Electronic Arts (EA)

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)June 30, 2026March 31, 2026 (a) ASSETS Current assets: Cash and cash equivalents$2,288 $2,864 Short-term investments116 116 Receivables, net 524 632 Other current assets457 361 Total current assets3,385 3,973 Property and equipment, net618 613 Goodwill5,386 5,388 Acquisition-related intangibles, net173 195 Deferred income taxes, net2,432 2,433 Other assets585 529 TOTAL ASSETS$12,579 $13,131 LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: Accounts payable, accrued, and other current liabilities$1,217 $1,564 Deferred net revenue (online-enabled games)1,583 2,233 2,800 3,797 Senior notes, net1,486 1,485 Income tax obligations643 604 Other liabilities571 481 Total liabilities5,500 6,367 Commitments and contingencies (See Note 11) Stockholders equity: 3 3 Additional paid-in capital202 256 Retained earnings6,956 6,607 Accumulated other comprehensive income (loss)(82)(102) Total stockholders equity7,079 6,764 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY$12,579 $13,131 See accompanying Notes to Condensed Consolidated Financial Statements (unaudited). (a) Derived from audited Consolidated Financial Statements. 3 Table of Contents ELECTRONIC ARTS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended June 3020262025$1,986 $1,671 274 279 1,712 1,392 743 706 263 214 181 184 12 17 1,199 1,121 513 271 17 2 530 273 133 72 $397 $201 $1.58 $0.80 $1.56 $0.79 252 251 254 254 Three Months Ended June 3020262025$397 $201 25 (93)(5)18 20 (75)$417 $126 Common Stock Additional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss) Total Stockholders Equity (In millions, except share data in thousands)SharesAmount Balances as of March 31, 2026 250,710 $3 $256 $6,607 $(102)$6,764 Total comprehensive income 397 20 417 Stock-based compensation 153 153 Issuance of common stock1,627 (207) (207) (48) (48) Balances as of June 30, 2026252,337 $3 $202 $6,956 $(82)$7,079 Common Stock Additional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss) Total Stockholders Equity (In millions, except share data in thousands)SharesAmount Balances as of March 31, 2025 252,315 $3 $ $6,470 $(87)$6,386 Total comprehensive income 201 (75)126 Stock-based compensation 152 152 Issuance of common stock1,677 (158) (158) Common stock repurchases and excise tax(2,984) 6 (382) (376) Cash dividends declared ($0.19 per common share) (48) (48) Balances as of June 30, 2025251,008 $3 $ $6,241 $(162)$6,082 Three Months Ended June 30, (In millions)20262025 OPERATING ACTIVITIES Net income$397 $201 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation, amortization, and accretion77 79 Stock-based compensation153 152 Change in assets and liabilities: Receivables, net108 145 Other assets(144)(55) Accounts payable, accrued, and other liabilities(184)(98) Deferred income taxes, net1 (40) Deferred net revenue (online-enabled games)(650)(367) Net cash provided by (used in) operating activities(242)17 INVESTING ACTIVITIES Capital expenditures(76)(72) Proceeds from maturities and sales of short-term investments44 42 Purchase of short-term and other investments (45)(42) Acquisitions, net of cash acquired (17) Net cash used in investing activities(77)(89) FINANCING ACTIVITIES (48)(48) Cash paid to taxing authorities for shares withheld from employees(204)(145) Common stock repurchases and excise taxes paid (375) Net cash used in financing activities(252)(568) Effect of foreign exchange on cash and cash equivalents(5)22 Increase (decrease) in cash and cash equivalents(576)(618) Beginning cash and cash equivalents2,864 2,136 Ending cash and cash equivalents$2,288 $1,518 Supplemental cash flow information: Cash paid during the period for income taxes, net$139 $26 Change in accrued capital expenditures$(12)$(26) As of June 30, 2026 Quoted Prices in Active Markets for Identical Financial InstrumentsSignificant Other Observable InputsSignificant Unobservable InputsBalance Sheet Classification (Level 1)(Level 2)(Level 3) Assets Bank and time deposits$32 $32 $ $ Cash equivalents Money market funds351 351 Cash equivalents Available-for-sale securities: Corporate bonds60 60 Short-term investments and cash equivalents U.S. Treasury securities32 32 Short-term investments U.S. agency securities2 2 Short-term investments 3 3 Short-term investments Asset-backed securities21 21 Short-term investments 50 50 Other current assets and other assets Deferred compensation plan assets (a) 50 50 Other assets Total assets at fair value$601 $465 $136 $ Liabilities Foreign currency derivatives$25 $ $25 $ Accounts payable, accrued, and other current liabilities and other liabilities Deferred compensation plan liabilities (a) 50 50 Other liabilities Total liabilities at fair value$75 $50 $25 $ 10 Table of Contents Fair Value Measurements at Reporting Date Using As of March 31, 2026 Quoted Prices in Active Markets for Identical Financial InstrumentsSignificant Other Observable InputsSignificant Unobservable InputsBalance Sheet Classification (Level 1)(Level 2)(Level 3) Assets Bank and time deposits$33 $33 $ $ Cash equivalents Money market funds502 502 Cash equivalents Available-for-sale securities: Corporate bonds52 52 Short-term investments U.S. Treasury securities33 33 Short-term investments U.S. agency securities2 2 Short-term investments 5 5 Short-term investments Asset-backed securities24 24 Short-term investments 35 35 Other current assets and other assets Deferred compensation plan assets (a) 46 46 Other assets Total assets at fair value$732 $614 $118 $ Liabilities Foreign currency derivatives$25 $ $25 $ Accounts payable, accrued, and other current liabilities and other liabilities Deferred compensation plan liabilities (a) 46 46 Other liabilities Total liabilities