Activision Blizzard Revenue Falls as Call of Duty Demand Sputters

Activision Blizzard Inc. ATVI -0.95% ‘s first-quarter sales and profit plunged as demand for its Call of Duty videogame franchise fell.

The videogame company, which in January agreed to be purchased by Microsoft Corp. MSFT 1.38% for $75 billion, posted a 22.3% drop in sales from a year ago, reflecting weaker premium sales for “Call of Duty: Vanguard,” the latest installment in the popular franchise, as well as lower engagement with “Call of Duty: Warzone,” a free-to-play title.

Microsoft agreed to buy the videogame developer for $95 a share in a bid to expand its catalog of blockbuster videogames and drive more customers to its cloud-gaming service. Microsoft valued the deal at nearly $69 billion after adjusting for Activision’s ATVI -0.95% net cash. The deal has been approved by the boards of both companies and would make Microsoft the world’s third-largest game company by sales.

For the quarter ended March 31, Activision posted a profit of $395 million, down from $619 million in the year-earlier quarter. In addition to tepid demand for its Call of Duty titles, Activision said it took a hit due to the product cycle timing for its Warcraft franchise, along with increased legal fees and other costs associated with the Microsoft acquisition.

Excluding one-time items, adjusted earnings for the quarter fell to 64 cents a share, down from 98 cents in 2021. Analysts polled by FactSet had been expecting earnings of 71 cents a share.

Sales were $1.77 billion for the quarter, short of analysts’ expectations of $1.82 billion.

The acquisition is slated to close in mid-2023.

Microsoft announced plans to buy Activision as the company was being roiled by claims of workplace misconduct. Its chief executive, Bobby Kotick, had known about various sexual-misconduct accusations for years, The Wall Street Journal previously reported, though he didn’t inform the board about everything he knew. The issues prompted lawsuits and federal investigations.

Mr. Kotick has said he has been transparent with the company’s board, and Activision has called the Journal’s reporting “misleading.”

Last week, the company said it plans to add two women to its board of directors.