Effect of foreign exchange on cash and cash equivalents	Effect of foreign exchange on cash and cash equivalents	(2)		25		Effect of foreign exchange on cash and cash equivalents	(60)		(2)
Increase (decrease) in cash and cash equivalents	Increase (decrease) in cash and cash equivalents	(3,630)		291		Increase (decrease) in cash and cash equivalents	(1,193)		(3,630)
Beginning cash and cash equivalents	Beginning cash and cash equivalents	5,260		3,768		Beginning cash and cash equivalents	2,732		5,260
Ending cash and cash equivalents	Ending cash and cash equivalents	$	1,630	$	4,059	Ending cash and cash equivalents	$	1,539	$	1,630
Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Cash paid during the period for income taxes, net	Cash paid during the period for income taxes, net	$	303	$	173	Cash paid during the period for income taxes, net	$	310	$	303
Cash paid during the period for interest	Cash paid during the period for interest	28		21		Cash paid during the period for interest	28		28

Non-cash investing activities:						Non-cash investing activities:
Change in accrued capital expenditures						Change in accrued capital expenditures	$	(21)	$	3

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

Table of Contents

ELECTRONIC ARTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Electronic Arts is a global leader in digital interactive entertainment. We develop, market, publish and deliver games, content and services that can be ~~played and watched~~experienced on game consoles, PCs, mobile phones and tablets. ~~We believe that the breadth and depth of~~At our ~~portfolio, live services offerings, and our use of multiple business models and distribution channels provide us with strategic advantages. Our foundation~~core is a ~~collection~~portfolio of intellectual property from which we create innovative games and content that ~~enables~~enable us to build on-going and meaningful relationships with a community of players, creators and viewers. Our portfolio includes brands that we either wholly own (such as ~~Battlefield, The Sims,~~ Apex Legends ~~Need for Speed~~, Battlefield, and ~~Plants vs. Zombies)~~The Sims) or license from others (such as ~~FIFA,~~ Madden, ~~NFL, UFC, NHL, Formula 1~~Star Wars, and ~~Star Wars)~~the 300+ licenses within our global football ecosystem). Through our live services offerings, we offer our players high-quality experiences designed to provide value to players and extend and enhance gameplay. These live services include extra content, subscription offerings and other revenue generated in addition to the sale of our base games and free-to-play games. In addition, we are focused on reaching more players whenever and wherever they want to play. We believe that we can add value to our network by making it easier for players to connect to a world of play by offering choice of business model, distribution channel and device.

Our fiscal year is reported on a 52- or 53-week period that ends on the Saturday nearest March 31. Our results of operations for the fiscal year ending March 31, ~~2022~~2023 contains 52 weeks and ends on April ~~2, 2022.~~1, 2023. Our results of operations for the fiscal year ended March 31, ~~2021~~2022 contained 5352 weeks and ended on April ~~3, 2021.~~2, 2022. Our results of operations for the three and six months ended September 30, 2022 contained 13 weeks and 26 weeks, respectively, and ended on October 1, 2022. Our results of operations for the three and six months ended September 30, 2021 contained 13 weeks and 26 weeks, respectively, and ended on October 2, 2021. ~~Our results of operations for the three and six months ended September 30, 2020 contained 13 weeks and 27 weeks, respectively, and ended on October 3, 2020.~~ For simplicity of disclosure, all fiscal periods are referred to as ending on a calendar month end.

The Condensed Consolidated Financial Statements are unaudited and reflect all adjustments (consisting only of normal recurring accruals unless otherwise indicated) that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the amounts reported in these Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ materially from those estimates. The results of operations for the current interim periods are not necessarily indicative of results to be expected for the current year or any other period.

These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2021,~~2022, as filed with the United States Securities and Exchange Commission (“SEC”) on May ~~26, 2021.~~

~~Change in Estimated Offering Period~~

The offering period is the period in which we offer to provide the future update rights and/or online hosting for the game and extra content sold. Because the offering period is not an explicitly defined period, we must make an estimate of the offering

period for the service related performance obligations (i.e., future update rights and online hosting). For sales prior to July 1, 2020, revenues for service related performance obligations were generally recognized over an estimated nine-month period beginning in the month after shipment for games and extra content sold through retail, and an estimated six-month period for digitally-distributed games and extra content beginning in the month of sale. During the three months ended September 30, 2020, we completed our annual evaluation of the Estimated Offering Period and as a result, for sales after July 1, 2020, revenue for service related performance obligations for games and extra content sold through retail is recognized over an estimated ten-month period beginning in the month of sale, and revenue for service related performance obligations for digitally-distributed games and extra content is recognized over an estimated eight-month period beginning in the month of sale. During the three months ended September 30, 2021, this change to our Estimated Offering Period resulted in an increase in net revenue of $125 million and net income of $95 million, and an increase of $0.33 diluted earnings per share. During the six months ended September 30, 2021, this change to our Estimated Offering Period resulted in an increase in net revenue of $102 million and net income of $77 million, and an increase of $0.27 diluted earnings per share.

~~Table of Contents~~

During the three months ended September 30, 2021, we completed our annual evaluation of the Estimated Offering Period. We have noted consumers are playing certain of our Online Hosted Service Games, such as PC and Console Free-to-Play games, for longer periods of time than in prior years as players engage with services we provide that are designed to enhance and extend gameplay, and as such, have concluded that the Estimated Offering Period for such games should be lengthened. As a result, for all new sales after July 1, 2021, the revenue that we recognize for service-related performance obligation related to our PC and Console Free-to-Play games is recognized generally over a twelve-month period. During the three months ended September 30, 2021, this change to our Estimated Offering Period resulted in an estimated decrease in net revenue of $17 million and net income of $13 million, and a decrease of $0.05 diluted earnings per share.25, 2022.

Recently Adopted Accounting Standards

In ~~December 2019,~~November 2021, the FASB issued ASU ~~2019-12,~~2021-10, ~~Simplifying the Accounting for Income Taxes~~Disclosures by Business Entities about Government Assistance ~~(Topic 740)~~(Topic 832). The amendments in this update ~~simplify the~~establish Topic 832 and require additional disclosures regarding government grants and money contributions when entities accounted for transactions with a government by analogizing to a grant or contribution accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.model. We adopted ASU ~~2019-12~~2021-10 in the first quarter of fiscal year ~~2022.~~2023 and elected to apply the amendments prospectively to all transactions within the scope of the amendment that are reflected in the financial statements at the date of adoption. The ~~amendments~~adoption did not have a material impact on our Condensed Consolidated Financial Statements ~~upon adoption.~~and related disclosures.

The standard clarified and amended existing guidance with respect to transactions in which a taxpayer realizes a step-up in tax basis of goodwill. As we integrate acquired intellectual property into our global operating structure, we may realize a tax basis step-up in goodwill. In such situations, we are required to assess whether the integration relates to the acquisition or is a separate transaction. When the integration is a separate transaction, we may be required to recognize deferred tax assets to the extent the stepped-up tax basis exceeds the associated U.S. GAAP basis. This assessment requires judgment around key indicators such as whether the tax basis step-up was contemplated as part of the original acquisition to which the intellectual property relates, whether the integration results in cash taxes, and whether the integration is achieved through a simple tax election. See ~~Note 10 — Income Taxes~~ for a discussion of the prospective application of this standard to our intra-entity transfer of Codemasters intellectual property (the “Codemasters intra-entity sale”) during the three months ended September 30, 2021.

Other Recently Issued Accounting Standards

In October 2021, the FASB issued ASU 2021-08, Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805). The amendments in this update require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. This update is effective for us beginning in the first quarter of fiscal year 2024. Early adoption is permitted. We are currently evaluating the timing of adoption and impact of this new standard on our Condensed Consolidated Financial Statements and related disclosures.

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(2) FAIR VALUE MEASUREMENTS

There are various valuation techniques used to estimate fair value, the primary one being the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the asset or liability. We measure certain financial and nonfinancial assets and liabilities at fair value on a recurring and nonrecurring basis.

Fair Value Hierarchy

The three levels of inputs that may be used to measure fair value are as follows:

•Level 1. Quoted prices in active markets for identical assets or liabilities.

•Level 2. Observable inputs other than quoted prices included within Level 1, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities.

•Level 3. Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of September 30, ~~2021~~2022 and March 31, ~~2021,~~2022, our assets and liabilities that were measured and recorded at fair value on a recurring basis were as follows (in millions):


				Fair Value Measurements at Reporting Date Using										Fair Value Measurements at Reporting Date Using
		As of September 30, 2021		Quoted Prices in Active Markets for Identical Financial Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs		Balance Sheet Classification		As of September 30, 2022		Quoted Prices in Active Markets for Identical Financial Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs		Balance Sheet Classification
				(Level 1)		(Level 2)		(Level 3)						(Level 1)		(Level 2)		(Level 3)
Assets	Assets										Assets
Bank and time deposits	Bank and time deposits	$	25	$	25	$	—	$	—	Cash equivalents	Bank and time deposits	$	52	$	52	$	—	$	—	Cash equivalents
Money market funds	Money market funds	112		112		—		—		Cash equivalents	Money market funds	13		13		—		—		Cash equivalents
Available-for-sale securities:	Available-for-sale securities:										Available-for-sale securities:
Corporate bonds	Corporate bonds	152		—		152		—		Short-term investments	Corporate bonds	128		—		128		—		Short-term investments
U.S. Treasury securities	U.S. Treasury securities	65		65		—		—		Short-term investments	U.S. Treasury securities	88		88		—		—		Short-term investments

U.S. agency securities											U.S. agency securities	4		—		4		—		Short-term investments
Commercial paper	Commercial paper	35		—		35		—		Short-term investments	Commercial paper	47		—		47		—		Short-term investments and cash equivalents
Foreign government securities	Foreign government securities	32		—		32		—		Short-term investments	Foreign government securities	17		—		17		—		Short-term investments
Asset-backed securities	Asset-backed securities	40		—		40		—		Short-term investments	Asset-backed securities	37		—		37		—		Short-term investments
Certificates of deposit	Certificates of deposit	18		—		18		—		Short-term investments	Certificates of deposit	18		—		18		—		Short-term investments
Foreign currency derivatives	Foreign currency derivatives	49		—		49		—		Other current assets and other assets	Foreign currency derivatives	301		—		301		—		Other current assets and other assets
Deferred compensation plan assets (a)	Deferred compensation plan assets (a)	23		23		—		—		Other assets	Deferred compensation plan assets (a)	22		22		—		—		Other assets
Total assets at fair value	Total assets at fair value	$	551	$	225	$	326	$	—		Total assets at fair value	$	727	$	175	$	552	$	—
Liabilities	Liabilities										Liabilities
Foreign currency derivatives	Foreign currency derivatives	$	12	$	—	$	12	$	—	Accrued and other current liabilities and other liabilities	Foreign currency derivatives	$	38	$	—	$	38	$	—	Accrued and other current liabilities and other liabilities
Deferred compensation plan liabilities (a)	Deferred compensation plan liabilities (a)	23		23		—		—		Other liabilities	Deferred compensation plan liabilities (a)	23		23		—		—		Other liabilities
Total liabilities at fair value	Total liabilities at fair value	$	35	$	23	$	12	$	—		Total liabilities at fair value	$	61	$	23	$	38	$	—

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				Fair Value Measurements at Reporting Date Using										Fair Value Measurements at Reporting Date Using
		As of March 31, 2021		Quoted Prices in Active Markets for Identical Financial Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs		Balance Sheet Classification		As of March 31, 2022		Quoted Prices in Active Markets for Identical Financial Instruments		Significant Other Observable Inputs		Significant Unobservable Inputs		Balance Sheet Classification
				(Level 1)		(Level 2)		(Level 3)						(Level 1)		(Level 2)		(Level 3)
Assets	Assets										Assets
Bank and time deposits	Bank and time deposits	$	157	$	157	$	—	$	—	Cash equivalents	Bank and time deposits	$	55	$	55	$	—	$	—	Cash equivalents
Money market funds	Money market funds	2,100		2,100		—		—		Cash equivalents	Money market funds	257		257		—		—		Cash equivalents
Available-for-sale securities:	Available-for-sale securities:										Available-for-sale securities:
Corporate bonds	Corporate bonds	380		—		380		—		Short-term investments and cash equivalents	Corporate bonds	116		—		116		—		Short-term investments
U.S. Treasury securities	U.S. Treasury securities	437		437		—		—		Short-term investments and cash equivalents	U.S. Treasury securities	104		104		—		—		Short-term investments and cash equivalents
U.S. agency securities		3		—		3		—		Short-term investments

Commercial paper	Commercial paper	142		—		142		—		Short-term investments and cash equivalents	Commercial paper	51		—		51		—		Short-term investments and cash equivalents
Foreign government securities	Foreign government securities	67		—		67		—		Short-term investments	Foreign government securities	17		—		17		—		Short-term investments
Asset-backed securities	Asset-backed securities	112		—		112		—		Short-term investments	Asset-backed securities	38		—		38		—		Short-term investments
Certificates of deposit	Certificates of deposit	41		—		41		—		Short-term investments	Certificates of deposit	18		—		18		—		Short-term investments
Foreign currency derivatives	Foreign currency derivatives	33		—		33		—		Other current assets and other assets	Foreign currency derivatives	63		—		63		—		Other current assets and other assets
Deferred compensation plan assets (a)	Deferred compensation plan assets (a)	18		18		—		—		Other assets	Deferred compensation plan assets (a)	21		21		—		—		Other assets
Total assets at fair value	Total assets at fair value	$	3,490	$	2,712	$	778	$	—		Total assets at fair value	$	740	$	437	$	303	$	—
Liabilities	Liabilities										Liabilities
Foreign currency derivatives	Foreign currency derivatives	$	40	$	—	$	40	$	—	Accrued and other current liabilities and other liabilities	Foreign currency derivatives	$	14	$	—	$	14	$	—	Accrued and other current liabilities and other liabilities
Deferred compensation plan liabilities (a)	Deferred compensation plan liabilities (a)	19		19		—		—		Other liabilities	Deferred compensation plan liabilities (a)	22		22		—		—		Other liabilities
Total liabilities at fair value	Total liabilities at fair value	$	59	$	19	$	40	$	—		Total liabilities at fair value	$	36	$	22	$	14	$	—

(a)The Deferred Compensation Plan assets consist of various mutual funds. See Note 15 in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2021,~~2022, for additional information regarding our Deferred Compensation Plan.

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(3) FINANCIAL INSTRUMENTS

Cash and Cash Equivalents

As of September 30, ~~2021~~2022 and March 31, ~~2021,~~2022, our cash and cash equivalents were ~~$1,630~~$1,539 million and ~~$5,260~~$2,732 million, respectively. Cash equivalents were valued using quoted market prices or other readily available market information.

Short-Term Investments

Short-term investments consisted of the following as of September 30, ~~2021~~2022 and March 31, ~~2021~~2022 (in millions):


		As of September 30, 2021								As of March 31, 2021									As of September 30, 2022								As of March 31, 2022
		Cost or Amortized Cost		Gross Unrealized				Fair Value		Cost or Amortized Cost		Gross Unrealized				Fair Value			Cost or Amortized Cost		Gross Unrealized				Fair Value		Cost or Amortized Cost		Gross Unrealized				Fair Value
				Gains		Losses						Gains		Losses							Gains		Losses						Gains		Losses
Corporate bonds	Corporate bonds	$	152	$	—	$	—	$	152	$	372	$	—	$	—	$	372	Corporate bonds	$	129	$	—	$	(1)	$	128	$	117	$	—	$	(1)	$	116
U.S. Treasury securities	U.S. Treasury securities	65		—		—		65		374		1		—		375		U.S. Treasury securities	89		—		(1)		88		103		—		(1)		102
U.S. agency securities	U.S. agency securities	—		—		—		—		3		—		—		3		U.S. agency securities	4		—		—		4		—		—		—		—
Commercial paper	Commercial paper	35		—		—		35		136		—		—		136		Commercial paper	43		—		—		43		39		—		—		39
Foreign government securities	Foreign government securities	32		—		—		32		67		—		—		67		Foreign government securities	17		—		—		17		17		—		—		17
Asset-backed securities	Asset-backed securities	40		—		—		40		112		—		—		112		Asset-backed securities	38		—		(1)		37		38		—		—		38
Certificates of deposit	Certificates of deposit	18		—		—		18		41		—		—		41		Certificates of deposit	18		—		—		18		18		—		—		18
Short-term investments	Short-term investments	$	342	$	—	$	—	$	342	$	1,105	$	1	$	—	$	1,106	Short-term investments	$	338	$	—	$	(3)	$	335	$	332	$	—	$	(2)	$	330

The following table summarizes the amortized cost and fair value of our short-term investments, classified by stated maturity as of September 30, ~~2021~~2022 and March 31, ~~2021~~2022 (in millions):


		As of September 30, 2021				As of March 31, 2021					As of September 30, 2022				As of March 31, 2022
		Amortized Cost		Fair Value		Amortized Cost		Fair Value			Amortized Cost		Fair Value		Amortized Cost		Fair Value
Short-term investments	Short-term investments									Short-term investments
Due within 1 year	Due within 1 year	$	242	$	242	$	895	$	896	Due within 1 year	$	264	$	262	$	250	$	249
Due 1 year through 5 years	Due 1 year through 5 years	94		94		203		203		Due 1 year through 5 years	69		68		77		76
Due after 5 years	Due after 5 years	6		6		7		7		Due after 5 years	5		5		5		5
Short-term investments	Short-term investments	$	342	$	342	$	1,105	$	1,106	Short-term investments	$	338	$	335	$	332	$	330

(4) DERIVATIVE FINANCIAL INSTRUMENTS

Assets or liabilities associated with our derivative instruments and hedging activities are recorded at fair value in other current assets/other assets, or accrued and other current liabilities/other liabilities, respectively, on our Condensed Consolidated Balance Sheets. As discussed below, the accounting for gains and losses resulting from changes in fair value depends on the use of the derivative instrument and whether it is designated and qualifies for hedge accounting.

We transact business in various foreign currencies and have significant international sales and expenses denominated in foreign currencies, subjecting us to foreign currency risk. We purchase foreign currency forward contracts, generally with maturities of 18 months or less, to reduce the volatility of cash flows primarily related to forecasted revenue and expenses denominated in certain foreign currencies. Our cash flow risks are primarily related to fluctuations in the Euro, British pound sterling, Canadian dollar, Swedish krona, Australian dollar, Japanese yen, Chinese yuan, South Korean won and Polish zloty. In addition, we utilize foreign currency forward contracts to mitigate foreign currency exchange risk associated with foreign-currency-denominated monetary assets and liabilities, primarily intercompany receivables and payables. The foreign currency forward contracts not designated as hedging instruments generally have a contractual term of approximately three months or less and are transacted near month-end. We do not use foreign currency forward contracts for speculative trading purposes.

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Cash Flow Hedging Activities

Certain of our forward contracts are designated and qualify as cash flow hedges. To qualify for hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedges and must be highly effective in offsetting changes to future cash flows on hedged transactions. The derivative assets or liabilities associated with our hedging activities are recorded at fair value in other current assets/other assets, or accrued and other current liabilities/other liabilities, respectively, on our Condensed Consolidated Balance Sheets. The gains or losses resulting from changes in the fair value of these hedges is initially reported, net of tax, as a component of accumulated other comprehensive income (loss) in stockholders’ equity. The gains or losses resulting from changes in the fair value of these hedges is subsequently reclassified into net revenue or research and development expenses, as appropriate, in the period when the forecasted transaction is recognized in our Condensed Consolidated Statements of Operations. In the event that the underlying forecasted transactions do not occur, or it becomes remote that they will occur, within the defined hedge period, the gains or losses on the related cash flow hedges are reclassified from accumulated other comprehensive income (loss) to net revenue or research and development expenses, in our Condensed Consolidated Statements of Operations.

Total gross notional amounts and fair values for currency derivatives with cash flow hedge accounting designation are as follows (in millions):


		As of September 30, 2021												As of March 31, 2021												As of September 30, 2022												As of March 31, 2022
		Notional Amount				Fair Value								Notional Amount				Fair Value								Notional Amount				Fair Value								Notional Amount				Fair Value
				Asset				Liability								Asset				Liability								Asset				Liability								Asset				Liability

Forward contracts to purchase	Forward contracts to purchase			$	264			$	2			$	3			$	370			$	14			$	1		Forward contracts to purchase	$	262			$	—			$	24			$	375			$	4			$	3

Forward contracts to sell	Forward contracts to sell	$	1,649			$	38			$	4			$	1,840			$	15			$	35	Forward contracts to sell		$	2,033			$	275			$	—			$	1,829			$	52			$	6

The effects of cash flow hedge accounting in our Condensed Consolidated Statements of Operations for the three and six months ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows (in millions):


		Three Months Ended September 30,								Six Months Ended September 30,									Three Months Ended September 30,								Six Months Ended September 30,
		2021				2020				2021				2020					2022				2021				2022				2021
		Net revenue		Research and development		Net revenue		Research and development		Net revenue		Research and development		Net revenue		Research and development			Net revenue		Research and development		Net revenue		Research and development		Net revenue		Research and development		Net revenue		Research and development
Total amounts presented in our Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	Total amounts presented in our Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	$	1,826	$	553	$	1,151	$	421	$	3,377	$	1,068	$	2,610	$	859	Total amounts presented in our Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	$	1,904	$	565	$	1,826	$	553	$	3,671	$	1,137	$	3,377	$	1,068
Gains (losses) on foreign currency forward contracts designated as cash flow hedges	Gains (losses) on foreign currency forward contracts designated as cash flow hedges	$	(18)	$	4	$	1	$	—	$	(37)	$	12	$	12	$	(6)	Gains (losses) on foreign currency forward contracts designated as cash flow hedges	$	61	$	(5)	$	(18)	$	4	$	80	$	(8)	$	(37)	$	12

Balance Sheet Hedging Activities

Our foreign currency forward contracts that are not designated as hedging instruments are accounted for as derivatives whereby the fair value of the contracts are reported as other current assets or accrued and other current liabilities on our Condensed Consolidated Balance Sheets, and gains and losses resulting from changes in the fair value are reported in interest and other income (expense), net, in our Condensed Consolidated Statements of Operations. The gains and losses on these foreign currency forward contracts generally offset the gains and losses in the underlying foreign-currency-denominated monetary assets and liabilities, which are also reported in interest and other income (expense), net, in our Condensed Consolidated Statements of Operations.

Total gross notional amounts and fair values for currency derivatives that are not designated as hedging instruments are accounted for as follows (in millions):


		As of September 30, 2021												As of March 31, 2021												As of September 30, 2022												As of March 31, 2022
		Notional Amount				Fair Value								Notional Amount				Fair Value								Notional Amount				Fair Value								Notional Amount				Fair Value
				Asset				Liability								Asset				Liability								Asset				Liability								Asset				Liability
Forward contracts to purchase	Forward contracts to purchase			$	364			$	—			$	5			$	599			$	—			$	4		Forward contracts to purchase	$	415			$	—			$	14			$	496			$	6			$	—

Forward contracts to sell	Forward contracts to sell	$	686			$	9			$	—			$	450			$	4			$	—	Forward contracts to sell		$	696			$	26			$	—			$	400			$	1			$	5

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The effect of foreign currency forward contracts not designated as hedging instruments in our Condensed Consolidated Statements of Operations for the three and six months ended September 30, ~~2021~~2022 and ~~2020~~2021 was as follows (in millions):


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended September 30,				Six Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
		Interest and other income (expense), net									Interest and other income (expense), net
Total amounts presented in our Condensed Consolidated Statements of Operations in which the effects of balance sheet hedges are recorded	Total amounts presented in our Condensed Consolidated Statements of Operations in which the effects of balance sheet hedges are recorded	$	(14)	$	(10)	$	(28)	$	(13)	Total amounts presented in our Condensed Consolidated Statements of Operations in which the effects of balance sheet hedges are recorded	$	—	$	(14)	$	(5)	$	(28)
Gain (losses) on foreign currency forward contracts not designated as hedging instruments	Gain (losses) on foreign currency forward contracts not designated as hedging instruments	$	4	$	(3)	$	(3)	$	(7)	Gain (losses) on foreign currency forward contracts not designated as hedging instruments	$	14	$	4	$	27	$	(3)

(5) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) by component, net of tax, for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows (in millions):


	Unrealized Net Gains (Losses) on Available-for-Sale Securities		Unrealized Net Gains (Losses) on Derivative Instruments		Foreign Currency Translation Adjustments		Total
Balances as of June 30, 2022	$	(4)	$	137	$	(62)	$	71
Other comprehensive income (loss) before reclassifications	—		165		(43)		122
Amounts reclassified from accumulated other comprehensive income (loss)	—		(56)		—		(56)
Total other comprehensive income (loss), net of tax	—		109		(43)		66
Balances as of September 30, 2022	$	(4)	$	246	$	(105)	$	137


	Unrealized Net Gains (Losses) on Available-for-Sale Securities		Unrealized Net Gains (Losses) on Derivative Instruments		Foreign Currency Translation Adjustments		Total
Balances as of June 30, 2021	$	—	$	(23)	$	(12)	$	(35)
Other comprehensive income (loss) before reclassifications	—		36		(17)		19
Amounts reclassified from accumulated other comprehensive income (loss)	—		14		—		14
Total other comprehensive income (loss), net of tax	—		50		(17)		33
Balances as of September 30, 2021	$	—	$	27	$	(29)	$	(2)

Unrealized Net Gains (Losses) on Available-for-Sale Securities Unrealized Net Gains (Losses) on Derivative Instruments Foreign Currency Translation Adjustments Total
Balances as of June 30, 2020 $ 7 $ 2 $ (61) $ (52)
Other comprehensive income (loss) before reclassifications (3) (42) 9 (36)
Amounts reclassified from accumulated other comprehensive income (loss) — (1) — (1)
Total other comprehensive income (loss), net of tax
(3) (43) 9 (37)
Balances as of September 30, 2020 $ 4 $ (41) $ (52) $ (89)

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The changes in accumulated other comprehensive income (loss) by component, net of tax, for the six months ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows (in millions):


	Unrealized Net Gains (Losses) on Available-for-Sale Securities		Unrealized Net Gains (Losses) on Derivative Instruments		Foreign Currency Translation Adjustments		Total
Balances as of March 31, 2022	$	(3)	$	47	$	(29)	$	15
Other comprehensive income (loss) before reclassifications	(1)		271		(76)		194
Amounts reclassified from accumulated other comprehensive income (loss)	—		(72)		—		(72)
Total other comprehensive income (loss), net of tax	(1)		199		(76)		122
Balances as of September 30, 2022	$	(4)	$	246	$	(105)	$	137


	Unrealized Net Gains (Losses) on Available-for-Sale Securities		Unrealized Net Gains (Losses) on Derivative Instruments		Foreign Currency Translation Adjustments		Total
Balances as of March 31, 2021	$	—	$	(29)	$	(21)	$	(50)
Other comprehensive income (loss) before reclassifications	—		31		(8)		23
Amounts reclassified from accumulated other comprehensive income (loss)	—		25		—		25
Total other comprehensive income (loss), net of tax	—		56		(8)		48
Balances as of September 30, 2021	$	—	$	27	$	(29)	$	(2)

~~Table~~The effects on net income of ~~Contents~~amounts reclassified from accumulated other comprehensive income (loss) for the three and six months ended September 30, 2022 were as follows (in millions):

Unrealized Net Gains (Losses) on Available-for-Sale Securities Unrealized Net Gains (Losses) on Derivative Instruments Foreign Currency Translation Adjustments Total
Balances as of March 31, 2020 $ (4) $ 39 $ (85) $ (50)
Other comprehensive income (loss) before reclassifications 8 (74) 33 (33)
Amounts reclassified from accumulated other comprehensive income (loss) — (6) — (6)
Total other comprehensive income (loss), net of tax
8 (80) 33 (39)
Balances as of September 30, 2020 $ 4 $ (41) $ (52) $ (89)


	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)
Statement of Operations Classification	Three Months Ended September 30, 2022		Six Months Ended September 30, 2022




(Gains) losses on foreign currency forward contracts designated as cash flow hedges
Net revenue	$	(61)	$	(80)
Research and development	5		8






Total net (gain) loss reclassified, net of tax	$	(56)	$	(72)

The effects on net income of amounts reclassified from accumulated other comprehensive income (loss) for the three and six months ended September 30, 2021 were as follows (in millions):


	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)
Statement of Operations Classification	Three Months Ended September 30, 2021		Six Months Ended September 30, 2021




(Gains) losses on foreign currency forward contracts designated as cash flow hedges
Net revenue	$	18	$	37
Research and development	(4)		(12)






Total net (gain) loss reclassified, net of tax	$	14	$	25

~~The effects on net income of amounts reclassified from accumulated other comprehensive income (loss) for the three and six months ended September 30, 2020 were as follows (in millions):~~
Amount Reclassified From Accumulated Other Comprehensive Income (Loss)
Statement of Operations Classification
Three Months Ended
September 30, 2020
Six Months Ended
September 30, 2020
(Gains) losses on foreign currency forward contracts designated as cash flow hedges
Net revenue $ (1) $ (12)
Research and development — 6
Total net (gain) loss reclassified, net of tax $ (1) $ (6)

~~(6) BUSINESS COMBINATIONS~~

~~Codemasters Group Holdings plc~~

On February 18, 2021, we completed our acquisition of 100% of the equity interests of Codemasters Group Holdings plc, a public limited company registered in England and Wales (“Codemasters”), for a total purchase price of $1.2 billion, net of cash acquired. The fair values assigned to assets acquired and liabilities assumed are based on management’s best estimates and assumptions, and are considered preliminary as of the reporting date pending finalization of the valuation of deferred tax assets, tax liabilities, and payroll tax liabilities. We expect to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. During the three months ended September 30, 2021, we recorded a $5 million net tax liability, which resulted in an increase to goodwill.