at fair value$71 $46 $25 $ (a)The Deferred Compensation Plan consists of various mutual funds. See Note 14 in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026, for additional information regarding our Deferred Compensation Plan. (3) FINANCIAL INSTRUMENTS Cash and Cash Equivalents As of June 30, 2026 and March 31, 2026, our cash and cash equivalents were $2,288 million and $2,864 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 June 30, 2026 and March 31, 2026 (in millions): As of June 30, 2026 As of March 31, 2026 Cost or Amortized CostGross UnrealizedFair ValueCost or Amortized CostGross UnrealizedFair Value GainsLossesGainsLosses Corporate bonds$58 $ $ $58 $52 $ $ $52 U.S. Treasury securities32 32 33 33 U.S. agency securities2 2 2 2 3 3 5 5 Asset-backed securities21 21 24 24 $116 $ $ $116 $116 $ $ $116 11 Table of Contents The following table summarizes the amortized cost and fair value of our short-term investments, classified by stated maturity as of June 30, 2026 and March 31, 2026 (in millions): As of June 30, 2026 As of March 31, 2026 Amortized CostFair ValueAmortized CostFair Value Short-term investments Due within 1 year$59 $59 $70 $70 Due 1 year through 5 years56 56 45 45 Due after 5 years1 1 1 1 Short-term investments$116 $116 $116 $116 (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 accounts payable, 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. 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. Gains or losses resulting from changes in the fair value of these hedges are 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 are 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 interest and other income (expense), net, 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 June 30, 2026 As of March 31, 2026 Notional AmountFair ValueNotional AmountFair Value AssetLiabilityAssetLiability $389 $ $13 $428 $4 $4 $1,713 $45 $6 $1,576 $28 $15 2025Research and developmentNet revenueResearch and development$1,986 $743 $1,671 $706 $(17)$1 $3 $ As of March 31, 2026 Notional AmountFair ValueNotional AmountFair Value AssetLiabilityAssetLiability Forward contracts to purchase$539 $ $6 $638 $ $6 $359 $5 $ $554 $3 $ 2025 Total amounts presented in our Condensed Consolidated Statements of Operations in which the effects of balance sheet hedges are recorded$17 $2 $2 $(16)Unrealized Net Gains (Losses) on Derivative InstrumentsForeign Currency Translation AdjustmentsTotal Balances as of March 31, 2026$ $(12)$(90)$(102) Other comprehensive income (loss) before reclassifications 9 (5)4 Amounts reclassified from accumulated other comprehensive income (loss) 16 16 Total other comprehensive income (loss), net of tax 25 (5)20 Balances as of June 30, 2026 $ $13 $(95)$(82) Unrealized Net Gains (Losses) on Available-for-Sale SecuritiesUnrealized Net Gains (Losses) on Derivative InstrumentsForeign Currency Translation AdjustmentsTotal Balances as of March 31, 2025$ $11 $(98)$(87) Other comprehensive income (loss) before reclassifications (90)18 (72) Amounts reclassified from accumulated other comprehensive income (loss) (3) (3) Total other comprehensive income (loss), net of tax (93)18 (75) Balances as of June 30, 2025 $ $(82)$(80)$(162) The effects on net income of amounts reclassified from accumulated other comprehensive income (loss) for the three months ended June 30, 2026 and 2025 were as follows (in millions): Three Months Ended June 30,20262025$17 $(3)(1) $16 $(3)ActivityEffects of Foreign Currency TranslationAs of June 30, 2026 Goodwill$5,756 $ $(2)$5,754 Accumulated impairment(368) (368) Total$5,388 $ $(2)$5,386 Acquisition-related intangibles consisted of the following (in millions): As of June 30, 2026 As of March 31, 2026 Gross Carrying AmountAccumulated Amortization Acquisition- Related Intangibles, NetGross Carrying AmountAccumulated Amortization Acquisition- Related Intangibles, Net $938 $(859)$79 $938 $(848)$90 Trade names and trademarks501 (407)94 501 (396)105 Registered user base and other intangibles56 (56) 56 (56) $1,495 $(1,322)$173 $1,495 $(1,300)$195 2025$10 $10 12 17 $22 $27 2027 (remaining nine months)$63 202882 202928 $173 15 Table of Contents (7) ROYALTIES AND LICENSES Our royalty expenses consist of payments to (1) content licensors, (2) independent software developers, and (3) co-publishing and/or distribution affiliates. Content license royalties consist of payments made to sports organizations, movie studios, and others 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 months ended June 30, 2026 and 2025, 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 June 30, 2026 As of March 31, 2026 Other current assets$96 $40 Other assets12 12 Royalty-related assets$108 $52 At any given time, depending on the timing of our payments to our content licensors, independent software developers, co-publishing, and/or distribution affiliates, we classify any recognized unpaid royalty amounts due to these parties as accrued liabilities. The current and long-term portions of accrued royalties, included in accounts payable, accrued, and other current liabilities and other liabilities, consisted of (in millions): As of June 30, 2026 As of March 31, 2026 Accounts payable, accrued, and other current liabilities$206 $221 Other liabilities9 Royalty-related liabilities$215 $221 As of June 30, 2026, we were committed to pay approximately $2,136 million 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 11 for further information on our developer and licensor commitments. 