~~Table of Contents~~

~~Glu Mobile Inc.~~

On April 29, 2021, we completed the acquisition of 100% of the equity interests of Glu Mobile Inc., a leading global developer and publisher of mobile games (“Glu” and the “Glu acquisition”) for a total purchase price of $2.0 billion, net of cash acquired of $332 million. The acquisition of Glu is expected to accelerate our mobile growth by creating a combined organization with ongoing live services across multiple games and genres. We also believe that the acquisition will create value by adding Glu’s expertise in casual sports and lifestyle genres to new titles based on our intellectual property. The transaction costs associated with the acquisition totaled approximately $15 million and were recognized in general and administrative expense, of which $11 million were recognized during fiscal 2022, all within the three months ended June 30, 2021.

In addition, upon the closing of the Glu acquisition, we assumed all outstanding unvested options and unvested restricted stock units relating to Glu common stock and such awards were converted into corresponding awards relating to a number of shares of our common stock using an exchange ratio equal to 0.0880, with substantially identical terms and conditions as were applicable to the corresponding Glu awards immediately prior to the closing of the acquisition, except as such terms and conditions were modified in the acquisition agreements (“Replacement Awards”). The estimated fair value of the Replacement Awards was $133 million, of which $23 million related to awards for which services were rendered prior to the Glu acquisition and represented part of the purchase consideration transferred in the Glu acquisition. The remaining $110 million is attributable to services to be rendered after the Glu acquisition and will be recognized as stock-based compensation expense over their remaining vesting periods.

During the three months ended September 30, 2021, we finalized the fair values assigned to the Glu assets acquired and liabilities assumed. The differences between the preliminary estimates recognized during the first quarter of fiscal 2022 and the final amounts are presented in the table below:

(In millions) Previously Reported
at June 30, 2021 Measurement Period Adjustments As Adjusted
at September 30, 2021
Current assets $ 63 $ — $ 63
Property and equipment, net 14 — 14
Other assets 48 — 48
Intangible assets 657 (131) 526
Goodwill 1,406 100 1,506
Deferred tax liabilities (69) 31 (38)
Current liabilities (78) — (78)
Other liabilities (39) — (39)
Purchase price, net of cash acquired $ 2,002 $ — $ 2,002
Intangibles assets by asset category(a)
Developed and core technology $ 305 $ (73) $ 232
Trade names and trademarks 252 (43) 209
Registered user base and other intangibles 12 — 12
In-process research and development 88 (15) 73
Total $ 657 $ (131) $ 526
(a) In-process research and development assets are considered indefinite-lived until complete. Excluding the in-process research and development assets, the weighted-average useful life of the Glu’s acquired intangible assets is currently estimated to be approximately 5.5 years.

The measurement period adjustments would not have had a material impact on the Condensed Consolidated Statements of Operations in the first quarter of fiscal 2022 had the adjustments to the provisional amounts been recognized as of the acquisition date.

~~Goodwill consists largely of workforce and synergies with our existing business. The goodwill is not deductible for tax purposes.~~

~~Table of Contents~~

The results of operations of Glu and the fair value of the assets acquired have been included in our Condensed Consolidated Financial Statements since the date of acquisition. Pro forma results of operations have not been presented because the effect of the acquisition was not material to our Condensed Consolidated Statements of Operations.

~~Playdemic Limited~~

On September 20, 2021, we completed the acquisition of 100% of the equity interests of Playdemic Limited, a private limited company incorporated in England and Wales (“Playdemic” and the “Playdemic acquisition”) for a total purchase price of $1.4 billion, net of cash acquired. The Playdemic acquisition is intended to be another step in our strategy of continued leadership in sports and mobile expansion. The transaction costs associated with the acquisition totaled approximately $11 million and were recognized in general and administrative expense, of which $8 million were recognized during the three months ended September 30, 2021.

Due to the proximity of the closing date of the Playdemic acquisition to the balance sheet date of September 30, 2021, the initial purchase accounting is incomplete and subject to change during the measurement period, which may result in material changes to our purchase price allocation. ~~We expect to finalize the purchase accounting as soon as practicable, but not later than one year from the acquisition date.~~

The following table summarizes the provisional allocation of the purchase price to the fair value of assets acquired and liabilities assumed based on management’s best estimates as of the reporting date:


~~(In millions)~~
~~Current assets~~	$	22
~~Property and equipment, net~~	2
~~Other assets~~	2
~~Intangible assets~~	~~354~~
~~Goodwill~~	~~1,100~~
~~Deferred tax liabilities~~	~~(67)~~
~~Current liabilities~~	~~(6)~~
~~Other liabilities~~	~~(2)~~
~~Purchase price, net of cash acquired~~	$	~~1,405~~

To develop our provisional fair values of assets acquired and liabilities assumed, we utilized currently available information and fair value allocation benchmarks from similar completed transactions. We are currently in the process of completing our purchase accounting; including, but not limited to, completing a valuation of acquired intangible assets and ~~valuation of deferred tax assets, tax liabilities, and payroll tax liabilities~~.

~~Goodwill consists largely of workforce and synergies with our existing business. The goodwill is not deductible for local tax purposes.~~

The results of operations during the three months ended September 30, 2021 for Playdemic are not material to our Condensed Consolidated Financial Statements. Pro forma results of operations have not been presented because the effect of the acquisition was not material to our Condensed Consolidated Statements of Operations.

~~During the six months ended September 30, 2021, we completed one other acquisition that was not material to our Condensed Consolidated Financial Statements.~~

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~~(7)~~(6) GOODWILL AND ACQUISITION-RELATED INTANGIBLES, NET

The changes in the carrying amount of goodwill for the six months ended September 30, ~~2021~~2022 are as follows (in millions):


		As of March 31, 2021		Activity		Effects of Foreign Currency Translation		As of September 30, 2021			As of March 31, 2022		Activity		Effects of Foreign Currency Translation		As of September 30, 2022
Goodwill	Goodwill	$	3,236	$	2,591	$	—	$	5,827	Goodwill	$	5,755	$	—	$	(12)	$	5,743
Accumulated impairment	Accumulated impairment	(368)		—		—		(368)		Accumulated impairment	(368)		—		—		(368)
Total	Total	$	2,868	$	2,591	$	—	$	5,459	Total	$	5,387	$	—	$	(12)	$	5,375

Acquisition-related intangibles consisted of the following (in millions):
As of September 30, 2021 As of March 31, 2021
Gross
Carrying
Amount Accumulated
Amortization Acquisition-
Related
Intangibles, Net Gross
Carrying
Amount Accumulated
Amortization Acquisition-
Related
Intangibles, Net
Finite-lived acquisition-related intangibles
Developed and core technology $ 939 $ (542) $ 397 $ 691 $ (472) $ 219
Trade names and trademarks 393 (169) 224 188 (144) 44
Registered user base and other intangibles 18 (10) 8 5 (5) —
Carrier contracts and related 85 (85) — 85 (85) —
Playdemic acquired intangibles 354 — $ 354 — — —
Total finite-lived acquisition-related intangibles $ 1,789 $ (806) $ 983 $ 969 $ (706) $ 263
Indefinite-lived acquisition-related intangibles
In-process research and development $ 97 $ — $ 97 $ 46 $ — $ 46
Total acquisition-related intangibles, net $ 1,886 $ (806) $ 1,080 $ 1,015 $ (706) $ 309

Due to the proximity of the closing date of the Playdemic acquisition to the balance sheet date of September 30, 2021, we included a provisional estimate of acquired intangibles as a separate line item in the above table. ~~We currently estimate the weighted-average useful life of Playdemic’s acquired intangible assets to be approximately~~ ~~7 years. See~~ ~~Note 6~~ ~~for additional information on our acquisition of Playdemic.~~


	As of September 30, 2022						As of March 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Acquisition- Related Intangibles, Net		Gross Carrying Amount		Accumulated Amortization		Acquisition- Related Intangibles, Net
Finite-lived acquisition-related intangibles
Developed and core technology	$	1,090	$	(720)	$	370	$	1,102	$	(643)	$	459
Trade names and trademarks	603		(255)		348		609		(212)		397
Registered user base and other intangibles	56		(43)		13		56		(30)		26

Total finite-lived acquisition-related intangibles	$	1,749	$	(1,018)	$	731	$	1,767	$	(885)	$	882
Indefinite-lived acquisition-related intangibles
In-process research and development	$	80	$	—	$	80	$	80	$	—	$	80
Total acquisition-related intangibles, net	$	1,829	$	(1,018)	$	811	$	1,847	$	(885)	$	962

Amortization of intangibles, including impairments for the three and six months ended September 30, ~~2021~~2022 and ~~2020~~2021 are classified in the Condensed Consolidated Statements of Operations as follows (in millions):


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended September 30,				Six Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Cost of revenue	Cost of revenue	$	22	$	—	$	44	$	—	Cost of revenue	$	39	$	22	$	69	$	44
Operating expenses	Operating expenses	30		6		70		11		Operating expenses	43		30		82		70
Total	Total	$	52	$	6	$	114	$	11	Total	$	82	$	52	$	151	$	114

During the three months ended September 30, 2022, we recorded an $18 million impairment charge for acquisition-related intangible assets, of which $12 million was recorded within cost of revenue and $6 million was recorded in operating expenses.

During the six months ended September 30, 2021, we recorded a $12 million impairment charge for acquisition-related intangible assets within operating expenses.

Acquisition-related intangible assets are generally amortized using the straight-line method over the lesser of their estimated useful lives or the agreement terms, currently ranging from 1 to 7 years. As of September 30, ~~2021~~2022 and March 31, ~~2021,~~2022, the weighted-average remaining useful life for acquisition-related intangible assets was approximately ~~5.4~~5.0 and ~~3.5~~5.2 years, respectively.

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As of September 30, ~~2021,~~2022, future amortization of finite-lived acquisition-related intangibles that will be recorded in the Condensed Consolidated Statements of Operations is estimated as follows (in millions):


Fiscal Year Ending March 31,	Fiscal Year Ending March 31,			Fiscal Year Ending March 31,
2022 (remaining six months)		$	149
2023		216
2023 (remaining six months)				2023 (remaining six months)	$	111
2024	2024	165		2024	156
2025	2025	121		2025	122
2026	2026	115		2026	118
2027	2027	96		2027	99
2028 and thereafter		121
2028				2028	96
2029 and thereafter				2029 and thereafter	29
Total	Total	$	983	Total	$	731

~~(8)~~(7) ROYALTIES AND LICENSES

Our royalty expenses consist of payments to (1) content licensors, (2) independent software developers, and (3) co-publishing and distribution affiliates. ~~License~~Content license royalties consist of payments made to celebrities, professional sports organizations, movie studios and other organizations for our use of their trademarks, copyrights, personal publicity rights, content and/or other intellectual property. Royalty payments to independent software developers are payments for the development of intellectual property related to our games. Co-publishing and distribution royalties are payments made to third parties for the delivery of products.

During the three and six months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we did not recognize any material losses or impairment charges on royalty-based commitments.

The current and long-term portions of prepaid royalties and minimum guaranteed royalty-related assets, included in other current assets and other assets, consisted of (in millions):


		As of September 30, 2021		As of March 31, 2021			As of September 30, 2022		As of March 31, 2022
Other current assets	Other current assets	$	76	$	24	Other current assets	$	72	$	35
Other assets	Other assets	22		20		Other assets	30		28
Royalty-related assets	Royalty-related assets	$	98	$	44	Royalty-related assets	$	102	$	63

At any given time, depending on the timing of our payments to our co-publishing and/or distribution affiliates, content licensors, and/or independent software developers, we classify any recognized unpaid royalty amounts due to these parties as accrued liabilities. AsThe current and long-term portions of ~~September 30, 2021 and March 31, 2021, royalty-related liabilities were $172 million and $210 million, respectively, which were~~accrued royalties, included in accrued and other current ~~liabilities.~~liabilities and other liabilities, consisted of (in millions):


	As of September 30, 2022		As of March 31, 2022
Accrued royalties	$	141	$	203
Other liabilities	—		3
Royalty-related liabilities	$	141	$	206

As of September 30, ~~2021,~~2022, we were committed to pay approximately ~~$1,961 million~~$2 billion to content licensors, independent software developers, and co-publishing and/or distribution affiliates, but performance remained with the counterparty (i.e., delivery of the product or content or other factors) and such commitments were therefore not recorded in our Condensed Consolidated Financial Statements. See Note 1211 for further information on our developer and licensor commitments.

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~~(9)~~(8) BALANCE SHEET DETAILS

Property and Equipment, Net

Property and equipment, net, as of September 30, ~~2021~~2022 and March 31, ~~2021~~2022 consisted of (in millions):


		As of September 30, 2021		As of March 31, 2021			As of September 30, 2022		As of March 31, 2022
Computer, equipment and software	Computer, equipment and software	$	821	$	808	Computer, equipment and software	$	861	$	853
Buildings	Buildings	369		370		Buildings	364		375
Leasehold improvements	Leasehold improvements	186		172		Leasehold improvements	179		202
Equipment, furniture and fixtures, and other	Equipment, furniture and fixtures, and other	93		93		Equipment, furniture and fixtures, and other	86		95
Land	Land	66		66		Land	66		66
Construction in progress	Construction in progress	46		12		Construction in progress	11		30
		1,581		1,521			1,567		1,621
Less: accumulated depreciation	Less: accumulated depreciation	(1,065)		(1,030)		Less: accumulated depreciation	(1,036)		(1,071)
Property and equipment, net	Property and equipment, net	$	516	$	491	Property and equipment, net	$	531	$	550

Depreciation expense associated with property and equipment was ~~$39~~$45 million and ~~$79~~$89 million for the three and six months ended September 30, 2022, respectively.

Depreciation expense associated with property and equipment was $$39 million and $$79 million for the three and six months ended September 30, 2021, respectively.

~~Depreciation expense associated with property and equipment was $32 million and $63 million for the three and six months ended~~Other Current Assets

Other current assets as of September 30, ~~2020, respectively.~~2022 and March 31, 2022 consisted of (in millions):


	As of September 30, 2022		As of March 31, 2022
Fair value of hedging contracts	$	287	$	61
Prepaids and deposits	242		239
Other	120		139
Total other current assets	$	649	$	439

Accrued and Other Current Liabilities

Accrued and other current liabilities as of September 30, ~~2021~~2022 and March 31, ~~2021~~2022 consisted of (in millions):


		As of September 30, 2021		As of March 31, 2021			As of September 30, 2022		As of March 31, 2022
Other accrued expenses	Other accrued expenses	$	343	$	351	Other accrued expenses	$	355	$	304
Accrued compensation and benefits	Accrued compensation and benefits	338		494		Accrued compensation and benefits	282		500

Accrued royalties	Accrued royalties	172		210		Accrued royalties	141		203
Sales returns and price protection reserves	Sales returns and price protection reserves	99		115		Sales returns and price protection reserves	68		144

Deferred net revenue (other)	Deferred net revenue (other)	99		95		Deferred net revenue (other)	111		156
Operating lease liabilities	Operating lease liabilities	68		76		Operating lease liabilities	77		81
Accrued and other current liabilities	Accrued and other current liabilities	$	1,119	$	1,341	Accrued and other current liabilities	$	1,034	$	1,388

Deferred net revenue (other) includes the deferral of ~~subscription revenue,~~ licensing arrangements, ~~advertising~~subscription revenue, and other revenue for which revenue recognition criteria has not been met.

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Deferred net revenue

Deferred net revenue as of September 30, ~~2021~~2022 and March 31, ~~2021~~2022 consisted of (in millions):


		As of September 30, 2021		As of March 31, 2021			As of September 30, 2022		As of March 31, 2022
Deferred net revenue (online-enabled games)	Deferred net revenue (online-enabled games)	$	1,322	$	1,527	Deferred net revenue (online-enabled games)	$	1,391	$	2,024
Deferred net revenue (other)	Deferred net revenue (other)	99		95		Deferred net revenue (other)	111		156
Deferred net revenue (noncurrent)	Deferred net revenue (noncurrent)	23		14		Deferred net revenue (noncurrent)	55		68
Total deferred net revenue	Total deferred net revenue	$	1,444	$	1,636	Total deferred net revenue	$	1,557	$	2,248

During the six months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we recognized ~~$1,504~~$1,951 million and ~~$985~~$1,504 million of revenue, respectively, that were included in the deferred net revenue balance at the beginning of the period.

~~Table of Contents~~

Remaining Performance Obligations

As of September 30, ~~2021,~~2022, revenue allocated to remaining performance obligations consists of our deferred revenue balance of ~~$1,444~~$1,557 million and amounts to be invoiced ~~and recognized as revenue~~ in future periods of ~~$89 million.~~$34 million, of which $24 million are expected to be recognized as revenue over the next 12 months, and the remainder thereafter. These balances exclude any estimates for future variable consideration as we have elected the optional exemption to exclude sales-based royalty revenue. ~~We expect to recognize substantially all of these balances as revenue over the next 12 months.~~

~~(10)~~(9) INCOME TAXES

The provision for income taxes for the three and six months ended September 30, ~~2021~~2022 is based on our projected annual effective tax rate for fiscal year ~~2022,~~2023, adjusted for specific items that are required to be recognized in the period in which they are incurred. Our effective tax rate for the three and six months ended September 30, ~~2021~~2022 was 1030 percent and 2129 percent, respectively, as compared to ~~negative 33~~10 percent and 921 percent, respectively, for the same period in fiscal year ~~2021. Our effective tax~~2022. The current period rate ~~for the three and six months ended September 30, 2021~~ was higher ~~than prior year~~ due to our decision to capitalize for income tax purposes certain foreign expenses which increased the taxable income in our foreign entities that is subject to U.S. tax. In accordance with our existing accounting policy, we do not establish deferred tax assets to offset this charge, but we expect future deductions of the capitalized amounts. The prior year effective tax rates included a tax benefit, net of valuation allowance, resulting from the Supreme Court of the United States denial of Altera’s appeal of the Altera opinion (the “Altera opinion”). Excluding the Altera opinion, the effective tax rate for three and six months ended September 30, 2020 would have been 13 percent and 20 percent, respectively.

~~In addition, during the three months ended September 30, 2021, we completed~~ the Codemasters intra-entity sale of intellectual property rights to our U.S. and Swiss intellectual property ~~owners. The transaction~~owners completed during the three months ended September 30, 2021, which resulted in a taxable gain. Under U.S. GAAP, any profit resulting from this intercompany transaction ~~will be~~was eliminated upon consolidation. However, the transaction resulted in a step-up of the U.S. and Swiss tax-deductible basis in the transferred intellectual property rights and, accordingly, created a temporary difference between the book basis and the tax basis of such intellectual property rights. As a result, we recognized a $60 million net tax benefit for the current and deferred tax impacts of the sale. Excluding the Codemasters intra-entity sale, the effective tax rate for three and six months ended September 30, 2021 would have been 28 percent and 31 percent, respectively.

We are subject to income tax examinations in various jurisdictions with respect to fiscal years after ~~2011.~~2013. The timing and potential resolution of income tax examinations is highly uncertain. The ~~total~~gross unrecognized tax benefits as of September 30, ~~2021~~2022 were ~~$587~~$743 million.

While we continue to measure our uncertain tax positions, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued. For example, in the period ended June 30, 2020, the decision of the Ninth Circuit Court of Appeals in Altera ~~opinion~~Corp. v Commissioner (“the Altera opinion”) resulted in a partial decrease of our unrecognized tax benefits. A complete resolution and settlement of the matters underlying the Altera opinion is reasonably possible within the next 12 months, which would result in an additional reduction of our gross unrecognized tax benefits. However, it is uncertain whether a complete resolution and settlement of such matters would also result in resolution of all related and unrelated U.S. positions for all applicable years. Therefore, it is not possible to provide a range of potential outcomes associated with a reversal of our gross unrecognized tax benefits.

~~It is also reasonably possible that an additional reduction of up to $5 million of~~ We expect changes in unrecognized tax benefits unrelated to the Altera opinion which may occur within the next 12twelve months ~~unrelated~~ to the Altera opinion, a portion of which would impact our effective tax rate. The actual amount could vary significantly depending on the ultimate timing and nature of any settlements and tax interpretations.

~~Each quarter, we perform a realizability analysis to evaluate whether it is more likely than not that all or a portion of our deferred tax assets will not~~ be realized. During the three and six months ended September 30, 2021, we recognized a decrease of $6 million and an increase of $7 million of valuation allowance against our deferred tax assets primarily due to the expected alignment of the recently acquired businesses with our global operating structure.insignificant.

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~~(11)~~(10) FINANCING ARRANGEMENTS

Senior Notes

In February 2021, we issued $750 million aggregate principal amount of 1.85% Senior Notes due February 15, 2031 (the “2031 Notes”) and $750 million aggregate principal amount of 2.95% Senior Notes due February 15, 2051 (the “2051 Notes”). Our proceeds were $1,478 million, net of discount of $6 million and issuance costs of $16 million. Both the discount and issuance costs are being amortized to interest expense over the respective terms of the 2031 Notes and the 2051 Notes using the effective interest rate method. The effective interest rate is 1.98% for the 2031 Notes and 3.04% for the 2051 Notes. Interest is payable semiannually in arrears, on February 15 and August 15 of each year.

In February 2016, we issued $400 million aggregate principal amount of 4.80% Senior Notes due March 1, 2026 (the “2026 Notes”). Our proceeds were $395 million, net of discount of $1 million and issuance costs of $4 million. Both the discount and issuance costs are being amortized to interest expense over the term of the 2026 Notes using the effective interest rate method. The effective interest rate was 4.97%. Interest is payable semiannually in arrears, on March 1 and September 1 of each year.

The carrying and fair values of the Senior Notes are as follows (in millions):


		As of September 30, 2021		As of March 31, 2021			As of September 30, 2022		As of March 31, 2022
Senior Notes:	Senior Notes:					Senior Notes:
4.80% Senior Notes due 2026	4.80% Senior Notes due 2026	$	400	$	400	4.80% Senior Notes due 2026	$	400	$	400
1.85% Senior Notes due 2031	1.85% Senior Notes due 2031	750		750		1.85% Senior Notes due 2031	750		750
2.95% Senior Notes due 2051	2.95% Senior Notes due 2051	750		750		2.95% Senior Notes due 2051	750		750
Total principal amount	Total principal amount	$	1,900	$	1,900	Total principal amount	$	1,900	$	1,900
Unaccreted discount	Unaccreted discount	(7)		(7)		Unaccreted discount	(6)		(6)
Unamortized debt issuance costs	Unamortized debt issuance costs	(16)		(17)		Unamortized debt issuance costs	(15)		(16)
Net carrying value of Senior Notes	Net carrying value of Senior Notes	$	1,877	$	1,876	Net carrying value of Senior Notes	$	1,879	$	1,878

Fair value of Senior Notes (Level 2)	Fair value of Senior Notes (Level 2)	$	1,911	$	1,873	Fair value of Senior Notes (Level 2)	$	1,462	$	1,711

As of September 30, ~~2021,~~2022, the remaining life of the 2026 Notes, 2031 Notes and 2051 Notes is approximately ~~4.4~~3.4 years, ~~9.4~~8.4 years, and ~~29.4~~28.4 years, respectively.