16 Table of Contents (8) BALANCE SHEET DETAILS Property and Equipment, Net Property and equipment, net, as of June 30, 2026 and March 31, 2026 consisted of (in millions): As of June 30, 2026 As of March 31, 2026 Computer, equipment and software$1,146 $1,117 Buildings400 393 Leasehold improvements233 237 Equipment, furniture and fixtures, and other117 119 Land66 66 Construction in progress38 38 2,000 1,970 Less: accumulated depreciation(1,382)(1,357) Property and equipment, net$618 $613 Depreciation expense associated with property and equipment was $56 million and $52 million for the three months ended June 30, 2026 and 2025, respectively. Accounts Payable, Accrued, and Other Current Liabilities Accounts payable, accrued, and other current liabilities as of June 30, 2026 and March 31, 2026 consisted of (in millions): As of June 30, 2026 As of March 31, 2026 Accounts payable$88 $128 Accrued compensation and benefits353 563 Accrued royalties206 221 136 112 Operating lease liabilities62 63 316 396 Sales returns and price protection reserves56 81 Accounts payable, accrued, and other current liabilities$1,217 $1,564 Deferred net revenue (other) includes the deferral of licensing arrangements, subscription revenue, and other revenue for which revenue recognition criteria has not been met. Other Non-Current Liabilities Other non-current liabilities as of June 30, 2026 and March 31, 2026 consisted of (in millions): As of June 30, 2026 As of March 31, 2026 Operating lease liabilities$323 $306 Deferred net revenue (noncurrent)126 70 Other122 105 $571 $481 17 Table of Contents Deferred net revenue Deferred net revenue as of June 30, 2026 and March 31, 2026 consisted of (in millions): As of June 30, 2026 As of March 31, 2026 Deferred net revenue (online-enabled games)$1,583 $2,233 Deferred net revenue (other)136 112 Deferred net revenue (noncurrent)126 70 Total deferred net revenue$1,845 $2,415 During the three months ended June 30, 2026 and 2025, we recognized $1,399 million and $1,065 million of net revenue, respectively, that were included in the deferred net revenue balance at the beginning of the period. Remaining Performance Obligations As of June 30, 2026, revenue allocated to remaining performance obligations consists of our deferred net revenue balance of $1,845 million and amounts to be invoiced in future periods of $245 million. Of those amounts to be invoiced, $17 million is expected to be recognized as net 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. (9) INCOME TAXES On July 4, 2025, the United States enacted the One Big Beautiful Bill Act ( OBBB ) which extended or modified certain corporate tax provisions under the 2017 Tax Cuts and Jobs Act ( TCJA ). The OBBB modified certain business deductions, including allowing for immediate expensing of U.S. research & development expenditures, effective in our fiscal year 2026. The OBBB also modified various international tax provisions which were set to change or expire after 2025 under the TCJA. Such modifications, including U.S. taxation of profits derived from foreign operations and associated foreign tax credit limitations, are effective in our fiscal year 2027. The changes resulting from the tax provisions of OBBB are not expected to have a material impact on our results of operations. The European Union and other countries, including Switzerland, have enacted, or have committed to enact global minimum taxes, commonly referred to as Pillar II, as proposed by the Organization for Economic Cooperation and Development ( OECD ), effective with our fiscal year 2025. Pillar II in the relevant countries where we operate did not have a material impact on our tax provision for the three months ended June 30, 2026. On January 5, 2026, the OECD published details of a side-by-side package for the Pillar II global minimum tax rules. The package includes an extension of the transitional safe harbor and new permanent safe harbor rules, including the exemption of U.S.-parented multinationals from certain Pillar II global minimum taxes effective in our current fiscal year. We do not expect the package to have material impact on our financial results and will continue to monitor legislative updates in our operating jurisdictions. The provision for income taxes for the three months ended June 30, 2026 is based on our projected annual effective tax rate for fiscal year 2027, 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 months ended June 30, 2026 was 25 percent, as compared to 26 percent for the same period in prior year. The decrease in the effective tax rate year-over-year is primarily due to higher excess tax benefits from stock-based compensation compared to prior year. We are subject to income tax examinations in various jurisdictions with respect to fiscal years after 2015. The timing and potential resolution of income tax examinations is highly uncertain. 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. It is also reasonably possible that a material reduction of unrecognized tax benefits may occur within the next 12 months, impacting our effective tax rate. The actual amount could vary significantly depending on the ultimate timing and nature of any settlements and tax interpretations. 