The Senior Notes are senior unsecured obligations and rank equally with all our other existing and future unsubordinated obligations and any indebtedness that we may incur from time to time under our Credit Facility.

The 2026 Notes, 2031 Notes and 2051 Notes are redeemable at our option at any time prior to December 1, 2025, November 15, 2030, and August 15, 2050, respectively, subject to a make-whole premium. After such dates, we may redeem each such series of Notes, respectively, at a redemption price equal to 100% of the aggregate principal amount plus accrued and unpaid interest. In addition, upon the occurrence of a change of control repurchase event, the holders of each such series of Notes may require us to repurchase all or a portion of these Notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. Each such series of Notes also include covenants that limit our ability to incur liens on assets and to enter into sale and leaseback transactions, subject to certain allowances.

Credit Facility

On August 29, 2019, we entered into a $500 million unsecured revolving credit facility ~~(“Credit~~(as amended, the “Credit Facility”) with a syndicate of ~~banks.~~banks which was amended on October 18, 2022. The Credit Facility terminates on August 29, 2024 unless the maturity is extended in accordance with its terms. The Credit Facility contains an option to arrange with existing lenders and/or new lenders to provide up to an aggregate of $500 million in additional commitments for revolving loans. Proceeds of loans made under the Credit Facility may be used for general corporate purposes.

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The credit agreement contains customary affirmative and negative covenants, including covenants that limit or restrict our ability to, among other things, incur subsidiary indebtedness, grant liens, and dispose of all or substantially all assets, in each case subject to customary exceptions for a credit facility of this size and type. We are also required to maintain compliance with a debt to EBITDA ratio. As of September 30, ~~2021,~~2022, we were in compliance with the debt to EBITDA ratio.

As of September 30, ~~2021,~~2022, no amounts were outstanding under the Credit Facility. $2 million of debt issuance costs that were paid in connection with obtaining this credit facility are being amortized to interest expense over the 5-year term of the Credit Facility.

Interest Expense

The following table summarizes our interest expense recognized for the three and six months ended September 30, ~~2021~~2022 and ~~2020~~2021 that is included in interest and other income (expense), net on our Condensed Consolidated Statements of Operations (in millions):


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended September 30,				Six Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021

Amortization of debt issuance costs	Amortization of debt issuance costs	$	(1)	$	—	$	(1)	$	(1)	Amortization of debt issuance costs	(1)		(1)		(1)		(1)
Coupon interest expense	Coupon interest expense	(14)		(11)		(28)		(21)		Coupon interest expense	(14)		(14)		(28)		(28)

Total interest expense	Total interest expense	$	(15)	$	(11)	$	(29)	$	(22)	Total interest expense	$	(15)	$	(15)	$	(29)	$	(29)

~~(12)~~

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(11) COMMITMENTS AND CONTINGENCIES

Development, Celebrity, League and Content Licenses: Payments and Commitments

The products we produce in our studios are designed and created by our employee designers, artists, software programmers and by non-employee software developers (“independent artists” or “third-party developers”). We typically advance development funds to the independent artists and third-party developers during development of our games, usually in installment payments made upon the completion of specified development milestones. Contractually, these payments are generally considered advances against subsequent royalties on the sales of the products. These terms are set forth in written agreements entered into with the independent artists and third-party developers.

In addition, we have certain celebrity, league and content license contracts that contain minimum guarantee payments and marketing commitments to promote the games we publish that may not be dependent on any deliverables. ~~Celebrities and organizations with whom we have contracts include, but are not limited to: CONMEBOL (Confederación Sudamericana de Fútbol),~~DFL Deutsche Fußball Liga E.V. (German Soccer League), FAPL (Football Association Premier League Limited), FIFA (Fédération Internationale de Football Association), FIFPRO Foundation, La Liga (Liga Nacional De Futbol Profesional), LFP (Ligue de Football Professionnel), Major League Soccer, Major League Soccer Players Association on behalf of OneTeam Partners, LLC, Serie A (Lega Nazionale Professionisti Serie A), and UEFA (Union des Associations Européennes de Football) (professional soccer); National Basketball Association and National Basketball Players Association (professional basketball); National Hockey League and NHL Players’ Association (professional hockey); NFL Properties LLC, NFL Players Association and NFL Players Inc. on behalf of OneTeam Partners, LLC (professional football); William Morris Endeavor Entertainment LLC (professional mixed martial arts); ESPN (content in EA SPORTS games); Disney Interactive (Star Wars and Disney Sorcerer’s Arena); Formula One Digital Media Limited and Formula Motorsport Limited (professional racing); PGA Tour, Inc. (professional golf); Major League Baseball and MLB Players Association (professional baseball); and Kimsaprincess, Inc. (Kim Kardashian: Hollywood). These developer and content license commitments represent the sum of (1) the cash payments due under non-royalty-bearing licenses and services agreements and (2) the minimum guaranteed payments and advances against royalties due under royalty-bearing licenses and services agreements, the majority of which are conditional upon performance by the counterparty. These minimum guarantee payments and any related marketing commitments are included in the table below.

~~Table of Contents~~

The following table summarizes our minimum contractual obligations as of September 30, ~~2021~~2022 (in millions):


				Fiscal Years Ending March 31,																	Fiscal Years Ending March 31,
				2022																	2023
				(Remaining																	(Remaining
		Total		six mos.)		2023		2024		2025		2026		2027		Thereafter			Total		six mos.)		2024		2025		2026		2027		2028		Thereafter
Unrecognized commitments	Unrecognized commitments																	Unrecognized commitments
Developer/licensor commitments	Developer/licensor commitments	$	1,961	$	109	$	392	$	427	$	421	$	330	$	79	$	203	Developer/licensor commitments	$	1,961	$	142	$	460	$	500	$	422	$	113	$	110	$	214
Marketing commitments	Marketing commitments	649		84		150		144		130		92		19		30		Marketing commitments	929		97		252		214		178		76		63		49
Senior Notes interest	Senior Notes interest	863		21		55		55		55		54		36		587		Senior Notes interest	809		22		55		55		54		36		36		551
Operating lease imputed interest	Operating lease imputed interest	31		4		6		5		4		3		2		7		Operating lease imputed interest	37		4		8		6		5		3		3		8
Operating leases not yet commenced (a)	Operating leases not yet commenced (a)	160		3		7		8		11		12		12		107		Operating leases not yet commenced (a)	152		—		4		10		16		16		14		92
Other purchase obligations	Other purchase obligations	215		12		66		128		7		2		—		—		Other purchase obligations	155		32		99		17		5		2		—		—
Total unrecognized commitments	Total unrecognized commitments	3,879		233		676		767		628		493		148		934		Total unrecognized commitments	4,043		297		878		802		680		246		226		914

Recognized commitments	Recognized commitments																	Recognized commitments
Senior Notes principal and interest	Senior Notes principal and interest	1,906		6		—		—		—		400		—		1,500		Senior Notes principal and interest	1,906		6		—		—		400		—		—		1,500
Operating leases	Operating leases	318		34		59		53		43		38		26		65		Operating leases	345		46		64		58		45		31		22		79
Transition Tax and other taxes	Transition Tax and other taxes	31		11		3		4		6		7		—		—		Transition Tax and other taxes	17		—		4		6		7		—		—		—
Licensing commitments		15		15		—		—		—		—		—		—

Total recognized commitments	Total recognized commitments	2,270		66		62		57		49		445		26		1,565		Total recognized commitments	2,268		52		68		64		452		31		22		1,579

Total Commitments	Total Commitments	$	6,149	$	299	$	738	$	824	$	677	$	938	$	174	$	2,499	Total Commitments	$	6,311	$	349	$	946	$	866	$	1,132	$	277	$	248	$	2,493

(a)As of September 30, ~~2021,~~2022, we have entered into ~~three~~ office ~~leases~~ and ~~one~~ equipment ~~lease~~leases that have not yet commenced with aggregate future lease payments of approximately ~~$160~~$152 million. These leases are expected to commence between fiscal year ~~2022~~2023 and fiscal year 2025, and will have lease terms ranging from 35 to 12 years.

The unrecognized amounts represented in the table above reflect our minimum cash obligations for the respective fiscal years, but do not necessarily represent the periods in which they will be recognized and expensed in our Condensed Consolidated Financial Statements. In addition, the amounts in the table above are presented based on the dates the amounts are contractually due as of September 30, ~~2021;~~2022; however, certain payment obligations may be accelerated depending on the performance of our operating results.

In addition to what is included in the table above, as of September 30, ~~2021,~~2022, we had a net liability for unrecognized tax benefits and an accrual for the payment of related interest totaling ~~$298~~$466 million, of which we are unable to make a reasonably reliable estimate of when cash settlement with a taxing authority will occur.

Legal Proceedings

~~The Netherlands Gambling Authority (“NGA”) has asserted that the randomized selection~~

Table of virtual items in the FIFA Ultimate Team mode of our FIFA franchise contravenes the Dutch Betting and Gaming Act. On October 15, 2020, the District Court of the Hague affirmed the NGA’s decision. We have appealed the District Court’s order, and the NGA’s decision is suspended through the appeals process. We do not believe that the operational or financial consequences from these proceedings will have a material adverse effect on our Condensed Consolidated Financial Statements. We do not believe that our products and services violate applicable gambling laws.Contents

We are ~~also~~ subject to claims and litigation arising in the ordinary course of business. We do not believe that any liability from any reasonably foreseeable disposition of such claims and litigation, individually or in the aggregate, would have a material adverse effect on our Condensed Consolidated Financial Statements.

~~Table of Contents~~

~~(13)~~(12) STOCK-BASED COMPENSATION

Valuation Assumptions

We recognize compensation cost for stock-based awards to employees based on the awards’ estimated grant-date fair value using a straight-line approach over the service period for which such awards are expected to vest. We account for forfeitures as they occur.

The estimation of the fair value of market-based restricted stock units, stock options and ESPP purchase rights is affected by assumptions regarding subjective and complex variables. Generally, our assumptions are based on historical information and judgment is required to determine if historical trends may be indicators of future outcomes. We estimate the fair value of our stock-based awards as follows:

•Restricted Stock Units and Performance-Based Restricted Stock Units. The fair value of restricted stock units and performance-based restricted stock units (other than market-based restricted stock units) is determined based on the quoted market price of our common stock on the date of grant.

•Market-Based Restricted Stock Units. Market-based restricted stock units consist of grants of performance-based restricted stock units to certain members of executive management that vest contingent upon the achievement of pre-determined market and service conditions (referred to herein as “market-based restricted stock units”). The fair value of our market-based restricted stock units is estimated using a Monte-Carlo simulation model. Key assumptions for the Monte-Carlo simulation model are the risk-free interest rate, expected volatility, expected dividends and correlation coefficient.

•Stock Options and Employee Stock Purchase Plan. The fair value of stock options and stock purchase rights granted pursuant to our equity incentive plans and our 2000 Employee Stock Purchase Plan, as amended (“ESPP”), respectively, is estimated using the Black-Scholes valuation model based on the multiple-award valuation method. Key assumptions of the Black-Scholes valuation model are the risk-free interest rate, expected volatility, expected term and expected dividends. The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant for the expected term of the option. Expected volatility is based on a combination of historical stock price volatility and implied volatility of publicly-traded options on our common stock. An expected term is estimated based on historical exercise behavior, post-vesting termination patterns, options outstanding and future expected exercise behavior.

There were an insignificant number of stock options granted during the three and six months ended September 30, ~~2021~~2022 and ~~2020.~~

2021.

The estimated assumptions used in the Black-Scholes valuation model to value our ESPP purchase rights were as follows:


		ESPP Purchase Rights		ESPP Purchase Rights
		Three Months Ended September 30,		Three Months Ended September 30,
		2021	2020			2022		2021
Risk-free interest rate	Risk-free interest rate	0.1%	0.1%		Risk-free interest rate	3.1 – 3.3%		0.1	%
Expected volatility	Expected volatility	25 - 28%	34 - 39%		Expected volatility	30 – 31%		25 – 28%
Weighted-average volatility	Weighted-average volatility	27%	37%		Weighted-average volatility	30	%	27	%
Expected term	Expected term	6 - 12 months	6 - 12 months		Expected term	6 – 12 months		6 – 12 months
Expected dividends	Expected dividends	0.6%	NaN		Expected dividends	0.7	%	0.6	%

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Stock Options

The following table summarizes our stock option activity for the six months ended September 30, ~~2021:~~2022:


		Options (in thousands)	Weighted- Average Exercise Prices		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)			Options (in thousands)	Weighted- Average Exercise Prices		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Outstanding as of March 31, 2021		267	$	35.71
Assumed via acquisition		150	60.87
Outstanding as of March 31, 2022								Outstanding as of March 31, 2022	286	$	39.28

Granted	Granted	2	142.78					Granted	2	125.20
Exercised	Exercised	(34)	46.29					Exercised	(67)	39.58
Forfeited, cancelled or expired	Forfeited, cancelled or expired	(35)	66.29					Forfeited, cancelled or expired	(1)	64.95
Outstanding as of September 30, 2021		350	$	42.86	3.18	$	35
Outstanding as of September 30, 2022								Outstanding as of September 30, 2022	220	$	39.78	1.63	$	17
Vested and expected to vest	Vested and expected to vest	350	$	42.86	3.18	$	35	Vested and expected to vest	220	$	39.78	1.63	$	17
Exercisable as of September 30, 2021		309	$	40.24	2.70	$	32
Exercisable as of September 30, 2022								Exercisable as of September 30, 2022	218	$	39.07	1.57	$	17

The aggregate intrinsic value represents the total pre-tax intrinsic value based on our closing stock price as of September 30, ~~2021,~~2022, which would have been received by the option holders had all the option holders exercised their options as of that date. We issue new common stock from our authorized shares upon the exercise of stock options.

Restricted Stock Units

The following table summarizes our restricted stock ~~unit~~units activity for the six months ended September 30, ~~2021:~~2022:


		Restricted Stock Rights (in thousands)	Weighted- Average Grant Date Fair Values			Restricted Stock Units (in thousands)	Weighted- Average Grant Date Fair Values
Outstanding as of March 31, 2021		5,764	$	113.25
Assumed via acquisition		816	120.54
Outstanding as of March 31, 2022					Outstanding as of March 31, 2022	6,682	$	129.57

Granted	Granted	3,486	142.04		Granted	4,564	127.72
Vested	Vested	(1,860)	117.02		Vested	(2,378)	123.46
Forfeited or cancelled	Forfeited or cancelled	(552)	121.42		Forfeited or cancelled	(507)	132.03
Outstanding as of September 30, 2021		7,654	$	125.63
Outstanding as of September 30, 2022					Outstanding as of September 30, 2022	8,361	$	130.15

Performance-Based Restricted Stock Units

Our performance-based restricted stock units vest upon the achievement of pre-determined performance-based milestones, including, but not limited to, management reporting milestones of net bookings and operating income metrics, as well as service conditions. If these performance-based milestones are not met but service conditions are met, the performance-based restricted stock units will not vest, in which case any compensation expense we have recognized to date will be reversed. Generally, the measurement periods of our performance-based restricted stock units are 3 to 4 years, with awards vesting after each annual measurement period or cliff-vesting after the completion of the total aggregate measurement period.

Each quarter, we update our assessment of the probability that the performance milestones will be achieved. We amortize the fair values of performance-based restricted stock units over the requisite service period. The performance-based restricted stock units contain threshold, target and maximum milestones for each performance-based milestone. The number of shares of common stock to be issued at vesting will range from zero to 200 percent of the target number of performance-based restricted stock units attributable to each performance-based milestone based on the company’s performance as compared to these threshold, target and maximum performance-based milestones. Each performance-based milestone is weighted evenly and the number of shares that vest based on each performance-based milestone is independent from the other.

In June 2017, performance-based restricted stock units were granted contingent upon the achievement of the non-GAAP net revenue and free cash flow performance milestones over a four-year performance period. During the three months ended June 30, 2021, approximately 266,000 of the 579,000 outstanding performance-based restricted stock units were earned and vested on May 26, 2021 and the remaining outstanding units were cancelled.

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In June 2021, performance-based restricted stock units were granted contingent upon the achievement of net bookings and operating income performance milestones over three annual measurement periods, with awards either vesting after each annual measurement period or cliff vesting after the completion of the three-year period.

The following table summarizes our performance-based restricted stock unit activity, presented with the maximum number of shares that could potentially vest, for the six months ended September 30, ~~2021:~~2022:


		Performance- Based Restricted Stock Units (in thousands)	Weighted- Average Grant Date Fair Value			Performance- Based Restricted Stock Units (in thousands)	Weighted- Average Grant Date Fair Value
Outstanding as of March 31, 2021		579	$	110.51
Outstanding as of March 31, 2022					Outstanding as of March 31, 2022	190	$	142.60
Granted	Granted	219	142.60		Granted	509	127.98
Vested	Vested	(266)	110.51		Vested	(73)	142.60
Forfeited or cancelled	Forfeited or cancelled	(317)	110.98		Forfeited or cancelled	(65)	136.78
Outstanding as of September 30, 2021		215	$	142.60
Outstanding as of September 30, 2022					Outstanding as of September 30, 2022	561	$	130.01

Market-Based Restricted Stock Units

Our market-based restricted stock units vest contingent upon the achievement of pre-determined market and service conditions. If these market conditions are not met but service conditions are met, the market-based restricted stock units will not vest; however, any compensation expense we have recognized to date will not be reversed. The number of shares of common stock to be issued at vesting will range from zero to 200 percent of the target number of market-based restricted stock units based on our total stockholder return (“TSR”) relative to the performance of companies in the ~~NASDAQ-100~~Nasdaq-100 Index for each measurement period, over either a one-year, two-year cumulative, and three-year cumulative period, a two-year and four-year cumulative period or a three-year period.

The following table summarizes our market-based restricted stock unit activity, presented with the maximum number of shares that could potentially vest, for the six months ended September 30, ~~2021:~~2022:


		Market-Based Restricted Stock Units (in thousands)	Weighted- Average Grant Date Fair Value			Market-Based Restricted Stock Units (in thousands)	Weighted- Average Grant Date Fair Value
Outstanding as of March 31, 2021		2,195	$	134.60
Outstanding as of March 31, 2022					Outstanding as of March 31, 2022	1,321	$	134.69
Granted	Granted	159	173.25		Granted	178	176.70
Vested	Vested	(176)	128.62		Vested	(95)	114.97
Forfeited or cancelled	Forfeited or cancelled	(614)	153.69		Forfeited or cancelled	(582)	129.16
Outstanding as of September 30, 2021		1,564	$	131.71
Outstanding as of September 30, 2022					Outstanding as of September 30, 2022	822	$	149.98

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense resulting from stock options, restricted stock units, market-based restricted stock units, performance-based restricted stock units, and the ESPP purchase rights included in our Condensed Consolidated Statements of Operations (in millions):


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended September 30,				Six Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Cost of revenue	Cost of revenue	$	2	$	2	$	3	$	3	Cost of revenue	$	1	$	2	$	3	$	3
Research and development	Research and development	101		74		186		140		Research and development	95		101		176		186
Marketing and sales	Marketing and sales	15		12		27		23		Marketing and sales	16		15		29		27
General and administrative	General and administrative	31		25		58		49		General and administrative	28		31		57		58
Stock-based compensation expense	Stock-based compensation expense	$	149	$	113	$	274	$	215	Stock-based compensation expense	$	140	$	149	$	265	$	274

During the three and six months ended September 30, 2022, we recognized $24 million and $45 million, respectively, of deferred income tax benefit related to our stock-based compensation expense. During the three and six months ended September 30, 2021, we recognized $27 million and $51 million, respectively, of deferred income tax benefit related to our stock-based compensation expense. ~~During the three and six months ended September 30, 2020, we recognized $15 million and $38 million, respectively, of deferred income tax benefit related to our stock-based compensation expense.~~

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As of September 30, ~~2021,~~2022, our total unrecognized compensation cost related to stock options, restricted stock units, market-based restricted stock units, and performance-based restricted stock units was ~~$866~~$974 million and is expected to be recognized over a weighted-average service period of ~~1.9~~2.1 years. Of the ~~$866~~$974 million of unrecognized compensation cost, ~~$779~~$917 million relates to restricted stock units, ~~$68~~$33 million relates to market-based restricted stock units, ~~$16~~$24 million relates to performance-based restricted stock ~~units at an 134 percent average payout, and $3 million relates to stock options.~~units.

Stock Repurchase Program

In ~~May 2018, a Special Committee of~~November 2020, our ~~Board of Directors, on behalf of the full~~ Board of Directors authorized a program to repurchase up to ~~$2.4~~$2.6 billion of our common stock. ~~We completed repurchases~~Repurchases under the ~~May 2018~~November 2020 program were completed in ~~April 2020.~~October 2022.

In ~~November 2020,~~August 2022, our Board of Directors authorized a program to repurchase up to $2.6 billion of our common stock. This stock repurchase program expires on November 4, ~~2022.~~2024. Under this program, we may purchase stock in the open market or through privately negotiated transactions in accordance with applicable securities laws, including pursuant to pre-arranged stock trading plans. The timing and actual amount of the stock repurchases will depend on several factors including price, capital availability, regulatory requirements, alternative investment opportunities and other market conditions. We are not obligated to repurchase a specific number of shares under this program and it may be modified, suspended or discontinued at any time. ~~We are actively~~Upon completion of the November 2020 program in October 2022, we began repurchasing shares under ~~this~~the current program.

The following table summarizes total shares repurchased during the three and six months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		May 2018 Program	November 2020 Program		Total									November 2020 Program
(In millions)	(In millions)			Shares	Amount		Shares	Amount		Shares		Amount			(In millions)				Shares	Amount
Three months ended September 30, 2022											Three months ended September 30, 2022					2.6	$	325
Six months ended September 30, 2022											Six months ended September 30, 2022					5.1	$	645
Three months ended September 30, 2021	Three months ended September 30, 2021			—	$	—	2.3	$	325	2.3		$	325		Three months ended September 30, 2021				2.3	$	325
Six months ended September 30, 2021	Six months ended September 30, 2021			—	$	—	4.6	$	650	4.6		$	650		Six months ended September 30, 2021				4.6	$	650
Three months ended September 30, 2020				—	$	—	—	$	—	—		$	—
Six months ended September 30, 2020				0.7	$	78	—	$	—	0.7		$	78

~~(14)~~(13) EARNINGS PER SHARE

The following table summarizes the computations of basic earnings per share (“Basic EPS”) and diluted earnings per share (“Diluted EPS”). Basic EPS is computed as net income divided by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock-based compensation plans including stock options, restricted stock ~~restricted stock~~ units, and ESPP purchase rights using the treasury stock method.


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended September 30,				Six Months Ended September 30,
(In millions, except per share amounts)	(In millions, except per share amounts)	2021		2020		2021		2020		(In millions, except per share amounts)	2022		2021		2022		2021
Net income	Net income	$	294	$	185	$	498	$	550	Net income	$	299	$	294	$	610	$	498
Shares used to compute earnings per share:	Shares used to compute earnings per share:									Shares used to compute earnings per share:
Weighted-average common stock outstanding — basic	Weighted-average common stock outstanding — basic	285		289		285		289		Weighted-average common stock outstanding — basic	278		285		279		285
Dilutive potential common shares related to stock award plans and from assumed exercise of stock options		2		4		3		3
Dilutive potential common shares related to stock award plans										Dilutive potential common shares related to stock award plans	1		2		1		3
Weighted-average common stock outstanding — diluted	Weighted-average common stock outstanding — diluted	287		293		288		292		Weighted-average common stock outstanding — diluted	279		287		280		288
Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	1.03	$	0.64	$	1.75	$	1.90	Basic	$	1.08	$	1.03	$	2.19	$	1.75
Diluted	Diluted	$	1.02	$	0.63	$	1.73	$	1.88	Diluted	$	1.07	$	1.02	$	2.18	$	1.73

~~For the three and six months ended September 30, 2021 and 2020, 1 million of~~Certain restricted stock ~~options,~~units, market-based restricted stock units and ~~market-based~~performance-based restricted stock units were excluded from the treasury stock method computation of diluted shares ~~respectively,~~ as their inclusion would have had an antidilutive effect.

~~Table of Contents~~

~~Our performance-based restricted stock units, which are considered contingently issuable~~ For both the three and six months ended September 30, 2022, two million such shares ~~are also excluded from the treasury stock method computation because the related performance-based milestones~~ were ~~not achieved as of the end of~~excluded. For both the three and six months ended September 30, 2021, ~~and 2020.~~one million such shares were excluded.

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~~(15)~~(14) SEGMENT AND REVENUE INFORMATION

Our reporting segment is based upon: our internal organizational structure; the manner in which our operations are managed; the criteria used by our Chief Executive Officer, our Chief Operating Decision Maker (“CODM”), to evaluate segment performance; the availability of separate financial information; and overall materiality considerations. Our CODM currently reviews total company operating results to assess overall performance and allocate resources. As of September 30, ~~2021,~~2022, we have only one reportable segment, which represents our only operating segment.

Information about our total net revenue by timing of recognition for the three and six months ended September 30, ~~2021~~2022 and ~~2020~~2021 is presented below (in millions):


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended September 30,				Six Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net revenue by timing of recognition	Net revenue by timing of recognition									Net revenue by timing of recognition
Revenue recognized at a point in time	Revenue recognized at a point in time	$	770	$	337	$	1,175	$	779	Revenue recognized at a point in time	$	725	$	770	$	1,071	$	1,175
Revenue recognized over time	Revenue recognized over time	1,056		814		2,202		1,831		Revenue recognized over time	1,179		1,056		2,600		2,202
Net revenue	Net revenue	$	1,826	$	1,151	$	3,377	$	2,610	Net revenue	$	1,904	$	1,826	$	3,671	$	3,377

Generally, performance obligations that are recognized upfront upon transfer of control are classified as revenue recognized at a point in time, while performance obligations that are recognized over either the estimated offering period, contractual term or subscription period as the services are provided are classified as revenue recognized over time.

Revenue recognized at a point in time includes revenue allocated to the software license performance obligation. This also includes revenue from the licensing of software to third-parties.

Revenue recognized over time includes service revenue allocated to the future update rights and the online hosting performance obligations. This also includes service revenue allocated to the future update rights from the licensing of software to third-parties, ~~online-only software services~~Online-Hosted Services such as our Ultimate Team game mode, and subscription services.

Information about our total net revenue by composition for the three and six months ended September 30, ~~2021~~2022 and ~~2020~~2021 is presented below (in millions):


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended September 30,				Six Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net revenue by composition	Net revenue by composition									Net revenue by composition
Full game downloads	Full game downloads	$	337	$	163	$	570	$	386	Full game downloads	$	328	$	337	$	565	$	570
Packaged goods	Packaged goods	280		119		369		255		Packaged goods	274		280		378		369
Full game	Full game	617		282		939		641		Full game	602		617		943		939

Live services and other	Live services and other	1,209		869		2,438		1,969		Live services and other	1,302		1,209		2,728		2,438
Net revenue	Net revenue	$	1,826	$	1,151	$	3,377	$	2,610	Net revenue	$	1,904	$	1,826	$	3,671	$	3,377

Full game net revenue includes full game downloads and packaged goods. Full game downloads includes revenue from digital sales of full games on console, PC, ~~and~~ mobile phones and tablets. Packaged goods primarily includes revenue from software that is ~~sold physically. This includes (1) net revenue from game software~~ sold physically through traditional channels such as brick and mortar retailers and ~~(2)~~ software licensing revenue from third parties ~~(for example, makers of console platforms, personal computers or computer accessories)~~ who include certain of our full games for sale with their ~~products (for example, OEM bundles).~~

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Live services and other net revenue includes revenue from sales of extra content for console, PC and mobile games, licensing revenue, ~~from third-party publishing partners who distribute our games digitally,~~ subscriptions, ~~advertising,~~ and ~~non-software licensing.~~advertising.

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Information about our total net revenue by platform for the three and six months ended September 30, ~~2021~~2022 and ~~2020~~2021 is presented below (in millions):


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended September 30,				Six Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Platform net revenue	Platform net revenue									Platform net revenue
Console	Console	$	1,198	$	714	$	2,170	$	1,646	Console	$	1,161	$	1,198	$	2,203	$	2,170
PC and other	PC and other	377		249		738		574		PC and other	423		377		825		738
Mobile	Mobile	251		188		469		390		Mobile	320		251		643		469
Net revenue	Net revenue	$	1,826	$	1,151	$	3,377	$	2,610	Net revenue	$	1,904	$	1,826	$	3,671	$	3,377

Information about our operations in North America and internationally for the three and six months ended September 30, ~~2021~~2022 and ~~2020~~2021 is presented below (in millions):


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended September 30,				Six Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net revenue from unaffiliated customers	Net revenue from unaffiliated customers									Net revenue from unaffiliated customers
North America	North America	$	778	$	578	$	1,460	$	1,205	North America	$	794	$	778	$	1,556	$	1,460
International	International	1,048		573		1,917		1,405		International	1,110		1,048		2,115		1,917
Net revenue	Net revenue	$	1,826	$	1,151	$	3,377	$	2,610	Net revenue	$	1,904	$	1,826	$	3,671	$	3,377

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Electronic Arts Inc.:

Results of Review of Interim Financial Information

We have reviewed the condensed consolidated balance sheet of Electronic Arts, Inc. and subsidiaries (the Company) as of October ~~2, 2021,~~1, 2022, the related condensed consolidated statements of operations, comprehensive income, ~~and~~ stockholders’ equity for the three-month and six-month periods ended October ~~2, 2021~~1, 2022 and October ~~3, 2020,~~2, 2021, and cash flows for the six-month periods ended October ~~2, 2021~~1, 2022 and October ~~3, 2020,~~2, 2021 and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of April ~~3, 2021,~~2, 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated May ~~26, 2021,~~25, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of April ~~3, 2021,~~2, 2022, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

(Signed) KPMG LLP

Santa Clara, California

November ~~9, 2021~~8, 2022

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We use words such as “anticipate,” “believe,” “expect,” “intend,” “estimate”, “plan”, “predict”, “seek”, “goal”, “will”, “may”, “likely”, “would”, “should”, “could” (and the negative of any of these terms), “future” and similar expressions to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, trends in our business, projections of markets relevant to our business, uncertain events and assumptions and other characterizations of future events or circumstances are forward-looking statements. Forward-looking statements consist of, among other things, statements related to the impact of the COVID-19 pandemic to our business, operations and financial results, industry prospects, our future financial performance, and our business plans and objectives, and may include certain assumptions that underlie the forward-looking statements. These forward-looking statements are not guarantees of future performance and reflect management’s current expectations. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that might cause or contribute to such differences include those discussed in Part II, Item 1A of this Quarterly Report under the heading “Risk Factors” in, as well as in other documents we have filed with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2021.~~2022. We assume no obligation to revise or update any forward-looking statement for any reason, except as required by law.

OVERVIEW

The following overview is a high-level discussion of our operating results, as well as some of the trends and drivers that affect our business. Management believes that an understanding of these trends and drivers provides important context for our results for the three months ended September 30, ~~2021,~~2022, as well as our future prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Form 10-Q, including in the remainder of “Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”),” “Risk Factors,” and the Condensed Consolidated Financial Statements and related Notes. Additional information can be found in the “Business” section of our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2021~~2022 as filed with the SEC on May ~~26, 2021~~25, 2022 and in other documents we have filed with the SEC.

About Electronic Arts

Electronic Arts is a global leader in digital interactive entertainment. We develop, market, publish and deliver games, content and services that can be ~~played and watched~~experienced on game consoles, PCs, mobile phones and tablets. ~~We believe that the breadth and depth of~~At our ~~portfolio, live services offerings, and our use of multiple business models and distribution channels provide us with strategic advantages. Our foundation~~core is a ~~collection~~portfolio of intellectual property from which we create innovative games and content that ~~enables~~enable us to build on-going and meaningful relationships with a community of players, creators and viewers. Our portfolio includes brands that we either wholly own (such as ~~Battlefield, The Sims,~~ Apex Legends ~~Need for Speed~~, Battlefield, and ~~Plants vs. Zombies)~~The Sims) or license from others (such as ~~FIFA,~~ Madden, ~~NFL, UFC, NHL, Formula 1~~Star Wars, and ~~Star Wars)~~the 300+ licenses within our global football ecosystem). Through our live services offerings, we offer our players high-quality experiences designed to provide value to players, and extend and enhance gameplay. These live services include extra content, subscription offerings and other revenue generated in addition to the sale of our base games and free-to-play games. In addition, we are focused on reaching more players whenever and wherever they want to play. We believe that we can add value to our network by making it easier for players to connect to a world of play by offering choice of business model, distribution channel and device.

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Financial Results

Our key financial results for our fiscal quarter ended September 30, ~~2021~~2022 were as follows:

•Total net revenue was ~~$1,826~~$1,904 million, up 594 percent year-over-year. On a constant currency basis, we estimate that total net revenue would have been ~~$1,802~~$1,930 million, up 577 percent year-over-year.

•Live services and other net revenue was ~~$1,209~~$1,302 million, up 398 percent year-over-year.

•Gross margin was ~~72.9~~75.7 percent, ~~down 2~~up 3 percentage points year-over-year.

•Operating expenses were ~~$992~~$1,015 million, up 392 percent year-over-year. On a constant currency basis, we estimate that

operating expenses would have been ~~$983~~$1,034 million, up 375 percent year-over-year.

•Operating income was ~~$340~~$427 million, up ~~128~~26 percent year-over-year.

•Net income was ~~$294~~$299 million with diluted earnings per share of ~~$1.02.~~$1.07.

•~~Operating~~Net cash ~~flow~~used in operating activities was ~~$64~~$112 million, up 5275 percent year-over-year.

•Total cash, cash equivalents and short-term investments were ~~$1,972~~$1,874 million.

•We repurchased ~~2.3~~2.6 million shares of our common stock for $325 million.

•We paid cash dividends of ~~$48~~$53 million during the quarter ended September 30, ~~2021.~~2022.

From time to time, we make comparisons of current periods to prior periods with reference to constant currency. Constant

currency comparisons are based on translating local currency amounts in the current period at actual foreign exchange rates

from the prior comparable ~~period.~~period, net of the impact of hedging activities. We evaluate our financial performance on a constant currency basis in order to facilitate

period-to-period comparisons without regard to the impact of changing foreign currency exchange rates.

Trends in Our Business

~~COVID-19 Impact~~. We are closely monitoring the impact of the COVID-19 pandemic to our people and our business. Since the outbreak of COVID-19, we have focused on actions to support our people, our players, and communities around the world that have been affected by the COVID-19 pandemic.

~~Our People~~: The well-being of our people is our top priority, and to keep everyone as safe as possible, the vast majority of our workforce is expected to work from home at least through January 2022. We are offering support to our people to assist with work from home and care needs, a pandemic care leave program, and additional services for mental and physical health. We have developed a detailed protocol for how we evaluate the readiness to return to work for each of our offices around the world, accounting for guidance from health authorities and government, vaccine availability and effectiveness, the comfort level of our employees, and preparation of our facilities for continued physical distancing.

~~Our Business~~: Execution against our strategic pillars and increased engagement with our products and services led to growth in our business, aided by consumers spending more time at home because of social restrictions and local government mandates related to the COVID-19 pandemic. In addition, longer-term trends that benefit our business accelerated. Live services and other net revenue for fiscal year 2021 increased more than 10 percent year-over-year. We have also experienced a significant increase in the percentage of our games purchased digitally.

~~Future Outlook~~: The full extent of the impact of the COVID-19 pandemic to our business, operations and financial results will depend on numerous evolving factors that cannot be accurately predicted at this time, such as the duration and spread of the pandemic, the extent, speed and effectiveness of worldwide containment and vaccination efforts and the impact of these and other factors on our employees, customers, partners and vendors. Trends from fiscal year 2021 that benefited our industry and business may not be indicative of results for future periods, particularly as factors related to the COVID-19 pandemic lessen and consumers can engage with other forms of entertainment, if the trend towards digital adoption decelerates, or if global macroeconomic effects of the COVID-19 pandemic persist even after the pandemic has subsided. Additional factors that could impact our business include: our ability to timely deliver high quality and technically stable games and services while our teams, including our development teams, work in a distributed environment, our ability to safely reintroduce our employees to our offices when it is appropriate to do so, and other factors included in Part II, Item 1A of this Quarterly Report under the heading “Risk Factors”.

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Live Services Business. We offer our players high-quality experiences designed to provide value to players and to extend and enhance gameplay. These live services include extra content, subscription offerings and other revenue generated in addition to the sale of our base games and free-to-play games. Our net revenue attributable to live services and other was $5,288 million, $4,485 million ~~$3,904 million~~ and ~~$3,358~~$3,904 million for the trailing twelve months ended September 30, 2022, 2021 ~~2020~~ and ~~2019,~~2020, respectively, and we expect that live services net revenue will continue to be material to our business. Within live services and other, net revenue attributable to extra content was $4,140 million, $3,382 million ~~$3,090 million~~ and ~~$2,599~~$3,090 million for the trailing twelve months ended September 30, 2022, 2021 ~~2020~~ and ~~2019,~~2020, respectively. Extra content net revenue has increased as more players engage with our games and services, ~~over longer periods of time,~~ and purchase additional content designed to provide value to players and extend and enhance gameplay. Our most popular live ~~service is~~services are the extra content purchased for the Ultimate Team mode associated with our sports ~~franchises.~~franchises and extra content purchased for our Apex Legends franchise. Ultimate Team allows players to collect current and former professional players in order to build and compete as a personalized team. ~~Net~~Live services net revenue generated from extra content ~~sales for~~ purchased within the Ultimate Team ~~was $1,623 million, $1,491 million and $1,369 million during fiscal years 2021, 2020 and 2019, respectively,~~ mode associated with our sports franchises, a substantial portion of which was derived from FIFA Ultimate ~~Team.~~Team, and from our Apex Legends franchise, is material to our business.

Digital Delivery of Games. In our industry, players increasingly purchase games digitally as opposed to purchasing physical discs. While this trend, as applied to our business, may not be linear ~~because~~due to a mix of ~~product mix~~products during a fiscal year, consumer buying patterns and other factors, over time we expect players to purchase an increasingly higher proportion of our games ~~digitally; therefore~~digitally. As a result, we expect net revenue attributable to digital full game downloads to increase over time and net revenue attributable to sales of packaged goods to decrease.

Our net revenue attributable to digital full game downloads was $1,282 million, $918 million ~~$811 million~~ and ~~$681~~$811 million during fiscal years 2022, 2021 ~~2020~~ and ~~2019,~~2020, respectively; while our net revenue attributable to packaged goods sales decreased from ~~$1,112 million in fiscal year 2019 to~~ $1,076 million in fiscal year 2020 ~~and~~to $695 million in fiscal year ~~2021.~~2021 and $711 million in fiscal year 2022. In addition, as measured based on total units sold on Microsoft’s Xbox One and Xbox Series X and Sony’s PlayStation 4 and 5 rather than by net revenue, we estimate that 6265 percent, 4962 percent, and 49 percent of our total units sold during fiscal years 2022, 2021 ~~2020~~ and ~~2019~~2020 were sold digitally. Digital full game units are based on sales information provided by Microsoft and Sony; packaged goods units sold through are estimated by obtaining data from significant retail partners in North America, Europe and Asia, and applying internal sales estimates with respect to retail partners from which we do not obtain data. We believe that these percentages are reasonable estimates of the proportion of our games that are digitally downloaded in relation to our total number of units sold for the applicable period of measurement.

During fiscal year 2021, the percentage of our full games purchased digitally accelerated, likely aided by factors associated with the COVID-19 pandemic, including store closures of our key retail partners for a portion of fiscal year 2021. While digital adoption may decelerate in fiscal year 2022, as factors related to the COVID-19 pandemic lessen or if global macroeconomic effects of the COVID-19 pandemic persist even after the pandemic has subsided, we believe that the significant increase in digital adoption we experienced in fiscal year 2021 is likely a permanent structural change. Increases in consumer adoption of digital purchase of games combined with increases in our live services revenue generally results in expansion of our gross margin, as costs associated with selling a game digitally is generally less than selling the same game through traditional retail and distribution channels.

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Increased Competition. Competition in our business is intense. Our competitors range from established interactive entertainment companies to emerging start-ups. In addition, the gaming, technology/internet, and entertainment industries have converged in recent years and larger, well-funded technology companies have strengthened their interactive entertainment capabilities resulting in more direct competition with us. For example, companies such as Amazon.com, Inc., Alphabet Inc., Meta Platforms, Inc., Microsoft Corporation, and Netflix, Inc. have increased investment and resources dedicated to interactive entertainment capabilities. We expect them to continue to pursue and strengthen these businesses. Their greater financial or other resources may provide larger budgets to develop and market tools, technologies, products and services that gain consumer success and shift player time and engagement away from our products and services. In addition, our leading position within the interactive entertainment industry makes us a prime target for recruiting our executives, as well as key creative and technical talent, resulting in retention challenges and increased cost to retain and incentivize our key people.

Recently, our industry has undergone a period of increased consolidation which increases competitive pressure on us as interactive entertainment companies grow through acquisition – such as Take Two Interactive’s recent acquisition of Zynga – or as larger, well-funded technology companies strengthen their interactive entertainment capabilities – such as Microsoft’s definitive agreement to acquire Activision Blizzard.

Free-to-Play Games. The global adoption of mobile devices and a business model for those devices that allows consumers to try new games with no up-front cost, and that are monetized through a live service associated with the game, particularly extra content sales, has led to significant sales growth historically in the mobile gaming industry. Similarly, sales of extra content are the primary driver of our mobile business. While the mobile gaming industry has recently experienced headwinds, it remains a strategic focus for us, as we look to reach new players, grow our existing network, and build interconnected ecosystems. We ~~are investing resources~~expect growth in our mobile business ~~seeking to maximize our~~and mobile ~~live services, innovate on mobile with our franchises, and have added additional growth opportunities through mergers and acquisitions activity.~~net revenue in fiscal year 2023. Likewise, the consumer acceptance of free-to-play, live service-based, online PC and console games has broadened our consumer base and has begun to expand into the console market. For example, within our business, we offer Apex Legends as a free-to-play, live service-based PC and console game. We expect extra content revenue generated from mobile, PC and console free-to-play games to continue to be an important part of our business.

Concentration of Sales Among the Most Popular Games. In all major segments of our industry, we see a large portion of games sales concentrated on the most popular titles. Similarly, a significant portion of our revenue historically has been derived from games based on a few popular franchises, several of which we have released on an annual or bi-annual basis. In particular, we have historically derived a significant portion of our net revenue from our ~~largest and most popular game, FIFA,~~global football franchise, the annualized version of which is consistently one of the best-selling games in the marketplace. We have invested in over 300 individual partnerships and licenses to create our global football ecosystem and starting in fiscal year 2024, our global football franchise will transition to a new EA SPORTS FC brand. Our vision for the future of interactive football with EA SPORTS FC is to create the largest football club in the world, and we believe this is the right opportunity for us so that we can continue delivering innovation and growing to connect more fans on a global scale for years to come.

COVID-19 Impact. We continue to monitor the impact of the COVID-19 pandemic to our people and our business. Since the initial outbreak, we have focused on actions to support our people, our players, and communities around the world that have been affected by the COVID-19 pandemic. The well-being of our people is our top priority as conditions continue to fluctuate around the world. We are ~~currently reviewing~~re-opening our ~~naming rights agreement with FIFA which~~office locations and resuming business travel as it is ~~separate from our other official partnerships and licenses~~appropriate to do so, consistent with the ~~players, clubs,~~health and ~~leagues included~~safety of our employees and in compliance with any local legal restrictions or requirements. During the pandemic, longer-term trends that benefit our business accelerated. Live services and other net revenue has increased and we have also experienced a significant increase in the ~~game.~~percentage of our games purchased digitally over the past two fiscal years. These trends may not be indicative of results for future periods, particularly if the trend towards digital adoption decelerates, or as a result of global macroeconomic effects related or unrelated to the COVID-19 pandemic. See the section titled “Risk Factors” in Part I, Item 1A of this Annual Report for further discussion of the possible impact of the COVID-19 pandemic to our workforce and business.

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~~Recurring~~Re-occurring Revenue Sources. Our business model includes revenue that we deem ~~recurring~~re-occurring in nature, such as revenue from our live services, annualized sports franchises (e.g., ~~FIFA,~~global football, Madden NFL), and our console, PC and mobile catalog titles (i.e., titles that did not launch in the current fiscal year)~~, and our live services.~~. We have been able to forecast revenue from these areas of our business with greater relative confidence than for new games, services and business models. As we continue to incorporate new business models and modalities of play into our games, our goal is to continue to look for opportunities to expand the ~~recurring~~re-occurring portion of our business.

Net Bookings. In order to improve transparency into our business, we disclose an operating performance metric, net bookings. Net bookings is defined as the net amount of products and services sold digitally or sold-in physically in the period. Net bookings is calculated by adding total net revenue to the change in deferred net revenue for online-enabled games.

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The following is a calculation of our total net bookings for the periods presented:


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended September 30,				Six Months Ended September 30,
(In millions)	(In millions)	2021		2020		2021		2020		(In millions)	2022		2021		2022		2021
Total net revenue	Total net revenue	$	1,826	$	1,151	$	3,377	$	2,610	Total net revenue	$	1,904	$	1,826	$	3,671	$	3,377
Change in deferred net revenue (online-enabled games)	Change in deferred net revenue (online-enabled games)	25		(241)		(190)		(310)		Change in deferred net revenue (online-enabled games)	(150)		25		(618)		(190)
Net bookings	Net bookings	$	1,851	$	910	$	3,187	$	2,300	Net bookings	$	1,754	$	1,851	$	3,053	$	3,187

Net bookings were ~~$1,851~~$1,754 million for the three months ended September 30, ~~2021~~2022 primarily driven by sales related to our FIFA franchise,Apex Legends, our Madden franchise, ~~Madden NFL 22~~The Sims 4, and our F1 franchise~~The Sims 4.~~. Net bookings ~~increased $941~~decreased $97 million, or ~~103~~5 percent, as compared to the three months ended September 30, ~~2020~~2021, primarily due to a $51 million impact related to fluctuations in foreign exchange rates, net of hedging activities, decreased sales of extra content related to Apex Legends due to timing of in-game events, and the year-over-year change in the launch date of ~~our FIFA console title~~F1 from ~~the third quarter in fiscal year 2021 to~~ the second quarter in fiscal year 2022 ~~and~~ ~~Apex Legends~~,to the first quarter in fiscal year 2023. The decreases were partially offset by sales of extra content from the addition of ~~UFC 4~~Golf Clash, and ~~the Star Wars~~strength in our FIFA franchise. Live services and other net bookings were ~~$1,155~~$1,119 million for the three months ended September 30, ~~2021,~~2022, and ~~increased $511~~decreased $36 million, or 793 percent, as compared to the three months ended September 30, ~~2020.~~2021. The ~~increase~~decrease in live services and other net bookings was primarily due ~~primarily~~ to ~~an increase~~fluctuations in foreign exchange rates, net of hedging activities, decreased sales of extra content ~~for~~ related toApex Legends, ~~FIFA Ultimate Team, new games added~~due to ~~our portfolio through acquisitions activity,~~timing of in-game events, and The Sims 4,. partially offset by sales of extra content from the addition of Golf Clash and strength in our FIFA franchise. Full game net bookings were ~~$696~~$635 million for the three months ended September 30, ~~2021,~~2022, and ~~increased $430~~decreased $61 million, or ~~162~~9 percent, as compared to the three months ended September 30, ~~2020~~2021 primarily due to the year-over-year change in the launch date of ~~our FIFA console title,~~F1 ~~and~~ ~~F1 2021,~~ ~~partially offset by~~ ~~UFC 4~~ ~~and the Star Wars franchise.~~

~~Mergers and Acquisitions~~

~~Acquisition of Codemasters~~. On February 18, 2021, we completed the acquisition of Codemasters Group Holdings plc for total cash consideration of $1.2 billion, net of cash acquired. Codemasters is a UK-based game developer and publisher of high-quality racing games across console, PC and mobile. We expect the Codemasters acquisition to grow our presence in racing, creating a global leader in racing entertainment. Codemasters was integrated into the Company for financial reporting purposes during the fourth quarter of fiscal year 2021.

~~Acquisition of Glu Mobile~~. On April 29, 2021, we completed the acquisition of 100% of the equity interests of Glu Mobile Inc., a leading global developer and publisher of mobile games for a total purchase price of $2.0 billion, net of cash acquired of $332 million. The acquisition of Glu is expected to accelerate our mobile growth by creating a combined organization with ongoing live services across multiple games and genres. We also believe that the acquisition will create value by adding Glu’s expertise in casual sports and lifestyle genres to new titles based on our intellectual property. Glu was integrated into the Company for financial reporting purposes during the first fiscal quarter of fiscal year 2022.

~~Acquisition of Playdemic.~~ On September 20, 2021, we completed the acquisition of 100% of the equity interests of Playdemic Limited, a private limited company incorporated in England and Wales for a total purchase price of $1.4 billion, net of cash acquired. The acquisition of Playdemic is intended to be another step in our strategy of continued leadership in sports and mobile expansion. Playdemic was integrated into the Company for financial reporting purposes duringfrom the second quarter ofin fiscal year ~~2022.~~

~~For more information about our acquisitions, see Part I, Item 1 of this Form 10-Q in the Notes~~2022 to the ~~Condensed Consolidated Financial Statements~~first quarter in ~~Note 6 — Business Combinations~~.fiscal year 2023 and the fluctuations in foreign exchange rates, net of hedging activities.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, and revenue and expenses during the reporting periods. The policies discussed below are considered by management to be critical because they are not only important to the portrayal of our financial condition and results of operations, but also because application and interpretation of these policies requires both management judgment and estimates of matters that are inherently uncertain and ~~unknown, including uncertainty in the current economic environment due to the COVID-19 pandemic.~~unknown. As a result, actual results may differ materially from our estimates.

Revenue Recognition

We derive revenue principally from sales of our games, and related extra content and services that can be ~~played~~experienced on game consoles, PCs, mobile phones and tablets. Our product and service offerings include, but are not limited to, the following:

•full games with both online and offline functionality (“Games with Services”), which generally includes (1) the initial game delivered digitally or via physical disc at the time of sale and typically provide access to offline core game content (“software license”); (2) updates on a when-and-if-available basis, such as software patches or updates, and/or additional free content to be delivered in the future (“future update rights”); and (3) a hosted connection for online playability (“online hosting”);

•full games with online-only functionality which require an Internet connection to access all gameplay and functionality (“Online-Hosted Service Games”);

•extra content related to Games with Services and Online-Hosted Service Games which provides access to additional in-game content;

•subscriptions, such as EA Play and EA Play Pro, that generally ~~offers~~offer access to a selection of full games, in-game content, online services and other benefits typically for a recurring monthly or annual fee; and

•licensing to third parties to distribute and host our games and content.

We evaluate and recognize revenue by:

•identifying the contract(s) with the customer;

•identifying the performance obligations in the contract;

•determining the transaction price;

•allocating the transaction price to performance obligations in the contract; and

•recognizing revenue as each performance obligation is satisfied through the transfer of a promised good or service to a customer (i.e., “transfer of control”).

Certain of our full game and/or extra content are sold to resellers with a contingency that the full game and/or extra content cannot be resold prior to a specific date (“Street Date Contingency”). We recognize revenue for transactions that have a Street Date Contingency when the Street Date Contingency is removed and the full game and/or extra content can be resold by the reseller. For digital full game and/or extra content downloads sold to customers, we recognize revenue when the full game and/or extra content is made available for download to the customer.

Online-Enabled Games

Games with Services. Our sales of Games with Services are evaluated to determine whether the software license, future update rights and the online hosting are distinct and separable. Sales of Games with Services are generally determined to have three distinct performance obligations: software license, future update rights, and the online hosting.

Since we do not sell the performance obligations on a stand-alone basis, we consider market conditions and other observable inputs to estimate the stand-alone selling price for each performance obligation. For Games with Services, generally 75 percent of the sales price is allocated to the software license performance obligation and recognized at a point in time when control of the license has been transferred to the ~~customer (which is usually at or near the same time as the booking of the transaction).~~customer. The remaining 25 percent is allocated to the future update rights and the online hosting performance obligations and recognized ratably as the service is provided (over the Estimated Offering Period).

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Online-Hosted Service Games. Sales of our Online-Hosted Service Games are determined to have one distinct performance obligation: the online hosting. We recognize revenue from these arrangements as the service is provided.

Extra Content. Revenue received from sales of downloadable content are derived primarily from the sale of virtual currencies and digital in-game content that are designed to extend and enhance players’ game experience. Sales of extra content are accounted for in a manner consistent with the treatment for our Games with Services and Online-Hosted Service Games as discussed above, depending upon whether or not the extra content has offline functionality. That is, if the extra content has offline functionality, then the extra content is accounted for similarly to Games with Services (generally determined to have three distinct performance obligations: software license, future update rights, and the online hosting). If the extra content does not have offline functionality, then the extra content is determined to have one distinct performance obligation: the online-hosted service offering.