18 Table of Contents (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. The carrying and fair values of the Senior Notes are as follows (in millions): As of June 30, 2026 As of March 31, 2026 Senior Notes: 1.85% Senior Notes due 2031 $750 $750 2.95% Senior Notes due 2051 750 750 Total principal amount$1,500 $1,500 Unaccreted discount(4)(4) Unamortized debt issuance costs(10)(11) Net carrying value of Senior Notes$1,486 $1,485 Fair value of Senior Notes (Level 2)$1,283 $1,292 As of June 30, 2026, the remaining life of the 2031 Notes and 2051 Notes is approximately 4.6 years, and 24.6 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 2031 Notes and 2051 Notes are redeemable at our option at any time prior to 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 March 22, 2023, we entered into a $500 million unsecured revolving credit facility (the Credit Facility") with a syndicate of banks. The Credit Facility terminates on March 22, 2028 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. The loans denominated in U.S. dollars bear interest, at our option, at the base rate plus an applicable spread or at a forward-looking term rate based upon the secured overnight financing rate plus a credit spread adjustment of 0.10% per annum (the Adjusted Term SOFR Rate ) plus an applicable spread, in each case with such spread based on our debt credit ratings. We are also obligated to pay other customary fees for a credit facility of this size and type. Interest is due and payable in arrears quarterly for loans bearing interest at the base rate and at the end of an interest period in the case of loans bearing interest at the Adjusted Term SOFR Rate. Principal, together with all accrued and unpaid interest, is due and payable on the maturity date, as such date may be extended in connection with the extension option. We may prepay the loans and terminate the commitments, in whole or in part, at any time without premium or penalty, subject to certain conditions. 19 Table of Contents The Credit Facility 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 June 30, 2026, we were in compliance with the debt to EBITDA ratio. The Credit Facility contains customary events of default, including among others, non-payment defaults, covenant defaults, cross-defaults to material indebtedness, bankruptcy and insolvency defaults, material judgment defaults and a change of control default, in each case, subject to customary exceptions for a credit facility of this size and type. The occurrence of an event of default could result in the acceleration of the obligations under the Credit Facility and an increase in the applicable interest rate. As of June 30, 2026, no amounts were outstanding under the Credit Facility. $2 million of debt issuance costs that were paid in connection with obtaining this credit facility are being amortized to interest expense over the 5-year term of the Credit Facility. Interest Expense The following table summarizes our interest expense recognized for the three months ended June 30, 2026 and 2025 that is included in interest and other income (expense), net on our Condensed Consolidated Statements of Operations (in millions):2025$(1)$ (9)(14)$(10)$(14) 2027 (remaining nine mos.)20282029203020312032Thereafter Unrecognized commitments Developer/licensor commitments$2,136 $245 $474 $459 $447 $387 $61 $63 Marketing commitments1,210 178 291 245 210 230 21 35 Senior Notes interest609 23 36 36 36 36 22 420 Operating lease imputed interest70 12 14 11 10 8 6 9 860 236 310 277 29 8 Total unrecognized commitments4,885 694 1,125 1,028 732 669 110 527 Recognized commitments Senior Notes principal and interest1,514 14 750 750 Operating leases385 45 63 46 34 45 41 111 1,899 59 63 46 34 795 41 861 Total Commitments$6,784 $753 $1,188 $1,074 $766 $1,464 $151 $1,388 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 June 30, 2026; however, certain payment obligations may be accelerated depending on the performance of our operating results. In addition to the amounts included in the table above, in our Condensed Consolidated Balance Sheets as of June 30, 2026, we had a net liability for unrecognized tax benefits and related interest totaling $690 million. While it is reasonably possible that material reduction of unrecognized tax benefits may occur within the next 12 months, the actual amount could vary significantly depending on the ultimate timing and nature of any settlements and tax interpretations. Legal Proceedings We are 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. 21 Table of Contents (12) STOCK-BASED COMPENSATION AND STOCK REPURCHASE PROGRAM 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 and stock options 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. The fair value of stock options granted pursuant to our equity incentive plans and our 2000 Employee Stock Purchase Plan, as amended, 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. The final purchase under the Employee Stock Purchase Plan ("ESPP") occurred during the fourth quarter of fiscal year 2026. In connection with the Merger, no offering period commenced following the February 2026 purchase. There were no market-based restricted stock unit granted during the three months ended June 30, 2026. There were an insignificant number of stock options granted during the three months ended June 30, 2026 and 2025. 22 Table of Contents Stock Options The following table summarizes our stock option activity for the three months ended June 30, 2026: Options (in thousands)Weighted- Average Exercise PricesWeighted- Average Remaining Contractual Term (in years)Aggregate Intrinsic Value (in millions) Outstanding as of March 31, 2026 3 $57.19 202.09 Exercised 187.57 Forfeited, cancelled or expired 59.78 Outstanding as of June 30, 2026 3 $57.05 1.90$0.4 Vested and expected to vest3 $57.05 1.90$0.4 Exercisable as of June 30, 2026 3 $57.05 1.90$0.4 The aggregate intrinsic value represents the total pre-tax intrinsic value based on our closing stock price as of June 30, 2026, 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 units activity for the three months ended June 30, 2026: Restricted Stock Units (in thousands)Weighted- Average Grant Date Fair Values Outstanding as of March 31, 2026 6,441 $145.62 2,864 203.09 Vested(2,179)141.93 Forfeited or cancelled(141)152.11 Outstanding as of June 30, 2026 6,985 $170.20 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 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. 