Subscriptions

Sales of our subscriptions are deemed to be one performance obligation and we recognize revenue from these arrangements ratably over the subscription term as the performance obligation is satisfied.

Licensing Revenue

~~In certain countries, we~~We utilize third-party licensees to distribute and host our games and content in accordance with license agreements, for which the licensees typically pay us a fixed minimum guarantee and/or sales-based royalties. These arrangements typically include multiple performance obligations, such as a time-based license of software and future update rights. We recognize as revenue a portion of the minimum guarantee when we transfer control of the license of software (generally upon commercial launch) and the remaining portion ratably over the contractual term in which we provide the licensee with future update rights. Any sales-based royalties are generally recognized as the related sales occur by the licensee.

Significant Judgments around Revenue Arrangements

Identifying performance obligations. Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct, (i.e., the customer can benefit from the goods or services either on its own or together with other resources that are readily available), and are distinct in the context of the contract (i.e., it is separately identifiable from other goods or services in the contract). To the extent a contract includes multiple promises, we must apply judgment to determine whether those promises are separate and distinct performance obligations. If these criteria are not met, the promises are accounted for as a combined performance obligation.

Determining the transaction price. The transaction price is determined based on the consideration that we will be entitled to receive in exchange for transferring our goods and services to the customer. Determining the transaction price often requires judgment, based on an assessment of contractual terms and business practices. It further includes review of variable consideration such as discounts, sales returns, price protection, and rebates, which is estimated at the time of the transaction. In addition, the transaction price does not include an estimate of the variable consideration related to sales-based royalties. Sales-based royalties are recognized as the sales occur.

Allocating the transaction price. Allocating the transaction price requires that we determine an estimate of the relative stand-alone selling price for each distinct performance obligation. Determining the relative stand-alone selling price is inherently subjective, especially in situations where we do not sell the performance obligation on a stand-alone basis (which occurs in the majority of our transactions). In those situations, we determine the relative stand-alone selling price based on various observable inputs using all information that is reasonably available. Examples of observable inputs and information include: historical internal pricing data, cost plus margin ~~analyses, third-party external~~analysis, pre-release versus post-release costs, and pricing ~~of similar or same products and services such as software licenses and maintenance support within~~data from competitors to the ~~enterprise software industry.~~extent the data is available. The results of our analysis resulted in a specific percentage of the transaction price being allocated to each performance obligation.

Determining the Estimated Offering Period. The offering period is the period in which we offer to provide the future update rights and/or online hosting for the game and related extra content sold. Because the offering period is not an explicitly defined period, we must make an estimate of the offering period for the service-related performance obligations (i.e., future update rights and online hosting). Determining the Estimated Offering Period is inherently subjective and is subject to regular revision. Generally, we consider the average period of time customers are online when estimating the offering period. We also consider the estimated period of time between the date a game unit is sold to a reseller and the date the reseller sells the game unit to the customer (i.e., time in channel). Based on these two factors, we then consider the method of distribution. For example, games

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and extra content sold at retail would have a composite offering period equal to the online gameplay period plus time in channel as opposed to digitally-distributed games and extra content which are delivered immediately via digital download and therefore, the offering period is estimated to be only the online gameplay period.

Additionally, we consider results from prior analyses, known and expected online gameplay trends, as well as disclosed service periods for competitors’ games in determining the Estimated Offering Period for future sales. We believe this provides a reasonable depiction of the transfer of future update rights and online hosting to our customers, as it is the best representation of the time period during which our games and extra content are ~~played.~~experienced. We recognize revenue for future update rights and online hosting performance obligations ratably on a straight-line basis over this period as there is a consistent pattern of delivery for these performance obligations. ~~Prior to July 1, 2020, these performance obligations were generally recognized over an estimated nine-month period beginning in the month after shipment~~Revenue for ~~games and extra content sold through retail and an estimated six-month period for digitally-distributed games and extra content beginning in the month of sale.~~

~~During the three months ended September 30, 2020, we completed our annual evaluation of the Estimated Offering Period and as a result, for sales after July 1, 2020, revenue for service related~~service-related performance obligations for games and extra content sold through retail ~~are~~is recognized over an estimated ten-month period beginning in the month of sale, ~~and~~ revenue for ~~service related~~service-related performance obligations for digitally-distributed games and extra content is recognized over an estimated eight-month period beginning in the month of sale. The fiscal year 2021 change in Estimated Offering period did not impact the amount of net bookings or the operating cash flows that we report. During the three months ended September 30, 2021, this change to our Estimated Offering Period resulted in an increase in netsale, and revenue of $125 million and net income of $95 million, and an increase of $0.33 diluted earnings per share. During the six months ended September 30, 2021, this change to our Estimated Offering Period resulted in an increase in net revenue of $102 million and net income of $77 million, and an increase of $0.27 diluted earnings per share.

During the three months ended September 30, 2021, we completed our annual evaluation of the Estimated Offering Period. We have noted consumers are playing certain of our Online Hosted Service Games, such as PC and Console Free-to-Play games, for longer periods of time than in prior years as players engage with services we provide that are designed to enhance and extend gameplay, and as such, have concluded that the Estimated Offering Period for such games should be lengthened. As a result, for all new sales after July 1, 2021, the revenue that we recognize for service-relatedservice related performance ~~obligation~~obligations related to our PC and ~~Console Free-to-Play~~console free-to-play games is recognized generally over a twelve-month period. This change in Estimated Offering Period did not impact the amount of net bookings or the operating cash flows that we report. We expect that this change will move the recognition of approximately $135 million in net revenue from fiscal year 2022 into fiscal year 2023. During the three months ended September 30, 2021, this change to our Estimated Offering Period resulted in an estimated decrease in net revenue of $17 million and net income of $13 million, and a decrease of $0.05 diluted earnings per share.

Principal Agent Considerations

We evaluate sales to end customers of our full games and related content via third-party storefronts, including digital storefronts such as Microsoft’s Xbox Store, Sony’s PlayStation Store, Apple App Store, and Google Play Store, in order to determine whether or not we are acting as the principal in the sale to the end customer, which we consider in determining if revenue should be reported gross or net of fees retained by the third-party storefront. An entity is the principal if it controls a good or service before it is transferred to the end customer. Key indicators that we evaluate in determining gross versus net treatment include but are not limited to the following:

•the underlying contract terms and conditions between the various parties to the transaction;

•which party is primarily responsible for fulfilling the promise to provide the specified good or service to the end customer;

•which party has discretion in establishing the price for the specified good or service; and

•which party has inventory risk before the specified good or service has been transferred to the end ~~customer; and~~

•~~which party has discretion in establishing the price for the specified good or service.~~customer.

Based on an evaluation of the above indicators, except as discussed below, we have determined that generally the third party is considered the principal to end customers for the sale of our full games and related content. We therefore report revenue related to these arrangements net of the fees retained by the storefront. However, ~~as an example,~~ for sales arrangements via Apple App Store and Google Play Store, EA is considered the principal to the end customer and thus, we report revenue on a gross basis and mobile platform fees are reported within cost of revenue.

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Fair Value Estimates

Business Combinations. We must estimate the fair value of assets acquired, liabilities assumed, and acquired in-process technology in a business combination. Our assessment of the estimated fair value of each of these can have a material effect on our reported results as intangible assets are amortized over various estimated useful lives. Furthermore, the estimated fair value assigned to an acquired asset or liability has a direct impact on the amount we recognize as goodwill, which is an asset that is not amortized. ~~Determining~~Accounting for business combinations requires us to make significant estimates and assumptions with respect to intangible assets.

Although we believe the ~~fair value of assets acquired requires an assessment~~assumptions and estimates we have made are reasonable, they are based in part on historical experience, market conditions, and information obtained from the management of the ~~highest~~acquired companies and ~~best~~are inherently uncertain and unpredictable. Examples of critical estimates used in valuing certain of the intangible assets and in determining the useful lives for the assets we have acquired or may acquire in the future include, but are not limited to:

•future expected revenues and cash flows;

•expected use of the ~~asset or group~~acquired assets;

•the acquired company’s trade name and trademarks, as well as assumptions about the period of ~~assets that maximizes~~time the acquired trade name and trademarks will continue to be used in our portfolio;

•expected costs to develop in-process research and development into commercially viable products and estimated cash flows from the projects when completed;

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•discount rates used to determine the present value of estimated future cash flows, which are typically derived from a ~~market participant perspective or the expected price~~weighted-average cost of capital analysis and adjusted to sell the asset and the related expected future cash flows. Determining the fair value of acquired in-process technology also requires an assessment of our expectations related to the use of that technology. reflect inherent risks.

Such estimates are inherently difficult and subjective and can have a material impact on our Condensed Consolidated Financial Statements. Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates, or actual results.

Income Taxes

We recognize deferred tax assets and liabilities for both (1) the expected impact of differences between the financial statement amount and the tax basis of assets and liabilities and (2) the expected future tax benefit to be derived from tax losses and tax credit carryforwards. We do not recognize any deferred taxes related to the U.S. taxes on foreign earnings as we recognize these taxes as a period cost.

We record a valuation allowance against deferred tax assets when it is considered more likely than not that all or a portion of our deferred tax assets will not be realized. In making this determination, we are required to give significant weight to evidence that can be objectively verified. It is generally difficult to conclude that a valuation allowance is not needed when there is significant negative evidence, such as cumulative losses in recent years. Forecasts of future taxable income are considered to be less objective than past results. Therefore, cumulative losses weigh heavily in the overall assessment.

In addition to considering forecasts of future taxable income, we are also required to evaluate and quantify other possible sources of taxable income in order to assess the realization of our deferred tax assets, namely the reversal of existing deferred tax liabilities, the carryback of losses and credits as allowed under current tax law, and the implementation of tax planning strategies. Evaluating and quantifying these amounts involves significant judgments. Each source of income must be evaluated based on all positive and negative evidence and this evaluation may involve assumptions about future activity. Certain taxable temporary differences that are not expected to reverse during the carry forward periods permitted by tax law cannot be considered as a source of future taxable income that may be available to realize the benefit of deferred tax assets.

~~Each~~Every quarter, we perform a realizability analysis to evaluate whether it is more likely than not that all or a portion of our deferred tax assets will not be realized. ~~In particular, our~~Our Swiss deferred tax asset realizability analysis relies upon future Swiss taxable income as the primary source of taxable income but considers all available sources of Swiss income based on the positive and negative evidence. We give more weight to evidence that can be objectively verified. However, there is ~~significant~~ judgment involved in estimating future Swiss taxable income, specifically related to assumptions about expected growth rates of future Swiss taxable income, which are based primarily on third party market and industry growth data. Actual results that differ materially from those estimates could have a material impact on our valuation allowance assessment. ~~Although objectively verifiable,~~ Swiss interest rates have an impact on the valuation allowance and are based on published Swiss ~~guidance.~~guidance, which generally occurs in the fourth quarter of our fiscal year. Any significant changes to such interest rates could result in a material impact to the valuation ~~allowance.~~allowance and to our Consolidated Financial Statements. We have adjusted our valuation allowance for changes in the published interest rates in the past and it is probable that we will do so again based on current global interest rate trends. Switzerland has a seven-year carryforward period and does not permit the carry back of losses. Changes in Estimated Offering Period and actions we take in connection with acquisitions could also impact the utilization of our Swiss deferred tax asset.

As part of the process of preparing our Condensed Consolidated Financial Statements, we are required to estimate our income taxes in each jurisdiction in which we operate prior to the completion and filing of tax returns for such periods. This process requires estimating both our geographic mix of income and our uncertain tax positions in each jurisdiction where we operate. These estimates ~~involve complex issues and~~ require us to make judgments about the likely application of the tax law to our situation, as well as with respect to other matters, such as anticipating the positions that we will take on tax returns prior to our preparing the returns and the outcomes of disputes with tax authorities. The ultimate resolution of these issues may take extended periods of time due to examinations by tax authorities and statutes of limitations. In addition, changes in our business, including acquisitions, ~~and the alignment of them with our global operating structure,~~ changes in our international corporate structure, changes in the geographic location of business functions or assets, changes in the geographic mix and amount of income, as well as changes in our agreements with tax authorities, valuation allowances, applicable accounting rules, applicable tax laws and regulations, rulings and interpretations thereof, developments in tax audit and other matters, and variations in the estimated and actual level of annual pre-tax income can affect the overall effective tax rate.

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IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

The information under the subheading “Other Recently Issued Accounting Standards” in Note 1 — Description of Business and Basis of Presentation to the Condensed Consolidated Financial Statements in this Form 10-Q is incorporated by reference into this Item 2.

RESULTS OF OPERATIONS

Net Revenue

Net revenue consists of sales generated from (1) full games sold as digital downloads or as packaged goods and designed for play on game consoles, PCs and mobile phones and tablets (2) live services associated with these games, such as extra-content, (3) subscriptions that generally offer access to a selection of full games, in-game content, online services and other benefits, and (4) licensing our games to third parties to distribute and host our games.

Net Revenue Quarterly Analysis

Net Revenue

Net revenue for the three months ended September 30, ~~2021~~2022 was ~~$1,826~~$1,904 million, primarily driven by sales related to FIFA 22~~sales of our~~ , FIFA ~~franchise,~~ 23, Apex Legends, Madden NFL 2223, and The Sims 4. Net revenue for the three months ended September 30, ~~2021~~2022 increased ~~$675~~$78 million as compared to the three months ended September 30, ~~2020.~~2021. This increase was driven by a ~~$785~~$234 million increase in net revenue primarily due to Battlefield 2042,the ~~year-over-year change in the launch date~~addition of ~~our FIFA console title from the third quarter in fiscal year 2021 to the second quarter in fiscal year 2022~~Golf Clash, and Apex Legends, partially offset by a ~~$110~~$156 million decrease in net revenue primarily ~~from~~due to the Star Wars franchise and ~~UFC franchises.~~fluctuations in foreign exchange rates, net of hedging activities.

Net Revenue by Composition

Our net revenue by composition for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 was as follows (in millions):
Three Months Ended September 30,
2021 2020 $ Change % Change
Net revenue:
Full game downloads $ 337 $ 163 $ 174 107 %
Packaged goods 280 119 161 135 %
Full game $ 617 $ 282 $ 335 119 %
Live services and other $ 1,209 $ 869 $ 340 39 %
Total net revenue $ 1,826 $ 1,151 $ 675 59 %

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	Three Months Ended September 30,
	2022		2021		$ Change		% Change
Net revenue:
Full game downloads	$	328	$	337	$	(9)	(3)	%
Packaged goods	274		280		(6)		(2)	%
Full game	$	602	$	617	$	(15)	(2)	%

Live services and other	$	1,302	$	1,209	$	93	8	%
Total net revenue	$	1,904	$	1,826	$	78	4	%

Full Game Net Revenue

Full game net revenue includes full game downloads and packaged goods. Full game downloads includes revenue from digital sales of full games on console, PC, and mobile phones and tablets. Packaged goods primarily includes revenue from software that is ~~sold physically. This includes (1) net revenue from game software~~ sold physically through traditional channels such as brick and mortar retailers and ~~(2)~~ software licensing revenue from third parties ~~(for example, makers of console platforms, personal computers or computer accessories)~~ who include certain of our full games for sale with their ~~products (for example, OEM bundles).~~products.

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For the three months ended September 30, ~~2021,~~2022, full game net revenue was ~~$617~~$602 million, primarily driven byFIFA 2223, Madden NFL 2223, , and ~~F1 2021.~~Battlefield 2042. Full game net revenue for the three months ended September 30, ~~2021 increased $335~~2022 decreased $15 million, or ~~119~~2 percent, as compared to the three months ended September 30, ~~2020.~~2021. This ~~increase~~decrease was primarily driven by ~~a $174 million increase in full game downloads net revenue and a $161 million increase in packaged goods net revenue, each primarily due to~~the year-over-year change in the launch date of ~~our FIFA console title~~F1 from ~~the third quarter in fiscal year 2021 to~~ the second quarter in fiscal year 2022 ~~and~~to the first quarter in fiscal year 2023, our FIFA franchise primarily due to fluctuations in foreign exchange rates, net of hedging activities, ~~F1 2021~~Mass Effect Trilogy Remaster, and our Madden franchise, partially offset by ~~the Star Wars franchise and~~ ~~UFC 4~~ Battlefield 2042.

Live Services and Other Net Revenue

For the three months ended September 30, ~~2021,~~2022, live services and other net revenue was ~~$1,209~~$1,302 million primarily driven by sales of extra content for FIFA Ultimate Team,, Apex Legends,, The Sims 4,, ~~Star Wars: Galaxy of Heroes,~~ and Madden Ultimate Team. Live services and other net revenue for the three months ended September 30, ~~2021~~2022 increased ~~$340~~$93 million, or 398 percent, as compared to the three months ended September 30, ~~2020.~~2021. This increase was primarily driven by sales of extra content ~~for~~from the addition of ~~FIFA Ultimate Team~~Golf Clash, and Apex Legends, partially offset by the Star Wars franchise and ~~new games added to our portfolio through acquisitions activity.~~The Sims 4.

Net Revenue Year-to-Date Analysis

Net Revenue

Net revenue for the six months ended September 30, ~~2021~~2022 was ~~$3,377~~$3,671 million, primarily driven by sales ~~of our~~ related to FIFA ~~franchise,~~22, Apex Legends, FIFA 23, Battlefield 2042, and The Sims 4~~, and our Madden franchise~~. Net revenue for the six months ended September 30, ~~2021~~2022 increased ~~$767~~$294 million ~~or 29 percent,~~ as compared to the six months ended September 30, ~~2020.~~2021. This increase was driven by a ~~$1,058~~$613 million increase in net revenue primarily ~~driven by the year-over-year change in the launch date of~~due to Battlefield 2042, new games added to our ~~FIFA console title and growth in FIFA catalog sales,~~mobile portfolio through acquisitions activity, and Apex Legends, partially offset by a ~~$291~~$319 million decrease in net revenue primarily ~~from~~due to the ~~Star Wars, The Sims, and Need for Speed franchises.~~prior year release of Mass Effect Trilogy Remaster.

Net Revenue by Composition

Our net revenue by composition for the six months ended September 30, ~~2021~~2022 and ~~2020~~2021 was as follows (in millions):
Six Months Ended September 30,
2021 2020 $ Change % Change
Net revenue:
Full game downloads $ 570 $ 386 $ 184 48 %
Packaged goods 369 255 114 45 %
Full game $ 939 $ 641 $ 298 46 %
Live services and other $ 2,438 $ 1,969 $ 469 24 %
Total net revenue $ 3,377 $ 2,610 $ 767 29 %

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	Six Months Ended September 30,
	2022		2021		$ Change		% Change
Net revenue:
Full game downloads	$	565	$	570	$	(5)	(1)	%
Packaged goods	378		369		9		2	%
Full game	$	943	$	939	$	4	—	%

Live services and other	$	2,728	$	2,438	290		12	%
Total net revenue	$	3,671	$	3,377	$	294	9	%

Full Game Net Revenue

For the six months ended September 30, ~~2021,~~2022, full game net revenue was ~~$939~~$943 million, primarily driven by ~~sales of our~~ FIFA ~~and Madden franchises,~~ 23, Battlefield 2042, FIFA 22, and ~~Mass Effect Trilogy Remaster.~~Madden NFL 23. Full game net revenue for the six months ended September 30, ~~2021~~2022 increased ~~$298~~$4 million, or 46less than 1 percent, as compared to the six months ended September 30, ~~2020.~~2021. This increase was primarily driven by a $184 million increase in full game downloads net revenue and a $114 million increase in packaged goods net revenue, each primarily due to year-over-year change in the launch date of our FIFA console title from the third quarter in fiscal year 2021 to the second quarter in fiscal year 2022, andBattlefield 2042, partially offset by Mass Effect Trilogy Remaster,,It Takes Two, ~~partially offset by~~and the ~~Star Wars,~~ Need ~~for~~For Speed, UFC, and ~~UFC~~Madden franchises.

Live Services and Other Net Revenue

For the six months ended September 30, ~~2021,~~2022, live services and other net revenue was ~~$2,438~~$2,728 million primarily driven by sales of extra content for FIFA Ultimate Team,, Apex Legends,, The Sims 4,,and Madden Ultimate Team~~, and~~ ~~Star Wars: Galaxy of Heroes~~. Live services and other net revenue for the six months ended September 30, ~~2021~~2022 increased ~~$469~~$290 million, or 2412 percent, as compared to the six months ended September 30, ~~2020.~~2021. This increase was primarily driven by sales of extra content ~~for~~ ~~FIFA Ultimate Team~~, ~~Apex Legends~~ ~~and~~related to new games added to our

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mobile portfolio through acquisitions activity, Apex Legends, andour FIFA franchise,partially offset by sales of extra content for the Star Wars franchise and The Sims 4.

Cost of Revenue Quarterly Analysis

Cost of revenue consists of (1) ~~manufacturing royalties, net of volume discounts and other vendor reimbursements, (2)~~ certain royalty expenses for celebrities, professional sports leagues, movie studios and other organizations, and independent software developers, ~~(3) data center, bandwidth and server costs associated with hosting our online games and websites, (4) inventory costs, (5) payment processing fees, (6)~~(2) mobile platform fees associated with our mobile revenue (for transactions in which we are acting as the principal in the sale to the end customer), ~~(7) expenses for defective products, (8) write-offs of post launch prepaid royalty~~(3) data center, bandwidth and server costs associated with hosting our online games and ~~losses on previously unrecognized licensed intellectual property commitments, (9)~~websites, (4) inventory costs, (5) payment processing fees, (6) amortization and impairment of certain intangible assets, ~~(10)~~(7) personnel-related costs, (8) manufacturing royalties, and ~~(11)~~(9) warehousing and distribution costs. We generally recognize volume discounts when they are earned from the manufacturer (typically in connection with the achievement of unit-based milestones); whereas other vendor reimbursements are generally recognized as the related revenue is recognized.

Cost of revenue for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 was as follows (in millions):


September 30, 2021		% of Net Revenue		September 30, 2020		% of Net Revenue		% Change		Change as a % of Net Revenue
September 30, 2022												September 30, 2022	% of Net Revenue		September 30, 2021		% of Net Revenue		% Change		Change as a % of Net Revenue
$	494	27	%	$	286	25	%	73	%	2	%	462	24	%	$	494	27	%	(6)	%	(3)	%

Cost of Revenue

Cost of revenue ~~increased~~decreased by ~~$208~~$32 million ~~or 73 percent~~ during the three months ended September 30, ~~2021,~~2022, as compared to the three months ended September 30, ~~2020. This increase~~2021. The decrease was primarily due to ~~an increase~~a decrease in royalty costs due to product mix, and a decrease in inventory ~~and royalty~~ costs ~~driven by~~due to the year-over-year change in the launch date of ~~our FIFA console title~~F1 from ~~the third quarter in fiscal year 2021 to~~ the second quarter in fiscal year 2022 to the first quarter in fiscal year 2023, partially offset by an increase in acquisition-related intangible asset amortization and impairment and an increase in platform and hosting ~~fees due to new games added to our portfolio through acquisitions activity and higher engagement with~~ ~~Apex Legends,~~ ~~and an increase in intangible amortization due to acquisition-related intangible assets.~~fees.

Cost of revenue as a percentage of total net revenue ~~increased~~decreased by 23 percent during the three months ended September 30, ~~2021,~~2022, as compared to the three months ended September 30, ~~2020.~~2021. This ~~increase~~decrease was primarily due to ~~an increase~~a decrease in ~~deferred net revenue, platform and hosting fees, and intangible amortization due to acquisition-related intangible assets, partially offset by lower~~ royalty ~~and inventory~~ costs ~~in proportion to net revenue~~ due to product mix, ~~and~~ a ~~favorable mix~~decrease in inventory costs due to the year-over-year change in the launch date of ~~higher~~F1 from the second quarter in fiscal year 2022 to the first quarter in fiscal year 2023, partially offset by a decrease in digital ~~net revenue as compared to packaged goods net revenue, respectively.~~

sales.

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Cost of Revenue Year-to-Date Analysis

Cost of revenue for the six months ended September 30, ~~2021~~2022 and ~~2020~~2021 was as follows (in millions):
September 30,
2021 % of Net Revenue September 30,
2020 % of Net Revenue % Change Change as a % of Net Revenue
809 24 % 574 22 % 41 % 2 %


September 30, 2022		% of Net Revenue		September 30, 2021	% of Net Revenue		% Change		Change as a % of Net Revenue
$	776	21	%	809	24	%	(4)	%	(3)	%

Cost of Revenue

Cost of revenue ~~increased~~decreased by ~~$235~~$33 million ~~or 41 percent~~ during the six months ended September 30, ~~2021,~~2022, as compared to the six months ended September 30, ~~2020. This increase~~2021. The decrease was primarily due to ~~an increase~~lower royalty costs due to product mix, and a decrease in inventory ~~and royalty~~ costs driven by ~~year-over-year change in~~ the ~~launch date~~FIFA franchise and the prior year release of ~~our FIFA console title from the third quarter in fiscal year 2021 to the second quarter in fiscal year 2022,~~Mass Effect Trilogy Remaster, partially offset by an increase in platform and hosting fees ~~due to new games added to our portfolio through acquisitions activity and higher engagement with~~ ~~Apex Legends,~~ and an increase in ~~intangible amortization due to~~ acquisition-related intangible ~~assets.~~asset amortization and impairment.

Cost of revenue as a percentage of total net revenue ~~increased~~decreased by 23 percent during the six months ended September 30, ~~2021,~~2022, as compared to the six months ended September 30, ~~2020.~~2021. This ~~increase~~decrease was primarily due to ~~an increase in deferred net revenue, platform and hosting fees, and intangible amortization due to acquisition-related intangible assets, partially offset by~~ lower royalty ~~and inventory~~ costs ~~in proportion to net revenue~~ due to product mix, ~~and~~ a ~~favorable mix,~~decrease in inventory costs due to the year-over-year change in the launch date of ~~higher~~F1 from the second quarter in fiscal year 2022 to the first quarter in fiscal year 2023, partially offset by a decrease in digital ~~net revenue as compared to packaged goods net revenue, respectively.~~sales.

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Research and Development

Research and development expenses consist of expenses incurred by our production studios for personnel-related costs, related overhead costs, external third-party development costs, contracted services, depreciation and any impairment of prepaid royalties for pre-launch products. Research and development expenses for our online products include expenses incurred by our studios consisting of direct development and related overhead costs in connection with the development and production of our online games. Research and development expenses also include expenses associated with our digital platform, software licenses and maintenance, and management overhead.

Research and development expenses for the three and six months ended September 30, ~~2021~~2022 and ~~2020~~2021 were as follows (in millions):


		September 30, 2021		% of Net Revenue		September 30, 2020		% of Net Revenue		$ Change		% Change			September 30, 2022		% of Net Revenue		September 30, 2021		% of Net Revenue		$ Change		% Change
Three months ended	Three months ended	$	553	30	%	$	421	37	%	$	132	31	%	Three months ended	$	565	30	%	$	553	30	%	$	12	2	%
Six months ended	Six months ended	$	1,068	32	%	$	859	33	%	$	209	24	%	Six months ended	$	1,137	31	%	$	1,068	32	%	$	69	6	%

Research and development expenses increased by ~~$132~~$12 million, or 312 percent, during the three months ended September 30, ~~2021,~~2022, as compared to the three months ended September 30, ~~2020.~~2021. This increase was primarily due to ~~a $72 million increase in personnel-related costs primarily resulting from~~ an ~~investment in headcount due to acquisitions and our continued investment in our studios, a $27 million increase in stock-based compensation, a $16~~$8 million increase in studio related contracted services, and a $9 million increase due to hedging activities, partially offset by a $6 million decrease in ~~facility related costs.~~stock-based compensation.

Research and development expenses increased by ~~$209~~$69 million, or 246 percent, during the six months ended September 30, ~~2021,~~2022, as compared to the six months ended September 30, ~~2020.~~2021. This increase was primarily due to a ~~$117~~$30 million increase in personnel-related costs primarily resulting from ~~an investment in headcount due to acquisitions and our~~ continued investment in our studios, including headcount from prior year acquisitions, a ~~$46~~$20 million increase ~~in stock-based compensation,~~due to hedging activities, and a ~~$34~~$15 million increase in studio related contracted ~~services, and a $16 million increase in facility related costs. These increases were partially offset by a $18 million benefit in cash flow hedging activities.~~

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services.

Marketing and Sales

Marketing and sales expenses consist of ~~personnel-related costs, related overhead costs,~~ advertising, marketing and promotional expenses, personnel-related costs, and related overhead costs, net of qualified advertising cost reimbursements from third parties.

Marketing and sales expenses for the three and six months ended September 30, ~~2021~~2022 and ~~2020~~2021 were as follows (in millions):


		September 30, 2021		% of Net Revenue		September 30, 2020		% of Net Revenue		$ Change		% Change			September 30, 2022		% of Net Revenue		September 30, 2021		% of Net Revenue		$ Change		% Change
Three months ended	Three months ended	$	233	13	%	$	156	14	%	$	77	49	%	Three months ended	$	233	12	%	$	233	13	%	$	—	—	%
Six months ended	Six months ended	$	423	13	%	$	277	11	%	$	146	53	%	Six months ended	$	467	13	%	$	423	13	%	$	44	10	%

Marketing and sales expenses increased by ~~$77~~$44 million, or ~~49 percent, and $146 million, or 53~~10 percent, during the ~~three and~~ six months ended September 30, ~~2021,~~2022, as compared to the ~~three and~~ six months ended September 30, ~~2021, respectively. These increases were~~2021. This increase was primarily due to an increase in advertising and promotional spending related to the release of our Apex Legends Mobile title in the first quarter of fiscal year 2023 and our FIFA franchise, partially offset by a decrease in advertising and promotional spending primarily onrelated to our mobile ~~titles,~~portfolio, and ~~FIFA 22, F1 2021,~~Mass Effect Trilogy Remaster and ~~the upcoming release of~~ ~~Battlefield 2042~~ It Takes Two., which were launched in previous fiscal years.

General and Administrative

General and administrative expenses consist of personnel and related expenses of executive and administrative staff, corporate functions such as finance, legal, human resources, and information technology (“IT”), related overhead costs, fees for professional services such as legal and accounting, and allowances for doubtful accounts.

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General and administrative expenses for the three and six months ended September 30, ~~2021~~2022 and ~~2020~~2021 were as follows (in millions):


		September 30, 2021		% of Net Revenue		September 30, 2020		% of Net Revenue		$ Change		% Change			September 30, 2022		% of Net Revenue		September 30, 2021		% of Net Revenue		$ Change		% Change
Three months ended	Three months ended	$	176	10	%	$	133	12	%	$	43	32	%	Three months ended	$	174	9	%	$	176	10	%	$	(2)	(1)	%
Six months ended	Six months ended	$	345	10	%	$	269	10	%	$	76	28	%	Six months ended	$	341	9	%	$	345	10	%	$	(4)	(1)	%

General and administrative expenses ~~increased~~decreased by ~~$43~~$2 million, or 321 percent, during the three months ended September 30, 2021, as compared to the three months ended September 30, 2020. This increase was primarily due to a $16 million increase in personnel-related costs resulting from an increase in headcount primarily due to acquisitions, and ~~a $13 million increase in acquisition-related transaction and integration costs.~~

~~General and administrative expenses increased by $76~~$4 million, or 281 percent during the six months ended September 30, 2021, as compared to the six months ended September 30, 2020. This increase was primarily due to a $23 million increase in personnel-related costs resulting from an increase in headcount primarily due to acquisitions, a $22 million increase in acquisition-related transaction and integration costs, and a $10 million increase in contracted services.

~~Amortization of Intangibles~~

~~Amortization of intangibles for the three and six months ended September 30, 2021 and 2020 were as follows (in millions):~~

September 30,
2021 % of Net
Revenue September 30,
2020 % of Net
Revenue $ Change % Change
Three months ended $ 30 2 % $ 6 1 % $ 24 400 %
Six months ended $ 70 2 % $ 11 — % $ 59 536 %

~~Amortization of intangibles increased by $24 million and $59 million~~ during the three and six months ended September 30, ~~2021,~~2022, as compared to the three and six months ended September 30, ~~2020, respectively,~~2021, respectively. These decreases were primarily due to a decrease in contracted services driven by prior year acquisition-related transaction and integration costs, partially offset by an increase in ~~acquired intangible assets from recent acquisitions.~~IT-related costs.

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Income Taxes

Provision for ~~(benefit from)~~ income taxes for the three and six months ended September 30, ~~2021~~2022 and ~~2020~~2021 were as follows (in millions):


		September 30, 2021		Effective Tax Rate		September 30, 2020		Effective Tax Rate			September 30, 2022		Effective Tax Rate		September 30, 2021		Effective Tax Rate
Three months ended	Three months ended	$	32	10	%	$	(46)	(33)	%	Three months ended	$	128	30	%	$	32	10	%
Nine months ended		$	136	21	%	$	57	9	%
Six months ended										Six months ended	$	253	29	%	$	136	21	%

The provision for income taxes for the three and six months ended September 30, ~~2021~~2022 is based on our projected annual effective tax rate for fiscal year ~~2022,~~2023, adjusted for specific items that are required to be recognized in the period in which they are incurred. Our effective tax rate for the three and six months ended September 30, ~~2021~~2022 was 1030 percent and 2129 percent, respectively, as compared to ~~negative 33~~10 percent and 921 percent, respectively, for the same period in fiscal year ~~2021. Our effective tax~~2022. The current period rate ~~for the three and six months ended September 30, 2021~~ was higher ~~than prior year~~ due to our decision to capitalize for income tax purposes certain foreign expenses which increased the taxable income in our foreign entities that is subject to U.S. tax. In accordance with our existing accounting policy, we do not establish deferred tax assets to offset this charge, but we expect future deductions of the capitalized amounts. The prior year effective tax rates included a tax benefit, net of valuation allowance, resulting from the Altera opinion. Excluding the Altera opinion, the effective tax rate for three and six months ended September 30, 2020 would have been 13 percent and 20 percent, respectively.

Each quarter, we perform a realizability analysis to evaluate whether it is more likely than not that all or a portion of our deferred tax assets will not be realized. During the three and six months ended September 30, 2021, we recognized a decrease of $6 million and an increase of $7 million of valuation allowance against our deferred tax assets primarily due to the expected alignment of the recently acquired businesses with our global operating structure.

LIQUIDITY AND CAPITAL RESOURCES


(In millions)	(In millions)	As of September 30, 2021			As of March 31, 2021			Increase/(Decrease)		(In millions)	As of September 30, 2022			As of March 31, 2022			Increase/(Decrease)
Cash and cash equivalents	Cash and cash equivalents	$	1,630		$	5,260		$	(3,630)	Cash and cash equivalents	$	1,539		$	2,732		$	(1,193)
Short-term investments	Short-term investments	342			1,106			(764)		Short-term investments	335			330			5
Total	Total	$	1,972		$	6,366		$	(4,394)	Total	$	1,874		$	3,062		$	(1,188)
Percentage of total assets	Percentage of total assets	15		%	48		%			Percentage of total assets	14		%	22		%


		Six Months Ended September 30,							Six Months Ended September 30,
(In millions)	(In millions)	2021		2020		Change		(In millions)	2022		2021		Change
Net cash provided by (used in) operating activities		$	(79)	$	439	$	(518)
Net cash used in operating activities								Net cash used in operating activities	$	(190)	$	(79)	$	(111)
Net cash used in investing activities	Net cash used in investing activities	(2,722)		(61)		(2,661)		Net cash used in investing activities	(119)		(2,722)		2,603
Net cash used in financing activities	Net cash used in financing activities	(827)		(112)		(715)		Net cash used in financing activities	(824)		(827)		3
Effect of foreign exchange on cash and cash equivalents	Effect of foreign exchange on cash and cash equivalents	(2)		25		(27)		Effect of foreign exchange on cash and cash equivalents	(60)		(2)		(58)
Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	$	(3,630)	$	291	$	(3,921)	Net increase (decrease) in cash and cash equivalents	$	(1,193)	$	(3,630)	$	2,437

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Changes in Cash Flow

Operating Activities. Net cash used in operating activities increased by ~~$518~~$111 million during the six months ended September 30, ~~2021,~~2022, as compared to the six months ended September 30, ~~2020,~~2021, primarily driven by ~~higher~~lower cash ~~payments for income taxes,~~receipts, higher marketing and advertising payments, higher personnel-related payments primarily from an increase in headcount and higher variable compensation payments, partially offset by cash inflows from hedging activities, and ~~higher~~lower cash payments for royalties. These increases were offset by higher collections due to improved performance as we executed against our strategic pillars and increased engagement with our products and services which led to growth in our business.

Investing Activities. Net cash used in investing activities ~~increased~~decreased by ~~$2,661~~$2,603 million during the six months ended September 30, ~~2021,~~2022, as compared to the six months ended September 30, ~~2020,~~2021, primarily driven by payments of $3,394 million in connection with acquisitions completed ~~during~~in the ~~six months ended September 30, 2021~~prior year, and a ~~$290 million decrease in proceeds from maturities and sales of short-term investments. These increases were offset by a $1,047~~$196 million decrease in the purchase of short-term investments, partially offset by a $962 million increase from maturities and sales of short-term investments.

Financing Activities. Net cash used in financing activities ~~increased~~decreased by ~~$715~~$3 million during the six months ended September 30, ~~2021,~~2022, as compared to the six months ended September 30, ~~2020,~~2021, primarily ~~driven by~~due to a ~~$572 million increase~~decrease in the repurchase and retirement of our common stock, ~~a payment of $97 million of cash dividends during the six months ended September 30, 2021, and a $44 million increase in~~ cash paid to taxing authorities in connection with withholding taxes for stock-based ~~compensation.~~compensation, and partially offset by an increase in cash dividend payments.

Short-term Investments

Due to our mix of fixed and variable rate securities, our short-term investment portfolio is susceptible to changes in short-term interest rates. As of September 30, ~~2021,~~2022, our short-term investments had gross unrealized ~~gains and~~ losses of ~~less than $1~~$3 million or ~~less than~~ 1 percent of ~~the~~ total in short-term investments. From time to time, we may liquidate some or all of our short-term investments to fund operational needs or other activities, such as capital expenditures, business acquisitions or stock repurchase programs.

Senior Notes

In February 2021, we issued $750 million aggregate principal amount of the 2031 Notes and $750 million aggregate principal amount of the 2051 Notes. The effective interest rate is 1.98% for the 2031 Notes and 3.04% for the 2051 Notes. Interest is payable semiannually in arrears, on February 15 and August 15 of each year.

In February 2016, we issued $400 million aggregate principal amount of the 2026 Notes. The effective interest rate is 4.97% for the 2026 Notes. Interest is payable semiannually in arrears, on March 1 and September 1 of each year.

See Note 1110 — Financing Arrangements to the Condensed Consolidated Financial Statements in this Form 10-Q as it relates to our Senior Notes, which is incorporated by reference into this Item 2.

Credit Facility

On August 29, 2019, we entered into a $500 million unsecured revolving credit facility ~~(“Credit~~(as amended, the “Credit Facility”) with a syndicate of ~~banks.~~banks which was amended on October 18, 2022. The Credit Facility terminates on August 29, 2024 unless the maturity is extended in accordance with its terms. As of September 30, ~~2021,~~2022, no amounts were outstanding under the Credit Facility. See Note 1110 — Financing Arrangements to the Condensed Consolidated Financial Statements in this Form 10-Q as it relates to our Credit Facility, which is incorporated by reference into this Item 2.

Return of Capital Program

In November 2020, our Board of Directors authorized a program to repurchase up to $2.6 billion of our common stock. Repurchases under the November 2020 program were completed in October 2022.

In August 2022, our Board of Directors authorized a program to repurchase up to $2.6 billion of our common stock. This stock repurchase program expires on November 4, 2024. Under this program, we may purchase stock in the open market or through privately negotiated transactions in accordance with applicable securities laws, including pursuant to pre-arranged stock trading plans. The timing and actual amount of the stock repurchases will depend on several factors including price, capital availability, regulatory requirements, alternative investment opportunities and other market conditions. We are not obligated to repurchase a specific number of shares under this program and it may be modified, suspended or discontinued at any time. Upon completion of the November 2020 program in October 2022, we began repurchasing shares under the current program.

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Financial Condition

Our material cash requirements, including commitments for capital expenditure, as of September 30, ~~2021~~2022 are set forth in our Note 1211 — Commitments and Contingencies to the Condensed Consolidated Financial Statements in this Form 10-Q, which is incorporated by reference into this Item 2. We expect capital expenditures to be approximately $200 million in fiscal year ~~2022~~2023 primarily due to facility ~~buildouts, which we expect to continue in fiscal year 2023.~~buildouts. We believe that our cash, cash equivalents, short-term investments, cash generated from operations and available financing facilities will be sufficient to meet these material cash requirements, which include licensing intellectual property from professional sports leagues and players associations used in our EA SPORTS titles (e.g., the 300+ licenses within our global football ecosystem, NFL Properties LLC, NFL Players Association and NFL Players Inc. on behalf of OneTeam Partners, LLC) and third-party content and celebrities (e.g., Disney Interactive), debt repayment obligations of $1.9 billion, and to fund our operating requirements for the next 12 months and ~~beyond, including~~beyond. Our operating requirements include working capital requirements, capital expenditures, our recently authorized $2.6 billion share repurchase program, quarterly cash dividend, which is currently ~~$0.17~~

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$0.19 per share, subject to declaration by our Board of Directors or a designated Committee of the Board of Directors, and potentially, future acquisitions or strategic investments. We may choose at any time to raise additional capital to repay debt, strengthen our financial position, facilitate expansion, repurchase our stock, pursue strategic acquisitions and investments, and/or to take advantage of business opportunities as they arise. There can be no assurance, however, that such additional capital will be available to us on favorable terms, if at all, or that it will not result in substantial dilution to our existing stockholders.

During the six months ended September 30, ~~2021,~~2022, we returned ~~$747~~$751 million to stockholders through our capital return programs, repurchasing ~~4.6~~5.1 million shares for approximately ~~$650~~$645 million and ~~$97~~returning $106 million through our quarterly cash dividend program which was initiated in November 2020.

During the six months ended September 30, 2021, we also completed mergers and acquisitions activity, including the acquisitions of 100% of the equity interests of Glu and Playdemic for cash considerations of $2.0 billion and $1.4 billion, net of cash acquired, respectively, and one other immaterial acquisition.

Our foreign subsidiaries are generally subject to U.S. tax, and to the extent earnings from these subsidiaries can be repatriated without a material tax cost, such earnings will not be indefinitely reinvested. As of September 30, ~~2021,~~2022, approximately ~~$0.7 billion~~$858 million of our cash and cash equivalents were domiciled in foreign tax jurisdictions. All of our foreign cash is available for repatriation without a material tax cost.

We have a “shelf” registration statement on Form S-3 on file with the SEC. This shelf registration statement, which includes a base prospectus, allows us at any time to offer any combination of securities described in the prospectus in one or more offerings. Unless otherwise specified in a prospectus supplement accompanying the base prospectus, we would use the net proceeds from the sale of any securities offered pursuant to the shelf registration statement for general corporate purposes, which may include funding for working capital, financing capital expenditures, research and development, marketing and distribution efforts, and if opportunities arise, for acquisitions or strategic alliances. Pending such uses, we may invest the net proceeds in interest-bearing securities. In addition, we may conduct concurrent or other financings at any time.

Our ability to maintain sufficient liquidity could be affected by various risks and uncertainties including, but not limited to, customer demand and acceptance of our products, our ability to collect our accounts receivable as they become due, successfully achieving our product release schedules and attaining our forecasted sales objectives, economic conditions in the United States and abroad, the impact of acquisitions and other strategic transactions in which we may engage, the impact of competition, the seasonal and cyclical nature of our business and operating results, and the other risks described in the “Risk Factors” section, included in Part II, Item 1A of this report.

As of September 30, ~~2021,~~2022, we did not have any off-balance sheet arrangements.

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Item 3.Quantitative and Qualitative Disclosures About Market Risk

MARKET RISK

We are exposed to various market risks, including changes in foreign currency exchange rates, interest rates and market prices, which have experienced significant ~~volatility, including increased volatility in connection with the COVID-19 pandemic.~~volatility. Market risk is the potential loss arising from changes in market rates and market prices. We employ established policies and practices to manage these risks. Foreign currency forward contracts are used to hedge anticipated exposures or mitigate some existing exposures subject to foreign exchange risk as discussed below. While we do not hedge our short-term investment portfolio, we protect our short-term investment portfolio against different market risks, including interest rate risk as discussed below. Our cash and cash equivalents portfolio consists of highly liquid investments with insignificant interest rate risk and original or remaining maturities of three months or less at the time of purchase. We do not enter into derivatives or other financial instruments for speculative trading purposes and do not hedge our market price risk relating to marketable equity securities, if any.

Foreign Currency Exchange Risk

Foreign Currency Exchange Rates. International sales are a fundamental part of our business, and the strengthening of the U.S. dollar (particularly relative to the Euro, British pound sterling, Australian dollar, Japanese yen, Chinese yuan, South Korean won and Polish zloty) has a negative impact on our reported international net revenue, but a positive impact on our reported international operating expenses (particularly the Swedish krona and the Canadian dollar) because these amounts are translated at lower rates as compared to periods in which the U.S. dollar is weaker. While we use foreign currency hedging contracts to mitigate some foreign currency exchange risk, these activities are limited in the protection that they provide us and can themselves result in losses.

Cash Flow Hedging Activities. We hedge a portion of our foreign currency risk related to forecasted foreign currency-denominated sales and expense transactions by purchasing foreign currency forward contracts that generally have maturities of 18 months or less. These transactions are designated and qualify as cash flow hedges. Our hedging programs are designed to reduce, but do not entirely eliminate, the impact of currency exchange rate movements in net revenue and research and development expenses.

Balance Sheet Hedging Activities. We use foreign currency forward contracts to mitigate foreign currency exchange risk associated with foreign currency-denominated monetary assets and liabilities, primarily intercompany receivables and payables. These foreign currency forward contracts generally have a contractual term of three months or less and are transacted near month-end.

We believe the counterparties to our foreign currency forward contracts are creditworthy multinational commercial banks. While we believe the risk of counterparty nonperformance is not material, a sustained decline in the financial stability of financial institutions as a result of disruption in the financial markets could affect our ability to secure creditworthy counterparties for our foreign currency hedging programs.

Notwithstanding our efforts to mitigate some foreign currency exchange risks, there can be no assurance that our hedging activities will adequately protect us against the risks associated with foreign currency fluctuations. As of September 30, ~~2021,~~2022, a hypothetical adverse foreign currency exchange rate movement of 10 percent or 20 percent would have resulted in potential declines in the fair value on our foreign currency forward contracts used in cash flow hedging of ~~$188~~$198 million or ~~$375~~$396 million, respectively. As of September 30, ~~2021,~~2022, a hypothetical adverse foreign currency exchange rate movement of 10 percent or 20 percent would have resulted in potential losses in the Condensed Consolidated Statements of Operations on our foreign currency forward contracts used in balance sheet hedging of ~~$104~~$101 million or ~~$207~~$203 million, respectively. This sensitivity analysis assumes an adverse shift of all foreign currency exchange rates; however, all foreign currency exchange rates do not always move in the same manner and actual results may differ materially. See Note 4 — Derivative Financial Instruments to the Condensed Consolidated Financial Statements in this Form 10-Q as it relates to our derivative financial instruments, which is incorporated by reference into this Item 3.

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Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our short-term investment portfolio. We manage our interest rate risk by maintaining an investment portfolio generally consisting of debt instruments of high credit quality and relatively short maturities. However, because short-term investments mature relatively quickly and, if reinvested, are invested at the then-current market rates, interest income on a portfolio consisting of short-term investments is subject to market fluctuations to a greater extent than a portfolio of longer term investments. Additionally, the contractual terms of the investments do not permit the issuer to call, prepay or otherwise settle the investments at prices less than the stated par value. Our investments are held for purposes other than trading. We do not use derivative financial instruments in our short-term investment portfolio.

As of September 30, ~~2021,~~2022, our short-term investments were classified as available-for-sale securities and, consequently, were recorded at fair value with changes in fair value, including unrealized gains and unrealized losses not related to credit losses, reported as a separate component of accumulated other comprehensive income (loss), net of tax, in stockholders’ equity.

Notwithstanding our efforts to manage interest rate risks, there can be no assurance that we will be adequately protected against risks associated with interest rate fluctuations. Changes in interest rates affect the fair value of our short-term investment portfolio. To provide a meaningful assessment of the interest rate risk associated with our short-term investment portfolio, we performed a sensitivity analysis to determine the impact a change in interest rates would have on the value of the portfolio assuming a 150 basis point parallel shift in the yield curve. As of September 30, ~~2021,~~2022, a hypothetical 150 basis point increase in interest rates would have resulted in a $4$3 million, or 1%1 percent decrease in the fair market value of our short-term investments.

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Item 4.Controls and Procedures

Evaluation of disclosure controls and procedures

Our Chief Executive Officer and our Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures, believe that as of the end of the period covered by this report, our disclosure controls and procedures were effective in providing the requisite reasonable assurance that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding the required disclosure.

Changes in internal control over financial reporting

There has been no change in our internal controls over financial reporting identified in connection with ~~our~~management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that occurred during the fiscal quarter ended September 30, ~~2021~~2022 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

Limitations on effectiveness of disclosure controls

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. These limitations include the possibility of human error, the circumvention or overriding of the controls and procedures and reasonable resource constraints. In addition, because we have designed our system of controls based on certain assumptions, which we believe are reasonable, about the likelihood of future events, our system of controls may not achieve its desired purpose under all possible future conditions. Accordingly, our disclosure controls and procedures provide reasonable assurance, but not absolute assurance, of achieving their objectives.

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PART II – OTHER INFORMATION

Item 1.Legal Proceedings

Refer to Note 1211 of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for disclosures regarding our legal proceedings.

Item 1A.Risk Factors

Our business is subject to many risks and uncertainties, which may affect our future financial performance. In the past, we have experienced certain of the events and circumstances described below, which adversely impacted our business and financial performance. If any of the events or circumstances described below occur, our business or financial performance could be harmed, our actual results could differ materially from our expectations and the market value of our stock could decline. The risks and uncertainties discussed below are not the only ones we face. There may be additional risks and uncertainties not currently known to us or that we currently do not believe could be material that may harm our business or financial performance.

STRATEGIC RISKS

Our business is intensely competitive. We may not deliver successful and engaging products and services, or consumers may prefer our competitors’ products or services over our own.

Competition in our business is intense. Many new products and services are regularly introduced, but only a relatively small number of products and associated services drive significant engagement and account for a significant portion of total revenue. Our competitors range from established interactive entertainment companies to emerging start-ups. In addition, the gaming, technology/internet, and entertainment industries have converged in recent years and larger, well-funded technology companies ~~are pursuing and strengthening~~have strengthened their interactive entertainment ~~capabilities.~~capabilities resulting in more direct competition with us. We expect them to continue to pursue and strengthen these businesses. Their greater financial and other resources may provide larger budgets to recruit our key creative and technical talent, develop and market products and services that gain consumer success and shift player time and engagement away from our products and services, or otherwise disrupt our operations. We also expect new competitors to continue to emerge throughout the world. If our competitors develop more successful and engaging products or services, offer competitive products or services at lower price points, or if we do not continue to develop consistently high-quality, well-received and engaging products and services, or if our marketing strategies are not innovative or fail to resonate with players, particularly during key selling periods, our revenue, margins, and profitability will decline.

We strive to create innovative and high-quality products and services that allow us to build on-going and meaningful relationships with our community. However, innovative and high-quality titles, even if highly-reviewed, may not meet our expectations or the expectations of our players. Many financially successful products and services within our industry are iterations of prior titles with large established consumer bases and significant brand recognition, which makes competing in certain categories challenging. In addition, products or services of our direct competitors or other entertainment companies may take a larger portion of consumer spending or time than we anticipate, which could cause our products and services to underperform relative to our expectations. A significant portion of our revenue historically has been derived from products and services based on a few popular franchises, and the underperformance of a single major title has had, and could in the future have, a material adverse impact on our financial results. For example, we have historically derived a significant portion of our net revenue from sales related to our ~~largest and most popular game, FIFA,~~global football franchise, annualized versions of which are consistently one of the best-selling games in the marketplace. Any events or circumstances that negatively impact our ~~FIFA~~global football franchise, such as product or service quality, ~~changes~~our transition to ~~the game,~~a new EA SPORTS FC brand, other products that take a portion of consumer spending and time, the delay or cancellation of a product or service launch, increased competition for key licenses, or real or perceived security risks, could negatively impact our financial results to a disproportionate extent.