23 Table of Contents The following table summarizes our performance-based restricted stock unit activity, presented with the maximum number of shares that could potentially vest, for the three months ended June 30, 2026: Performance- Based Restricted Stock Units (in thousands)Weighted- Average Grant Date Fair Value Outstanding as of March 31, 2026 1,058 $141.72 Granted495 203.12 Vested(385)146.53 Forfeited or cancelled(393)145.90 Outstanding as of June 30, 2026 775 $176.45 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 for these awards are based on our total stockholder return ( TSR ) relative to the performance of either companies in the Nasdaq-100 (for awards granted in fiscal years 2023 and 2024) or the S&P 500 Index (for awards granted in fiscal year 2025) ( Relative TSR ) and on absolute TSR performance measured against pre-established goals, which started in fiscal year 2025 ( Absolute TSR ), each over a three-year period. Payout with respect to the Relative TSR component ranges from zero to 200 percent of the target number of Relative TSR units granted, and payout with respect to the Absolute TSR component ranges from zero to 75 percent of the target number of the underlying base award (which is comprised of Performance-Based Restricted Stock Units and Relative TSR units). These awards cliff-vest after the completion of the three-year measurement period, contingent on the achievement of both market and service conditions. We amortize the fair values of market-based restricted stock units over the requisite service 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 three months ended June 30, 2026: Market-Based Restricted Stock Units (in thousands)Weighted- Average Grant Date Fair Value Outstanding as of March 31, 2026 890 $103.80 Granted Vested(96)152.92 Forfeited or cancelled(47)152.92 Outstanding as of June 30, 2026 747 $94.43 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):2025$3 $3 106 110 14 12 30 27 $153 $152 20262025$397 $201 252 251 2 3 254 254 $1.58 $0.80 $1.56 $0.79 2025$1,986 $1,671 261 266 637 596 249 202 150 157 23 27 153 152 (17)(2)133 72 $397 $201 Information about our total net revenue by timing of recognition for the three months ended June 30, 2026 and 2025 is presented below (in millions): 2025$421 $442 1,565 1,229 $1,986 $1,671 2025$438 $233 76 56 514 289 1,472 1,382 $1,986 $1,671 2025$1,192 $1,007 519 374 275 290 $1,986 $1,671 2025$764 $642 1,222 1,029 $1,986 $1,671 20262025$1,986 $1,671 (637)(373)$1,349 $1,298 20262025$ Change% Change Net revenue: Full game downloads$438 $233 $205 88 % Packaged goods76 56 20 36 % Full game$514 $289 $225 78 % Live services and other$1,472 $1,382 $90 7 % Total net revenue$1,986 $1,671 $315 19 % Full Game Net Revenue Full game net revenue includes full game downloads and packaged goods. Full game downloads primarily include revenue from digital sales of full games on console, PC, and certain licensing revenue. Packaged goods primarily include revenue from full games that are sold physically through distribution arrangements, mass market retailers, and specialty stores. For the three months ended June 30, 2026, full game net revenue was $514 million, primarily driven by Battlefield 6 and EA SPORTS FC 26. Full game net revenue for the three months ended June 30, 2026 increased $225 million, or 78 percent, as compared to the three months ended June 30, 2025, primarily due to Battlefield 6, partially offset by Split Fiction. Live Services and Other Net Revenue Live services and other net revenue primarily includes revenue from sales of extra content for console, PC, and mobile games, certain licensing revenue, subscriptions, and advertising. For the three months ended June 30, 2026, live services and other net revenue was $1,472 million, primarily driven by sales of extra content for our EA SPORTS FC and American football franchises, and Apex Legends. Live services and other net revenue for the three months ended June 30, 2026 increased $90 million, or 7 percent, as compared to the three months ended June 30, 2025. This increase was primarily driven by increased sales of extra content within our EA SPORTS FC franchise and Battlefield 6, partially offset by decreased sales of Ultimate Team within EA SPORTS College Football. Cost of Revenue Quarterly Analysis Cost of revenue consists of (1) certain royalty expenses for sports organizations, movie studios, independent software developers, and others (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), (3) data center, bandwidth and server costs associated with hosting our online games and websites, (4) inventory costs, including manufacturing royalties, (5) payment processing fees, (6) amortization and impairments of certain intangible assets, and (7) personnel-related costs. 36 Table of Contents Cost of revenue for the three months ended June 30, 2026 and 2025 was as follows (in millions):June 30, 2025% of Net Revenue% ChangeChange as a % of Net Revenue $274 %$279 17 %(2)%(3)% Cost of Revenue Cost of revenue decreased by $5 million, and cost of revenue as a percentage of total net revenue decreased by 3 percent during the three months ended June 30, 2026, as compared to the three months ended June 30, 2025. This decrease was primarily due to a net decrease in royalty costs driven by the mix of sales from royalty-bearing titles. Research and Development Research and development expenses consist of expenses incurred by our production studios for personnel-related costs, related overhead costs, external third-party development costs, contracted services, and depreciation. Research and development expenses for our online products include expenses incurred by our studios consisting of direct development and related overhead costs in connection with the development and production of our online games. Research and development