The increased importance of live services, including extra content, to our business heightens the risks associated with the products for which such live services are offered. Live services that are either poorly-received or provided in connection with underperforming games may generate lower than expected sales. Any lapse, delay or failure in our ability to provide high-quality live services content to consumers over an extended period of time could materially and adversely affect our financial results, consumer engagement with our live services, and cause harm to our reputation and brand. Our most popular live ~~service is~~services are the extra content available for the Ultimate Team mode associated with our sports ~~franchises.~~franchises and extra content purchased within Apex Legends. Any events or circumstances that negatively impact our ability to reliably provide content or

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sustain engagement for Ultimate Team, particularly FIFA Ultimate Team, or Apex Legends, would negatively impact our financial results to a disproportionate extent.

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We may not meet our product and live service development schedules and key events, sports seasons and/or movies that are tied to our product and live service release schedule may be delayed, cancelled or poorly received.

Our ability to meet product and live service development schedules is affected by a number of factors both within and outside our control, including feedback from our players, the creative processes involved, the coordination of large and sometimes geographically dispersed development teams, the complexity of our products and the platforms for which they are developed, the need to fine-tune our products prior to their release, factors related to the COVID-19 pandemic, and, in certain cases, approvals from third parties. We have experienced development delays for our products and services in the past which caused us to delay or cancel release dates. Any failure to meet anticipated production or release schedules likely would result in a delay of revenue and/or possibly a significant shortfall in our revenue, increase our development and/or marketing expenses, harm our profitability, and cause our operating results to be materially different than anticipated. If we miss key selling periods for products or services, particularly the fiscal quarter ending in December, for any reason, including product delays or product cancellations our sales likely will suffer significantly.

We also seek to release certain products and extra content for our live services - such as our sports franchises and the associated Ultimate Team live service - in conjunction with key events, such as the beginning of a sports season, events associated with the sports calendar, or the release of a related movie. If such seasons or events were delayed, cancelled or poorly received, our sales could suffer materially. For example, the COVID-19 pandemic has resulted in the disruption, postponement, and cancellation of sports seasons and sporting events. Further disruption, postponement and cancellation of sports seasons and sporting events around which we seek to launch our games and provide live services could have a material adverse impact on our business and operating ~~results.~~results could be materially adversely affected.

Our industry changes rapidly and we may fail to anticipate or successfully implement new or evolving technologies, or adopt successful business strategies, distribution methods or services.

Rapid changes in our industry require us to anticipate, sometimes years in advance, the ways in which our ~~products and services will be~~business can remain competitive in the market. We have invested, and in the future may invest, in new business and marketing strategies, tools and technologies, distribution methods, products, and services. There can be no assurance that these strategic investments will achieve expected returns. For example, ~~we are investing in~~ our mobile business ~~through seeking~~is a strategic focus as we look to ~~maximize~~reach new players, grow our existing network, and build interconnected ecosystems. Successfully monetizing mobile games is difficult and requires that we deliver valuable and entertaining player experiences that engage significant number of players or that we are able to otherwise monetize our mobile ~~live services, meaningfully expanding key franchises~~games. The success of our mobile games depends, in part, on unpredictable and volatile factors beyond our control including industry headwinds, consumer preferences, competing games, new mobile platforms and the mobile platform and through mergers and acquisitions activity. In addition, we are investing in a technological infrastructure that we expect will enable us to deliver content that will resonate with players and provide more choice in the way that players connect with their games, with eachavailability of other ~~and with new types of content.~~entertainment experiences. Such endeavors involve significant risks and uncertainties. No assurance can be given that the tools and technology we choose to implement, the business and marketing strategies we choose to adopt and the products, services and platform strategies that we pursue will achieve financial results that meet or exceed our expectations. Our reputation and brand could also be adversely affected. We also may miss opportunities or fail to respond quickly enough to ~~adopt~~industry change, including the adoption of tools and technology or distribution methods or develop products, services or new ways to engage with our games that become popular with consumers, which could adversely affect our financial results.

Our product and service development process usually starts with particular platforms and distribution methods in mind, and a range of technical development, feature and ongoing goals that we hope to be able to achieve. We may not be able to achieve these goals, or our competition may be able to achieve them more quickly and in a way that better engages consumers. In either case, our products and services may be technologically inferior to those of our competitors, less appealing to consumers, or both. If we cannot achieve our goals within the original development schedule for our products and services, then we may delay their release until these goals can be achieved, which may delay or reduce revenue and increase our development expenses. Alternatively, we may increase the resources employed in research and development in an attempt to accelerate our development of new technologies, either to preserve our product or service launch schedule or to keep up with our competition, which would increase our development expenses.

~~Negative perceptions about~~Stakeholders have high expectations for the quality and integrity of our ~~industry,~~ business, culture, products and ~~services and the communities within~~services. We may be unsuccessful in meeting these expectations or make business decisions to meet these expectations that impact our ~~products and services may damage our business, and we may incur costs to address concerns.~~short-term financial results.

Expectations regarding the quality, performance and integrity of our business, culture, products and services are high. Players and other stakeholders have sometimes been critical of our industry, brands, products, services, online communities, business models and/or practices for a wide variety of reasons, including perceptions about gameplay fun, fairness, game content, features or services, or objections to certain of our practices. These negative responses may not be foreseeable. We also may not effectively manage our responses because of reasons within or outside of our control. For example, we have included in certain

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contain variable digital items. The inclusion of variable digital items in certain games has attracted the attention of our community and if the future implementation of these features creates a negative perception of gameplay fairness or other negative perceptions, our reputation and brand could be harmed and revenue could be negatively impacted. In addition, we have taken actions, including delaying the release of our games and delaying or discontinuing content, features and services for our games, after taking into consideration, among other things, feedback from our community or geopolitical events even if those decisions negatively impacted our operating results in the short term. For example, in response to the current conflict in Ukraine, we stopped sales of our games and content in Russia and Belarus, worked with our platform partners to remove our games and live services from their stores, and took other actions. These actions had a negative impact on our financial results and may impact our future development processes. We expect to continue to take actions ~~to address concerns~~ as appropriate, including actions that may result in additional expenditures and the loss of revenue.

We aim to offer our players ~~safe,~~ fun, fair and ~~inclusive~~safe environments in which to ~~play; provide players with information about their engagement~~play and ~~tools that allow them control of their experiences;~~invest in, and deploy, tools and technologies to ~~give players~~promote positive play and facilitate players’ faith in their gameplay experience. Although we expend resources, and expect to continue to expend resources, to promote positive play, our efforts may not be successful due to scale, limitations of existing technologies or other factors. If our efforts are unsuccessful, negative sentiment about our business may increase and our brand and reputation may be harmed, scrutiny from governmental bodies and consumer groups may occur, and our financial and operating results may be adversely impacted. Negative sentiment about gameplay fairness, our online communities, our business practices, business models or game content also can lead to investigations or increased scrutiny from governmental bodies and consumer groups, as well as litigation, which, regardless of their outcome, may be costly, damaging to our reputation and harm our business.

Certain of our games and features on our platforms support online features that allow players and viewers to communicate with one another and post content, in real time, that is visible to other players and viewers. From time to time, this “user generated content” may contain objectionable and offensive content that is distributed and disseminated by third parties and our brands may be negatively affected by such actions. If we fail to appropriately respond to the dissemination of such content, we may be subject to lawsuits and governmental regulation, our players may not engage with our products and services and/or may lose confidence in our brands and our financial results may be adversely affected.

External game developers may not meet product development schedules or otherwise honor their obligations.

We contract with external game developers to develop our games or to publish or distribute their games. While we maintain contractual protections, we have less control over the product development schedules of games developed by external developers. We depend on their ability to meet product development schedules which could be negatively affected by, among other things, ~~the~~ distributed workforce ~~model resulting from the COVID-19 pandemic.~~models. In addition, disputes occasionally arise with external developers, including with respect to game content, launch timing, achievement of certain milestones, the game development timeline, marketing campaigns, contractual terms and interpretation. If we have disputes with external developers or they cannot meet product development schedules, acquire certain approvals or are otherwise unable or unwilling to honor their obligations to us, we may delay or cancel previously announced games, alter our launch schedule or experience increased costs and expenses, which could result in a delay or significant shortfall in anticipated revenue, harm our profitability and reputation, and cause our financial results to be materially affected.

Our business depends on the success and availability of consoles, systems and devices developed by third parties and our ability to develop commercially successful products and services for those consoles, systems and devices.

The success of our business is driven in part by the commercial success and adequate supply of third-party consoles, systems and devices for which we develop our products and services or through which our products and services are distributed. Our success depends in part on ~~our ability to connect more players, across more platforms, and more ways to play by~~ accurately predicting which consoles, systems and devices will be successful in the marketplace ~~our ability to develop~~and providing engaging and commercially successful ~~products~~games and services that reach players across multiple channels, our ability to simultaneously manage products and services on multiple consoles, systems and devices and our ability to effectively transition our products and services to newfor those consoles, systems and devices. We must make product development decisions and commit significant resources well in advance of the commercial availability of new consoles, systems and devices, and we may incur significant expense to adjust our product portfolio and development efforts in response to changing consumer preferences. ~~Additionally, we~~We may enter into certain exclusive licensing arrangements that affect our ability to deliver or market products or services on certain consoles, systems or devices. A console, system or device for which we are developing products and services may not succeed as expected ~~or new consoles, systems or devices may take market share~~ and interactive entertainment consumers away from those for which we have devoted significant resources. If consumer demand for the consoles, systems or devices for which we are developing products and services is lower than our expectations, we may be unable to fully recover the investments we have made in developing our products and ~~services, and our financial performance will be harmed. Alternatively, a console, system~~services; or ~~device~~new consoles, systems or devices may take market share away from those for which we have ~~not~~ devoted significant resources, ~~could be more successful than we initially anticipated,~~ causing us to not be able to reach our intended audience and take advantage of meaningful revenue opportunities.

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In fiscal year 2021, our key console partners Sony and Microsoft each released new generation consoles. In periods of transition, sales of products for legacy generation consoles typically slow or decline in response to the introduction of new consoles, and sales of products for new generation consoles typically stabilize only after new consoles are widely-established

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with the consumer base. This console transition may have a comparable impact on our live services business, potentially increasing the impact on our financial results. The transition could accelerate faster or slower than ~~anticipated and may put downward pressure on legacy generation pricing, which could negatively affect our operating results. Our revenue from sales for the~~we expect. For example, production of new generation consoles from Sony and Microsoft ~~may not offset the negative effects of the transition on our operating results. Alternatively, adoption of the new generation consoles in which we have made significant investments may be~~has been slower than ~~we anticipate or wide consumer availability may be delayed.~~expected because of semiconductor chip shortages and global supply chain disruptions. We do not control the unit volumes of consoles made available for sale, the pricing or appeal of new generation consoles, or the rates at which consumers purchase these consoles. For a period of time, we will also develop, market and operate games and services on both legacy and new generation consoles simultaneously. As a result of these factors, our operating results during ~~this transition~~console transitions may be more volatile and difficult to predict.

We may experience declines or fluctuations in the ~~recurring~~re-occurring portion of our business.

Our business model includes revenue that we deem ~~recurring~~re-occurring in nature, such as revenue from our live services, annualized sports franchises (e.g., ~~FIFA,~~ Madden ~~NFL)~~NFL, global football), and our console, PC and mobile catalog titles (i.e., titles that did not launch in the current fiscal year)~~, and our live services.~~. While we have been able to forecast the revenue from these areas of our business with greater relative confidence than for new games, services and business models, we cannot provide assurances that consumer demand will remain consistent, including in connection with circumstances outside of our control. Furthermore, we may cease to offer games and services that we previously had deemed to be ~~recurring~~re-occurring in nature. Consumer demand has declined and fluctuated, and could in the future decline or fluctuate, as a result of a number of factors, including their level of satisfaction with our games and services, our ability to improve and innovate our annualized titles, our ability to adapt our games and services to new distribution channels and business models, outages and disruptions of online services, the games and services offered by our competitors, our marketing and advertising efforts or declines in consumer activity generally as a result of economic downturns, among others. The reception to our sports games also depends, in part, on the popularity, reputation and brand of the leagues, organizations and individual athletes with whom we partner. Events and circumstances outside of our control that have a negative impact on the accessibility, popularity, reputation and brand of these partners has impacted, and could in the future negatively impact, sales related to our annualized sports games. Any decline or fluctuation in the ~~recurring~~re-occurring portion of our business may have a negative impact on our financial and operating results.

We could fail to successfully adopt new business models.

From time to time we seek to establish and implement new business models. Forecasting the success of any new business model is inherently uncertain and depends on a number of factors both within and outside of our control. Our actual revenue and profit for these businesses may be significantly greater or less than our forecasts. In addition, these new business models could fail, resulting in the loss of our investment in the development and infrastructure needed to support these new business models, as well as the opportunity cost of diverting management and financial resources away from more successful and established businesses. For example, we have devoted financial and operational resources to our subscription offerings without any assurance that these businesses will be financially successful. While we anticipate growth in this area of our business, consumer demand is difficult to ~~predict as a result of a number of factors, including satisfaction with our products and services, our ability~~predict. Any failure to provide engaging products and services, third parties offering their products and services within our subscription, partners that provide, or don’t provide, access to our subscription, products and services offered by our competitors, reliability of our infrastructure and the infrastructure of our partners, pricing, the actual or perceived security of our and our partners information technology systems and reductions in consumer spending levels. In addition, if our subscription offerings are successful, salessuccessfully implement new business models could be diverted from established business models. If we do not select a target price that is optimal for our subscription services, maintain our target pricing structure or correctly project renewal rates,materially impact our financial ~~results may be harmed.~~and operating results.

Acquisitions, investments, divestitures and other strategic transactions could result in operating difficulties and other negative consequences.

We have made and may continue to make acquisitions or enter into other strategic transactions including (1) acquisitions of companies, businesses, intellectual properties, and other assets, (2) ~~minority~~ investments in, or transactions with, strategic partners, and (3) investments in new ~~interactive entertainment~~ businesses as part of our long-term business strategy. ~~For example, in 2021 we have completed several acquisitions, including the acquisitions of Codemasters, Glu and Playdemic.~~ These acquisitions and other transactions involve significant challenges and risks including that the transaction does not advance our business strategy or strategic goals, that we do not realize a satisfactory return on our investment or cannot realize anticipated tax benefits, that we acquire liabilities

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and/or litigation from acquired companies or liabilities and/or litigation results from the transactions, that our due diligence process does not identify significant issues, liabilities or other challenges, diversion of management’s attention from our other businesses, and the incurrence of debt, contingent liabilities or amortization expenses, write-offs of goodwill, intangibles, or acquired in-process technology, or other increased cash and non-cash expenses. In addition, we may not integrate these businesses successfully or achieve expected synergies. For example, we may experience difficulties and costs associated with the integration of business systems and technologies, and acquired products and services, the integration and retention of new employees, the implementation of our internal control and compliance procedures and/or the remediation of the internal control and compliance environment of the acquired entity, or the maintenance of key business and customer relationships. These events could harm our operating results or financial condition.

We may fund strategic transactions with (1) cash, which would reduce cash available for other corporate purposes, (2) debt, which would increase our interest expense and leverage and/or (3) equity which would dilute current shareholders’ percentage

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ownership and also dilute our earnings per share. We also may divest or sell assets or a business and we may have difficulty selling such assets or business on acceptable terms in a timely manner. This could result in a delay in the achievement of our strategic objectives, cause us to incur additional expense, or the sale of such assets or business at a price or on terms that are less favorable than we anticipated.

We may be unable to maintain or acquire licenses to include intellectual property owned by others in our games, or to maintain or acquire the rights to publish or distribute games developed by others.

Many of our products and services are based on or incorporate intellectual property owned by others. For example, our EA Sports products include rights licensed from major sports leagues, teams and players’ associations and our Star Wars products include rights licensed from Disney. Competition for these licenses and rights is intense. If we are unable to maintain these licenses and rights or obtain additional licenses or rights with significant commercial value, our ability to develop successful and engaging products and services may be adversely affected and our revenue, profitability and cash flows may decline significantly. Other competitors may assume certain licenses and create competing products, impacting our sales. Competition for these licenses has increased, and may continue to increase, the amounts that we must pay to licensors and developers, through higher minimum guarantees or royalty rates, which could significantly increase our costs and reduce our profitability.

Our business partners may be unable to honor their obligations to us or their actions may put us at risk.

We rely on various business partners, including platform partners, third-party service providers, vendors, licensing partners, development partners and licensees. Their actions may put our business and our reputation and brand at risk. For example, we may have disputes with our business partners that may impact our business and/or financial results. In many cases, our business partners may be given access to sensitive and proprietary information in order to provide services and support, and they may misappropriate our information and engage in unauthorized use of it. In addition, the failure of these third parties to provide adequate services and technologies, or the failure of the third parties to adequately maintain or update their services and technologies, could result in a disruption to our business operations. Further, disruptions in the financial markets, economic downturns, poor business decisions, or reputational harm may adversely affect our business partners and they may not be able to continue honoring their obligations to us or we may cease our arrangements with them. Alternative arrangements and services may not be available to us on commercially reasonable terms or we may experience business interruptions upon a transition to an alternative partner or vendor. If we lose one or more significant business partners, our business could be harmed and our financial results could be materially affected.

~~A significant portion of our packaged goods sales are made to a relatively small number of retail and distribution partners, and these sales may be disrupted.~~

We derive a significant percentage of our net revenue attributable to sales of our packaged goods products to our top retail and distribution partners. The concentration of a significant percentage of these sales through a few large partners could lead to a short-term disruption to our business if certain of these partners significantly reduced their purchases or ceased to offer our products. The financial position of certain partners has deteriorated and while we maintain protections such as monitoring the credit extended to these partners, we could be vulnerable to collection risk if one or more of these partners experienced continued deterioration of their business or declared bankruptcy. The COVID-19 pandemic has resulted in closures of the retail stores of certain partners, which could negatively impact the sales of our packaged goods products and accelerate deterioration of the financial position of such partners. Additionally, receivables from these partners generally increase in our December fiscal quarter as sales of our products generally increase in anticipation of the holiday season which exposes us to heightened risk at that time of year. Having a significant portion of our packaged goods sales concentrated in a few partners could reduce

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our negotiating leverage with them. If one or more of these partners experience deterioration in their business or become unable to obtain sufficient financing to maintain their operations, our business could be harmed.

OPERATIONAL RISKS

The COVID-19 pandemic ~~has~~and the various responses to it have affected how we are operating our business and the ~~full~~duration and extent ~~of the~~to which this will impact ~~of the COVID-19 pandemic on~~ our ~~business~~future operations and financial results is uncertain.

~~As a result of the~~The COVID-19 pandemic and ~~related public health measures, federal, state, local~~the various responses to it have affected how we and ~~foreign governmental authorities~~our partners are operating our businesses and have ~~imposed,~~affected our operating results. The duration and ~~continue~~extent to ~~impose, protocols~~which this will impact our future operations and restrictions intended to contain the spread of the virus, including limitations on the size of gatherings, mandated closure of work facilities, schools and businesses, quarantines, lockdowns and travel restrictions. In addition, weresults remains uncertain. We have established and ~~will~~ continue to maintain, protocols to promote the health and safety of our workforce and business partners. ~~Substantially all of~~We are re-opening our office locations ~~including~~and resuming business travel, consistent with the health and safety of our ~~global headquarters~~employees and in ~~Redwood Shores, California and key studios across North America, Europe and Asia remain closed~~compliance with any local legal restrictions or requirements. The reintroduction of employees to the ~~majority~~workplace could introduce operational risk, negatively impact productivity, and give rise to claims by employees or otherwise adversely affect our business. As we re-open our offices, employees may be offered more flexibility in the amount of time they work in an office, which may adversely impact the productivity of certain employees. The long-term effects of the COVID-19 pandemic on the future of work are not certain and may present operational challenges and impact our ~~employees.~~ability to attract and retain talent, and our teams’ ability to collaborate creatively, each of which may adversely affect our business.

~~The global work-from-home operating environment has caused strain and fatigue to our global workforce. In addition, certain~~Certain of our development teams ~~currently work~~have worked for an extended period in a distributed environment, whereas these teams historically collaborated in-person on the creative and technical process required to develop high-quality products and services at scale. ~~Each of these factors~~This has disrupted, and may continue to disrupt, the productivity of our workforce and the creative process to which our teams are accustomed. Companies in our industry have experienced issues related to game and service quality associated with the period during ~~the current work-from-home period,~~which employees primarily worked-from-home, and we have changed the launch date of key products because of challenges associated with a distributed development environment. In addition, the longer-term impact to our creative and technical development processes is unknown and the associated risks, including with respect to game quality and developmental delays, which may cause us to delay or cancel additional release dates, may be ~~heightened as the work-from-home period persists.~~heightened.

~~We are beginning to re-open locations to a limited number~~

Table of employees as it is appropriate to do so, consistent with the health and safety of our employees and in compliance with any local legal restrictions or requirements. The reintroduction of employees to the workplace could introduce operational risk, negatively impact productivity, and give rise to claims by employees or otherwise adversely affect our business. In addition, the long-term effects of the COVID-19 pandemic on the nature of the office environment and remote working are not certain and may present operational challenges and impact our ability to attract and retain talent, and our teams’ ability to collaborate creatively, each of which may adversely affect our business.Contents

During fiscal 2021, we experienced increased demand for our products and services and changing player behavior with more people staying at home. Our financial results and operating metrics benefited during fiscal year 2021 from these factors. In addition, longer-term trends that benefit our business accelerated, including a significant increase in live services revenue and the proportion of our games purchased digitally. These trends from fiscal year 2021 may not be indicative of results for future periods, particularly as factors related to the COVID-19 pandemic lessen and consumers can engage with other forms of entertainment, if the trend towards digital adoption decelerates, or if global macroeconomic effects related to the COVID-19 pandemic persist even after the pandemic has subsided.

The extent of the impact of the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the duration ~~and spread~~ of the pandemic, future waves of COVID-19 infections and variants, the extent, speed and effectiveness of worldwide containment and vaccination efforts and the impact of these and other factors on our employees, customers, partners and vendors. If we are not able to flexibly respond to and manage the impact of these and other currently unknown impacts related to the COVID-19 pandemic, our business will be harmed.

To the extent that the COVID-19 pandemic harms our business and results of operations, many of the other risks described in this “Risk Factors” section may be heightened.

Catastrophic events may disrupt our business.

Natural disasters, cyber-incidents, weather events, wildfires, power disruptions, telecommunications failures, pandemics, health crises and other public health events, failed upgrades of existing systems or migrations to new systems, acts of terrorism or other events could cause outages, disruptions and/or degradations of our infrastructure (including our or our partners’ information technology and network systems), a failure in our ability to conduct normal business operations, or the closure of public spaces in which players engage with our games and services. The health and safety of our employees, players, third-party

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organizations with whom we partner, or regulatory agencies on which we rely could be also affected, any of which may prevent us from executing against our business strategies and/or cause a decrease in consumer demand for our products and services.

We recognize the inherent physical risks associated with climate change. Natural disasters and weather events linked to climate change are increasing in size and scope and certain of our office locations are located in areas that are vulnerable to climate change effects. Climate-related events and their impact on critical infrastructure in areas in which we do business have the potential to disrupt our business and operations, and/or the businesses and operations of our partners, and may cause us to incur additional costs to maintain or resume operations.

System redundancy may be ineffective and our disaster recovery and business continuity planning may not be sufficient for all eventualities. Such failures, disruptions, closures, or inability to conduct normal business operations could also prevent access to our products, services or online stores selling our products and services, cause delay or interruption in our product or live services offerings, allow breaches of data security or result in the loss of critical data. Our corporate headquarters and several of our key studios also are located in seismically active regions. An event that results in the disruption or degradation of any of our critical business functions or information technology systems, harms our ability to conduct normal business operations or causes a decrease in consumer demand for our products and services could materially impact our reputation and brand, financial condition and operating results.

We have and may continue to experience security breaches and cyber threats.

The integrity of our and our partners’ information technology networks and systems is critical to our ongoing operations, products, and services. Our industry is prone to, and our systems and networks are subject to actions by malfeasant actors, ~~such as~~which may include individuals or groups, including state-sponsored attackers. These actions include cyber-attacks, including ransomware, and other information security incidents that seek to exploit, disable, damage, and/or disrupt our networks, business operations, products and services and supporting technological infrastructure, or gain access to consumer and employee personal information, our intellectual property and other assets. In addition, our systems and networks could be harmed or improperly accessed due to error by employees or third parties that are authorized to access these networks and systems. We also rely on technological infrastructure provided by third-party business partners to support the online functionality of our products and services, who are also subject to these same cyber risks. Both our partners and we have expended, and expect to continue to expend, financial and operational resources to guard against cyber risks and to help protect our data and systems. However, the techniques used by malfeasant actors change frequently, continue to evolve in sophistication and volume, and often are not detected for long periods of time.

As a result of the COVID-19 pandemic, remote access to our networks and systems, and the networks and systems of our partners, has increased substantially. Many of our employees are resuming work in our offices under a hybrid work model in which they spend a portion of their time working in offices and a portion of time working remotely. While we and our partners have taken steps to secure our networks and systems, these networks and systems may be more vulnerable to a successful cyber-attack or information security incident ~~while workforces remain distributed.~~in this hybrid working model. The costs to respond to, mitigate, and/or notify affected parties of cyber-attacks and other security vulnerabilities are significant. It may also be necessary for us to take additional extraordinary measures and make additional expenditures to take appropriate responsive and preventative steps. In addition, such events could compromise the confidentiality, integrity, or accessibility of these networks and systems or result in the compromise or loss of the data, including personal data, processed by these systems. Consequences of such events, responsive measures and preventative measures have included, and could in the future include, the loss of proprietary and

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personal data and interruptions or delays in our business operations, exploitation of our data, as well as loss of player confidence and damage to our brand and reputation, financial expenses and financial loss. In addition, such events could cause us to be non-compliant with applicable regulations, and subject us to legal claims or penalties under laws protecting the privacy or security of personal information or proprietary material information. We have experienced such events in the past and expect future events to occur.

In addition, the virtual economies that we have established in many of our games are subject to abuse, exploitation and other forms of fraudulent activity that can negatively impact our business. Virtual economies involve the use of virtual currency and/or virtual assets that can be used or redeemed by a player within a particular game or service. The abuse or exploitation of our virtual economies have included the illegitimate or unauthorized generation and sale of virtual items, including in black markets. Our online services have been impacted by in-game exploits and the use of automated or other fraudulent processes designed to generate virtual ~~item~~items or currency illegitimately ~~and~~or to execute account takeover attacks against our players. We anticipate such activity ~~may~~to continue. These abuses and exploits, and the steps that we take to address these abuses and exploits may result in a loss of anticipated revenue, increased costs to protect against or remediate these issues, interfere with players’ enjoyment of a balanced game environment ~~and~~or cause harm to our reputation and brand.

We may experience outages, disruptions or degradations in our services, products and/or technological infrastructure.

The reliable performance of our products and services depends on the continuing operation and availability of our information technology systems and those of our external service providers, including third-party “cloud” computing services. Our games and services are complex software products and maintaining the sophisticated internal and external technological infrastructure required to reliably deliver these games and services is expensive and ~~complex.~~complicated. The reliable delivery and stability of our products and services has been, and could in the future be, adversely impacted by outages, disruptions, failures or degradations in our network and related infrastructure, as well as in the online platforms or services of key business partners that offer,

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support or host our products and services. In addition, the supply chain of hardware needed to maintain this technological infrastructure has been disrupted and geopolitical events, including the Russian invasion of Ukraine and any indirect effects, may further complicate existing supply chain constraints. The reliability and stability of our products and services has been affected by events outside of our control as well as by events within our control, such as the migration of data among data centers and to third-party hosted environments, the performance of upgrades and maintenance on our systems, and online demand for our products and services that exceeds the capabilities of our technological infrastructure.

If we or our external business partners were to experience an event that caused a significant system outage, disruption or degradation or if a transition among data centers or service providers or an upgrade or maintenance session encountered unexpected interruptions, unforeseen complexity or unplanned disruptions, our products and services may not be available to consumers or may not be delivered reliably and stably. As a result, our reputation and brand may be harmed, consumer engagement with our products and services may be reduced, and our revenue and profitability could be negatively impacted. We do not have redundancy for all our systems, many of our critical applications reside in only one of our data centers, and our disaster recovery planning may not account for all eventualities.

As our digital business grows, we will require an increasing amount of internal and external technical infrastructure, including network capacity and computing power to continue to satisfy the needs of our players. We are investing, and expect to continue to invest, in our own technology, hardware and software and the technology, hardware and software of external service providers to support our business. It is possible that we may fail to scale effectively and grow this technical infrastructure to accommodate increased demands, which may adversely affect the reliable and stable performance of our games and services, therefore negatively impacting engagement, reputation, brand and revenue growth.

Attracting, managing and retaining our talent is critical to our success.

Our business depends on our ability to attract, train, motivate and retain executive, technical, creative, marketing and other personnel that are essential to the development, marketing and support of our products and services. The market for highly-skilled workers and leaders in our industry is extremely competitive, particularly in the geographic locations in which many of our key personnel are ~~located.~~located and has recently intensified further due to industry trends. In addition, our leading position within the interactive entertainment industry makes us a prime target for recruiting our executives, as well as key creative and technical talent. We strive to provide a workplace culture that is diverse, equitable, inclusive and safe and have invested in policies, practices, tools and people in this regard. If we cannot successfully recruit, train, motivate and retain qualified employees, develop and maintain a diverse, equitable, inclusive and safe work environment, or replace key employees following their departure, our reputation and brand may be negatively impacted and our ability to develop and manage our business will be impaired.

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We rely on the consoles, systems and devices of partners who have significant influence over the products and services that we offer in the marketplace.

A significant percentage of our digital net revenue is attributable to sales of products and services through our significant partners, including Sony, Microsoft, Apple and Google. The concentration of a material portion of our digital sales in these partners exposes us to risks associated with these businesses. Any deterioration in the businesses of our significant partners could disrupt and harm our business, including by limiting the methods through which our digital products and services are offered and exposing us to collection risks.

In addition, our license agreements typically provide these partners with significant control over the approval and distribution of the products and services that we develop for their consoles, systems and devices. For products and services delivered via digital channels, each respective partner has policies and guidelines that control the promotion and distribution of these titles and the features and functionalities that we are permitted to offer through the channel. Our partners could choose to exclude our products and services from, or de-emphasize the promotion of our products and services within, some or all of their distribution channels in order to promote their own products and services or those of our competitors. In addition, we are dependent on these partners to invest in, and upgrade, the capabilities of their systems in a manner that corresponds to the preferences of consumers. Failure by these partners to keep pace with consumer preferences could have an adverse impact on the engagement with our products and services and our ability to merchandise and commercialize our products and services which could harm our business and/or financial results.

Moreover, certain significant partners can determine and change unilaterally certain key terms and conditions, including the ability to change their user and developer policies and guidelines. In many cases these partners also set the rates that we must pay to provide our games and services through their online channels, and retain flexibility to change their fee structures or adopt different fee structures for their online channels, which could adversely impact our costs, profitability and margins. These partners also control the information technology systems through which online sales of our products and service channels are captured. If our partners establish terms that restrict our offerings, significantly impact the financial terms on which these products or services are offered to our customers, or their information technology systems experience outages that impact our

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players’ ability to access our games or purchase extra content or cause an unanticipated delay in reporting, our business and/or financial results could be materially affected.

A significant portion of our packaged goods sales are made to a relatively small number of retail and distribution partners, and these sales may be disrupted.

We derive a significant percentage of our net revenue attributable to sales of our packaged goods products to our top retail and distribution partners. The concentration of a significant percentage of these sales through a few large partners could lead to a short-term disruption to our business if certain of these partners significantly reduced their purchases or ceased to offer our products. The financial position of certain partners has deteriorated and while we maintain protections such as monitoring the credit extended to these partners, we could be vulnerable to collection risk if one or more of these partners experienced continued deterioration of their business or declared bankruptcy. Additionally, receivables from these partners generally increase in our December fiscal quarter as sales of our products generally increase in anticipation of the holiday season which exposes us to heightened risk at that time of year. Having a significant portion of our packaged goods sales concentrated in a few partners could reduce our negotiating leverage with them. If one or more of these partners experience deterioration in their business or become unable to obtain sufficient financing to maintain their operations, our business could be harmed.

The products or services we release may contain defects, bugs or errors.

Our products and services are extremely complex software programs and are difficult to develop and distribute. We have quality controls in place to detect defects, bugs or other errors in our products and services before they are released. Nonetheless, these quality controls are subject to human error, overriding, and resource or technical constraints. In addition, the effectiveness of our quality controls and preventative measures may be negatively affected by the distribution of our workforce resulting from the COVID-19 pandemic. As such, these quality controls and preventative measures may not be effective in detecting all defects, bugs or errors in our products and services before they have been released into the marketplace. In such an event, the technological reliability and stability of our products and services could be below our standards and the standards of our players and our reputation, brand and sales could be adversely affected. In addition, we could be required to, or may find it necessary to, offer a refund for the product or service, suspend the availability or sale of the product or service or expend significant resources to cure the defect, bug or error each of which could significantly harm our business and operating results.

LEGAL AND COMPLIANCE RISKS

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Our business is subject to complex and prescriptive regulations regarding consumer protection and data privacy practices, and could be adversely affected if our consumer protection, data privacy and security practices are not adequate, or perceived as being inadequate.

We are subject to global data privacy, data protection, localization, security and consumer-protection laws and regulations worldwide. These laws and regulations are emerging and evolving and the interpretation and application of these laws and regulations often are uncertain, contradictory and changing. The failure to maintain data practices that are compliant with applicable laws and regulations, or evolving interpretations of applicable laws and regulations, could result in inquiries from enforcement agencies or direct consumer complaints, resulting in civil or criminal penalties, and could adversely impact our reputation and brand. In addition, the operational costs of compliance with these regulations is high and will likely continue to increase. Even if we remain in strict compliance with applicable laws and regulations, consumer sensitivity to the collection and processing of their personal information continues to increase. Any real or perceived failures in maintaining acceptable data privacy practices, including allowing improper or unauthorized access, acquisition or misuse and/or uninformed disclosure of consumer, employee and other information, or a perception that we do not adequately secure this information or provide consumers with adequate notice about the information that they authorize us to collect and disclose could result in brand, reputational, or other harms to the business, result in costly remedial measures, deter current and potential customers from using our products and services and cause our financial results to be materially affected.

Third party vendors and business partners receive access to certain information that we collect. These vendors and business partners may not prevent data security breaches with respect to the information we provide them or fully enforce our policies, contractual obligations and disclosures regarding the collection, use, storage, transfer and retention of personal data. A data security breach of one of our vendors or business partners could cause reputational and financial harm to them and us, negatively impact our ability to offer our products and services, and could result in legal liability, costly remedial measures, governmental and regulatory investigations, harm our profitability, reputation and brand, ~~and~~and/or cause our financial results to be materially affected.

We also are subject to payment card association rules and obligations pursuant to contracts with payment card processors. Under these rules and obligations, if information is compromised, we could be liable to payment card issuers for the cost of associated expenses and penalties. In addition, if we fail to follow payment card industry security standards, even if no consumer information is compromised, we could incur significant fines or experience a significant increase in payment card transaction costs.

Government regulations applicable to us may negatively impact our business.

We are a global company subject to various and complex laws and regulations domestically and internationally, including laws and regulations related to consumer protection, protection of minors, online safety, content, advertising, localization, information security, intellectual property, competition, sanctions, addressing climate change, taxation, and employment, among others. Many of these laws and regulations are continuously evolving and developing, and the application to, and impact on, us is uncertain. For example, the World Health Organization included “gaming disorder” in the 11th Revision of the International Classification of Diseases, prompting discussion and consideration of legislation and policies aimed at mitigating the risk of overuse of, and overspending within,

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~~video games.~~ These laws could harm our business by limiting the products and services we can offer consumers or the manner in which we offer them. The costs of compliance with these laws may increase in the future as a result of changes in applicable laws or changes to interpretation. Any failure on our part to comply with these laws or the application of these laws in an unanticipated manner may harm our business and result in penalties or significant legal liability.

Certain of our business models and features within our games and services are subject to new laws or regulations or evolving interpretations and application of existing laws and regulations, including those related to gambling. The growth and development of electronic commerce, virtual items and virtual currency has prompted calls for new laws and regulations and resulted in the application of existing laws or regulations that have limited or restricted the sale of our products and services in certain territories. For example, governmental organizations have applied existing laws and regulations to certain mechanics commonly included within our games, including the Ultimate Team mode associated with our sports franchises. In addition, we include modes in our games that allow players to compete against each other and manage player competitions that are based on our products and services. Although we structure and operate our skill-based competitions with applicable laws in mind, including those related to gambling, our skill-based competitions in the future could become subject to evolving laws and regulations. We are also introducing features into our games and services that allow players to create and share user-generated content. Such content may be objectionable or offensive and decrease engagement with our products and services, cause a loss of confidence in our brands and expose us to liability and regulatory oversight, particularly as applicable global laws and regulations are introduced and evolve. New laws related to these business models and features or the interpretation or application of current laws ~~that impact these business models and features - each of which could vary significantly across jurisdictions -~~ could subject us to additional regulation and oversight, cause us to further limit or restrict the sale of our products and services or otherwise impact our products and services, lessen the engagement with, and growth of, profitable

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business models, and expose us to increased compliance costs, significant liability, fines, penalties and harm to our reputation and brand.

We are subject to laws in certain foreign countries, and adhere to industry standards in the United States, that mandate rating requirements or set other restrictions on the advertisement or distribution of interactive entertainment software based on content. In addition, certain foreign countries allow government censorship of interactive entertainment software products or require pre-approval processes of uncertain length before our games and services can be offered. Adoption of ratings systems, censorship, restrictions on distribution and changes to approval processes or the status of any approvals could harm our business by limiting the products we are able to offer to our consumers. In addition, compliance with new and possibly inconsistent regulations for different territories could be costly, delay or prevent the release of our products in those territories.

We may be subject to claims of infringement of third-party intellectual property rights.

From time to time, third parties may claim that we have infringed their intellectual property rights. Although we take steps to avoid knowingly violating the intellectual property rights of others, it is possible that third parties still may claim infringement. Existing or future infringement claims against us may be expensive to defend and divert the attention of our employees from business operations. Such claims or litigation could require us to pay damages and other costs. We also could be required to stop selling, distributing or supporting products, features or services which incorporate the affected intellectual property rights, redesign products, features or services to avoid infringement, or obtain a license, all of which could be costly and harm our business.

In addition, many patents have been issued that may apply to potential new modes of delivering, playing or monetizing products and services such as those that we produce or would like to offer in the future. We may discover that future opportunities to provide new and innovative modes of game play and game delivery may be precluded by existing patents that we are unable to acquire or license on reasonable terms.

From time to time we may become involved in other legal proceedings.

We are currently, and from time to time in the future may become, subject to legal proceedings, claims, litigation and government investigations or inquiries, which could be expensive, lengthy, disruptive to normal business operations and occupy a significant amount of our employees’ time and attention. In addition, the outcome of any legal proceedings, claims, litigation, investigations or inquiries may be difficult to predict and could have a material adverse effect on our business, reputation, operating results, or financial condition.

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Our products and brands are subject to intellectual property infringement, including in jurisdictions that do not adequately protect our products and intellectual property rights.

We regard our products, brands and intellectual property as proprietary and take measures to protect our assets from infringement. We are aware that some unauthorized copying of our products and brands occurs, and if a significantly greater amount were to occur, it could negatively impact our business. Further, our products and services are available worldwide and the laws of some countries, particularly in Asia, either do not protect our products, brands and intellectual property to the same extent as the laws of the United States or are poorly enforced. Legal protection of our rights may be ineffective in countries with weaker intellectual property enforcement mechanisms. In addition, certain third parties have registered our intellectual property rights without authorization in foreign countries. Successfully registering such intellectual property rights could limit or restrict our ability to offer products and services based on such rights in those countries. Although we take steps to enforce and police our rights, our practices and methodologies may not be effective against all eventualities.

FINANCIAL RISKS

Our financial results are subject to currency and interest rate fluctuations.

International sales are a fundamental part of our business. For our fiscal year ended March 31, ~~2021,~~2022, international net revenue comprised 5657 percent of our total net revenue, and we expect our international business to continue to account for a significant portion of our total net revenue. As a result of our international sales, and also the denomination of our foreign investments and our cash and cash equivalents in foreign currencies, we are exposed to the effects of fluctuations in foreign currency exchange rates, and volatility in foreign currency exchange rates remains elevated as compared to historic levels. Strengthening of the U.S. dollar, particularly relative to the Euro, British pound sterling, Australian dollar, Japanese yen, Chinese yuan, South Korean won and Polish zloty, has a negative impact on our reported international net revenue but a positive impact on our

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reported international operating expenses (particularly when the U.S. dollar strengthens against the Swedish krona and the Canadian dollar) because these amounts are translated at lower rates. We use foreign currency hedging contracts to mitigate some foreign currency risk. However, these activities are limited in the protection they provide us from foreign currency fluctuations and can themselves result in losses. In addition, interest rate volatility ~~including lower interest rates resulting from actions taken in connection with the COVID-19 pandemic,~~ can decrease the amount of interest earned on our cash, cash equivalents and short-term investment portfolio.

We utilize debt financing and such indebtedness could adversely impact our business and financial condition.

We have $1.9 billion in senior unsecured notes outstanding as well as an unsecured $500 million revolving credit facility. While the facility is currently undrawn, we may use the proceeds of any future borrowings for general corporate purposes. We may also enter into other financial instruments in the future.

This indebtedness and any indebtedness that we may incur in the future could affect our financial condition and future financial results by, among other things:

•Requiring the dedication of a substantial portion of any cash flow from operations to the payment of principal of, and interest on, our indebtedness, thereby reducing the availability of such cash flow for other purposes, including capital expenditures, share repurchases, acquisitions or otherwise funding our growth strategy;

•Limiting our flexibility in planning for, or reacting to, changes in our business and our industry; and

•Increasing our vulnerability to downturns in our business or adverse changes in general economic and industry conditions.

The agreements governing our indebtedness impose restrictions on us and require us to maintain compliance with specified covenants. In particular, the revolving credit facility requires us to maintain compliance with a debt to EBITDA ratio. Our ability to comply with these covenants may be affected by events beyond our control. If we breach any of these covenants and do not obtain a waiver from the lenders or noteholders, then, subject to applicable cure periods, our outstanding indebtedness may be declared immediately due and payable. There can be no assurance that any refinancing or additional financing would be available on terms that are favorable or acceptable to us, if at all. In addition, changes by any rating agency to our credit rating may negatively impact the value and liquidity of both our debt and equity securities, as well as the potential costs associated with any potential refinancing of our indebtedness. Downgrades in our credit rating could also restrict our ability to obtain additional financing in the future and could affect the terms of any such financing.

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Changes in our tax rates or exposure to additional tax liabilities, and changes to tax laws and interpretations of tax laws could adversely affect our earnings and financial condition.

We are subject to taxes in the United States and in various foreign jurisdictions. Significant judgment is required in determining our worldwide income tax provision, tax assets, and accruals for other taxes, and there are many transactions and calculations where the ultimate tax determination is uncertain. Our effective income tax rate is based in part on our corporate operating structure and the manner in which we operate our business and develop, value and use our intellectual property. Taxing authorities in jurisdictions in which we operate have challenged and audited, and may continue to, challenge and audit our methodologies for calculating our income taxes, which could increase our effective income tax rate and have an adverse impact on our results of operations and cash flows. In addition, our provision for income taxes is materially affected by our profit levels, changes in our business, changes in our geographic mix of earnings, changes in the elections we make, changes in the valuation of our deferred tax assets and liabilities, changes in our corporate structure, changes in applicable accounting rules, or changes in applicable tax laws or interpretations of existing income and withholding tax laws, as well as other factors. The impact of excess tax benefits and tax deficiencies could result in significant fluctuations to our effective tax rate.

~~In addition, changes~~Changes to U.S. federal, state or international tax laws or their applicability to corporate multinationals in the countries in which we do business, particularly in Switzerland, where our international business is headquartered, and actions we have taken in our business with respect to such laws, have affected, and could continue to affect, our effective tax rates and cash taxes, and could cause us to change the way in which we structure our business and result in other costs. In particular, ~~enactment of the~~ recently proposed ~~U.S.~~changes to tax ~~legislation~~law in the United States and among the countries in the Organization for Economic Co-operation and Development could materially impact our provision for income taxes and cash taxes. Our effective tax rate also could be adversely affected by changes in our valuation allowances for deferred tax assets. Our valuation allowances, in turn, ~~can be~~are impacted by several factors ~~including changes~~with respect to ~~the expected mix and timing of product releases and future taxable income, expected growth rates of future taxable income, which are based primarily on third party market~~our business and industry ~~growth data, changes in~~and macroeconomic factors, including rising interest ~~rates, and actions we take in connection with acquisitions.~~rates. Significant judgment is involved in determining the amount of valuation allowances, and actual financial results also may differ materially from our current estimates and could have a material impact on our assessments.

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We are required to pay taxes other than income taxes, such as payroll, sales, use, value-added, net worth, property, transfer, and goods and services taxes, in both the United States and foreign jurisdictions. Several foreign jurisdictions have introduced new digital services taxes on revenue of companies that provide certain digital services or expanded their interpretation of existing tax laws with regard to other non-income taxes. There is limited guidance about the applicability of these new taxes or changing interpretations to our business and significant uncertainty as to what will be deemed in scope. If these foreign taxes are applied to us, it could have an adverse and material impact on our business and financial performance.

GENERAL RISKS

Our business is subject to economic, market, public health and geopolitical conditions.

Our business is subject to economic, market, public health and geopolitical conditions, which are beyond our control. The United States and other international economies have experienced cyclical downturns from time to time. Worsening economic conditions, political instability, and adverse political developments in or around any of the countries in which we do business, particularly conditions that negatively impact discretionary consumer spending and consumer demand or increase our operating costs, including conflict, inflation, slower growth, recession and other macroeconomic conditions ~~including those resulting from,~~have had, and ~~that may persist from, public health outbreaks such as the COVID-19 pandemic and geopolitical issues, such as the impact from the United Kingdom’s departure from the European Union,~~ could continue to have, a material adverse impact on our business and operating results. In addition, relations between the United States and countries in which we have operations and sales have fluctuated over time resulting in the adoption or expansion of trade restrictions, including economic sanctions, that have a negative impact on our financial results and development processes.

We are particularly susceptible to market conditions and risks associated with the entertainment industry, which, in addition to general macroeconomic downturns, also include the popularity, price and timing of our games, changes in consumer demographics, the availability and popularity of other forms of entertainment, and critical reviews and public tastes and preferences, which may change rapidly and cannot necessarily be predicted.

Our stock price has been volatile and may continue to fluctuate significantly.

The market price of our common stock historically has been, and we expect will continue to be, subject to significant fluctuations. These fluctuations may be due to our operating results or factors specific to our operating results (including those discussed in the risk factors above, as well as others not currently known to us or that we currently do not believe are material), changes in securities analysts’ estimates of our future financial performance, ratings or recommendations, our results or future financial guidance falling below our expectations and analysts’ and investors’ expectations, the failure of our capital return programs to meet analysts’ and investors’ expectations, the announcement and integration of any acquisitions we may make,

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departure of key personnel, cyberattacks, or factors largely outside of our control including, those affecting interactive gaming, entertainment, and/or technology companies generally, national or international economic conditions, investor sentiment or other factors related or unrelated to our operating performance. In particular, economic downturns may contribute to the public stock markets experiencing extreme price and trading volume volatility. These broad market fluctuations could adversely affect the market price of our common stock.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

In November 2020, our Board of Directors authorized a program to repurchase up to $2.6 billion of our common stock. ~~This stock repurchase~~Repurchases under the November 2020 program ~~expires on November 4,~~were completed in October 2022. Under this program, we may purchase stock in the open market or through privately negotiated transactions in accordance with applicable securities laws, including pursuant to pre-arranged stock trading plans. The timing and actual amount of the stock repurchases will depend on several factors including price, capital availability, regulatory requirements, alternative investment opportunities and other market conditions. We are not obligated to repurchase a specific number of shares under this program and it may be modified, suspended or discontinued at any time.

During the three months ended September 30, ~~2021,~~2022, we repurchased approximately ~~2.3~~2.6 million shares for approximately $325 million under ~~this program. We are actively repurchasing shares under this~~the November 2020 program.

Fiscal Month Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Dollar Value that May Still Be Purchased Under the Programs (in millions)
July 4, 2021 - July 31, 2021 687,704 $ 142.54 687,704 $ 1,527
August 1, 2021 - August 28, 2021 736,713 $ 140.06 736,713 $ 1,424
August 29, 2021 - October 2, 2021 893,512 $ 138.58 893,512 $ 1,300
2,317,929 $ 140.23 2,317,929


Fiscal Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Maximum Dollar Value that May Still Be Purchased Under the Programs (in millions)
July 3, 2022 - July 30, 2022	781,169	$	125.48	781,169	$	232
July 31, 2022 - August 27, 2022	787,588	$	131.01	787,588	$	129
August 28, 2022 - October 1, 2022	999,491	$	123.88	999,491	$	5
	2,568,248	$	126.56	2,568,248

Item 3.Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

Not applicable.

Item 6.Exhibits

The exhibits listed in the accompanying index to exhibits on Page 6560 are filed or incorporated by reference as part of this report.

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ELECTRONIC ARTS INC.

FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER 30, ~~2021~~2022

EXHIBIT INDEX

Incorporated by Reference

Number

Exhibit Title

Form

File No.

Filing Date

Filed
Herewith

3.1

Certificate of Amendment to Amended and Restated Certificate of Incorporation

8-K

000-17948

8/15/2022

~~3.1~~3.2

Amended and Restated ~~Certificate of Incorporation~~Bylaws

8-K

000-17948

~~08/13/2021~~8/15/2022

10.1 *

Amended and Restated 2019 Equity Incentive Plan

8-K

000-17948

8/15/2022

10.2*

Electronic Arts Inc. Executive Officer Cash Severance Policy

8-K

000-17948

9/1/2022

10.3

Amendment No. 1 dated as of October 18, 2022 to the Credit Agreement dated as of August 29, 2019, by and among Electronic Arts Inc., the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent

8-K

000-17948

10/20/2022

15.1

Awareness Letter of KPMG LLP, Independent Registered Public Accounting Firm

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Additional exhibits furnished with this report:

32.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS†

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH†

Inline XBRL Taxonomy Extension Schema Document

101.CAL†

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF†

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB†

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE†

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Management contract or compensatory plan or arrangement.

† Attached as Exhibit 101 to this Quarterly Report on Form 10-Q for the quarterly period ended September 30, ~~2021~~2022 are the following formatted in Inline eXtensible Business Reporting Language (“iXBRL”): (1) Condensed Consolidated Balance

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Sheets, (2) Condensed Consolidated Statements of Operations, (3) Condensed Consolidated Statements of Comprehensive Income, (4) Condensed Consolidated Statements of Stockholders' Equity, (5) Condensed Consolidated Statements of Cash Flows, and (6) Notes to Condensed Consolidated Financial Statements.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						ELECTRONIC ARTS INC.
						(Registrant)

						/s/ ~~Blake Jorgensen~~Chris Suh
DATED:						~~Blake Jorgensen~~Chris Suh
November ~~9, 2021~~8, 2022						EVP and Chief Financial Officer (Duly Authorized Officer)

6662


	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)
Statement of Operations Classification	Three Months Ended September 30, 2020		Six Months Ended September 30, 2020




(Gains) losses on foreign currency forward contracts designated as cash flow hedges
Net revenue	$	(1)	$	(12)
Research and development	—		6
Total net (gain) loss reclassified, net of tax	$	(1)	$	(6)


(In millions)	Previously Reported at June 30, 2021		Measurement Period Adjustments		As Adjusted at September 30, 2021
Current assets	$	63	$	—	$	63
Property and equipment, net	14		—		14
Other assets	48		—		48
Intangible assets	657		(131)		526
Goodwill	1,406		100		1,506
Deferred tax liabilities	(69)		31		(38)
Current liabilities	(78)		—		(78)
Other liabilities	(39)		—		(39)
Purchase price, net of cash acquired	$	2,002	$	—	$	2,002

Intangibles assets by asset category(a)
Developed and core technology	$	305	$	(73)	$	232
Trade names and trademarks	252		(43)		209
Registered user base and other intangibles	12		—		12
In-process research and development	88		(15)		73
Total	$	657	$	(131)	$	526
(a) In-process research and development assets are considered indefinite-lived until complete. Excluding the in-process research and development assets, the weighted-average useful life of the Glu’s acquired intangible assets is currently estimated to be approximately 5.5 years.