expenses also include expenses associated with our digital platform, software licenses and maintenance, and management overhead. Research and development expenses for the three months ended June 30, 2026 and 2025 were as follows (in millions): June 30, 2026% of Net RevenueJune 30, 2025% of Net Revenue$ Change% Change Three months ended$743 37 %$706 42 %$37 5 % % of Net RevenueJune 30, 2025% of Net Revenue$ Change% Change Three months ended$263 13 %$214 13 %$49 23 % % of Net RevenueJune 30, 2025% of Net Revenue$ Change% Change Three months ended$181 9 %$184 11 %$(3)(2)% Effective Tax RateJune 30, 2025Effective Tax Rate$ Change Three months ended$133 25 %$72 26 %$61 As of June 30, 2026 As of March 31, 2026 Increase/(Decrease) Cash and cash equivalents$2,288 $2,864 $(576) Short-term investments116 116 Total$2,404 $2,980 $(576) Percentage of total assets19 %23 % Three Months Ended June 30, (In millions)20262025Change Net cash provided by (used in) operating activities$(242)$17 $(259) Net cash used in investing activities(77)(89)12 Net cash used in financing activities(252)(568)316 Effect of foreign exchange on cash and cash equivalents(5)22 (27) Net increase (decrease) in cash and cash equivalents$(576)$(618)$42 Changes in Cash Flow Operating Activities. Net cash used in operating activities increased by $259 million during the three months ended June 30, 2026, as compared to the three months ended June 30, 2025, primarily driven by higher cash payments for income taxes, higher variable compensation and personnel-related payments, partially offset by higher cash collections from sales. Investing Activities. Net cash used in investing activities decreased by $12 million during the three months ended June 30, 2026, as compared to the three months ended June 30, 2025, primarily driven by acquisition-related payments made in the prior year. Financing Activities. Net cash used in financing activities decreased by $316 million during the three months ended June 30, 2026, as compared to the three months ended June 30, 2025, primarily driven by a $375 million decrease in cash paid for common stock repurchases, offset by a $59 million increase in cash paid to taxing authorities in connection with withholding taxes for stock-based compensation. Short-term Investments 38 Table of Contents 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 June 30, 2026, our short-term investments had net unrealized losses of less than $1 million or less than 1 percent of total 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 debt repayment obligations. 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. See Note 10 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 March 22, 2023, we entered into a $500 million unsecured revolving credit facility (the "Credit Facility") with a syndicate of banks. The Credit Facility terminates on March 22, 2028 unless the maturity is extended in accordance with its terms. As of June 30, 2026, no amounts were outstanding. 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. See Note 10 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. Financial Condition Our material cash requirements, including commitments for capital expenditure, as of June 30, 2026 are set forth in our Note 11 Commitments and Contingencies to the Condensed Consolidated Financial Statements in this Form 10-Q, which is incorporated by reference into this Item 2. 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 sports organizations and players associations used in our EA SPORTS titles and third-party content, debt repayment obligations, and to fund our operating requirements for the next 12 months and beyond. Our operating requirements include working capital requirements, capital expenditures, our capital return programs, 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, 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 three months ended June 30, 2026, we returned $48 million to stockholders through our quarterly cash dividend program. 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 June 30, 2026, approximately $456 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. 39 Table of Contents As of June 30, 2026, we did not have any off-balance sheet arrangements. 40 Table of Contents 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. 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 June 30, 2026, 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 $204 million or $408 million, respectively. As of June 30, 2026, 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 $88 million or $177 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. 41 Table of Contents 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 June 30, 2026, 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 June 30, 2026, a hypothetical 150 basis point increase in interest rates would have resulted in a $1 million, or 1 percent decrease in the fair market value of our short-term investments. 42 Table of Contents 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 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 June 30, 2026 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. 43 Table of Contents PART II OTHER INFORMATION Item 1.Legal Proceedings Refer to Note 11 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. MERGER RISKS If our proposed Merger does not close, or is delayed, we may experience financial and operational disruptions. In addition our stock price may decline if the Merger is perceived as uncertain to close. On September 28, 2025, we entered into a Merger Agreement to be acquired by an investor Consortium comprised of the Public Investment Fund, private investment funds affiliated with Silver Lake Group, L.L.C., and private investment funds affiliated with Affinity Partners. The closing of the Merger is subject to the satisfaction or waiver of certain conditions, many of which are not within our full control. In addition, both we and the Consortium may terminate the Merger Agreement for reasons specified therein. The announcement and pendency of the Merger could adversely affect our business and stock price, including if the Merger does not close or is delayed. Lawsuits have been or may be filed against us and the members of our Board of Directors arising out of the proposed Merger, which may delay or prevent the proposed Merger or otherwise negatively affect our business and operations. Putative stockholder complaints, including stockholder class action complaints, and other complaints have been or in the future may be filed against us, our Board of Directors and others in connection with the transactions contemplated by the Merger Agreement. Certain complaints asserted in connection with the transaction contemplated by the Merger Agreement have been mooted, however, the outcome of any additional litigation is uncertain, and we may not be successful in defending against any such future claims. Lawsuits that have been or may be filed against us, our Board of Directors or others could delay or prevent the Merger from being completed, divert the attention of our management and employees away from our day-to-day business, and otherwise adversely affect our business, results of operations, and financial condition. If the Merger is not consummated for any reason, litigation could be filed in connection with the failure to consummate the Merger. 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, we compete with large, diversified companies that have strengthened their interactive entertainment capabilities. Their greater financial and other resources provide larger budgets to recruit our key creative and technical talent, develop and market products and services that gain consumer success, 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. 44 Table of Contents We strive to create innovative and high-quality products and services that allow us to grow the global online communities around our key franchises and reach more players. However, innovative and high-quality titles, even if highly-reviewed or critically acclaimed, 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 have shifted consumer spending or engagement from our products and services and may do so in the future, which could cause our products and services to underperform. 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 EA SPORTS FC franchise, annualized versions of which are consistently one of the best-selling games in the marketplace. Any events or circumstances that negatively impact our EA SPORTS FC franchise, including Ultimate Team, such as product or service quality, 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 or regulatory risks, negatively impacts our financial results to a disproportionate extent. We may not meet our product and live service development schedules. 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, evolving work models, the complexity of our products and the platforms for which they are developed, the need to fine-tune our products prior to their release, 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 as a result of product delays or product cancellations, our sales likely will suffer significantly. 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 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 the strategic investments we pursue will achieve financial results that meet or exceed our expectations. We may miss opportunities or fail to respond quickly enough to industry change, including the failure to adopt tools, technology and distribution methods or failure to develop new products, services or ways to engage with our games that become popular with consumers, each of which could adversely affect our financial results. For example, we expect our competitive landscape to evolve as artificial intelligence technology advances and is integrated into the markets in which we compete. Our competitors may incorporate new artificial intelligence tools and technology into their existing products and services more successfully, may invest in more successful artificial intelligence initiatives, may use these new tools and technology more efficiently or may create new categories of products and services before we do. Stakeholders have high expectations for the quality and integrity of our business, culture, products and services and we may be unsuccessful in meeting these expectations. Expectations regarding the quality, performance and integrity of our business, brand, reputation, 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. 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. These actions have had a negative impact on our financial results and have impacted our future development processes. We expect to continue to take actions as appropriate, including actions that may result in additional expenditures and the loss of revenue. Maintaining high ratings on the third-party console, platforms and devices on which we operate are important to drive players to our products and services. If we receive significant negative reviews that result in a decrease in our ratings, including as a 45 Table of Contents result of negative review campaigns intended to harm our ratings, our games could be more difficult for players to find, negatively impacting our financial and operating results. 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. 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. If these quality controls and preventative measures are not effective in detecting all defects, bugs or errors in our products and services before they have been released into the marketplace, then 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. We are integrating artificial intelligence tools and technologies into our business and development processes. The use of artificial intelligence might present social and ethical issues that, if not managed appropriately, may result in legal and reputational harm, cause consumers to lose confidence in our business and brands and negatively impact our financial and operating results. 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. 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, platforms and devices developed by third parties and our ability to develop and maintain commercially successful products and services for those consoles, platforms and devices. The success of our business is driven in part by the commercial success, adequate supply and consumer adoption of third-party consoles, platforms 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 accurately predicting which consoles, platforms and devices will be successful in the marketplace and providing engaging and commercially successful products and services for those consoles, platforms and devices. We must make product development decisions and commit significant resources well in advance of the commercial availability of new consoles, platforms and devices, and we may incur significant expense to adjust our product portfolio and development efforts in response to changing consumer preferences. We may enter into certain exclusive licensing arrangements that affect our ability to deliver or market products or services on certain consoles, platforms or devices. A console, platform or device for which we are developing products and services may not achieve consumer adoption at the rate we expect and we may be unable to fully recover the investments we have made in developing our products and services; or new consoles, platforms or devices may take market share away from those for which we have devoted significant resources, causing us to not reach our intended audience and take advantage of meaningful revenue opportunities. 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 46 Table of Contents established businesses. Any failure to successfully implement new business models could materially impact our financial 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) investments in, or transactions with, strategic partners, and (3) investments in new businesses as part of our long-term business strategy. 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, that we cannot realize anticipated tax benefits or incur tax costs, that we acquire liabilities and/or litigation from acquired companies, that our due diligence process does not identify significant issues or liabilities, 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 be able to complete the acquisition as a result of challenges in obtaining regulatory approvals or we may not integrate these businesses successfully, retain key employees from acquired companies and achieve expected synergies. 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 ownership and also dilute our earnings per share. 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 not 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. 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, geopolitical conditions, 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. OPERATIONAL RISKS Catastrophic events may disrupt our business. Catastrophic events, including natural disasters, cyber-incidents, power disruptions, pandemics, acts of terrorism or other events have caused, and in the future 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 products and services all of which could materially impact our reputation and brand, financial condition and operating results. The health and safety of our employees, players, third-party organizations with whom we partner, or regulatory agencies on which we rely could be also affected, any of which may prevent 47 Table of Contents 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. Our business relies on the reliable transmission of energy worldwide and is susceptible to weather-related events that could stress the power grid. System redundancy may be ineffective, and our disaster recovery and business continuity planning may not be sufficient for all eventualities. In addition, our corporate headquarters and several of our key studios also are located in seismically active regions and areas that are vulnerable to other natural disasters and weather events such as wildfires and hurricanes. These catastrophic events could 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. 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, 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. Additionally, as artificial intelligence capabilities develop rapidly, individuals or groups of hackers and sophisticated organizations, may use these technologies to create new sophisticated attack methods that are increasingly automated, targeted and coordinated and more difficult to defend against. In addition, our systems and networks could be harmed or improperly accessed due to errors 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. Remote access to our networks and systems, and the networks and systems of our partners is substantial. 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 in a 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. Consequences of such events, responsive measures and preventative measures have included, and could in the future include, the loss of proprietary and 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 items or currency illegitimately or to execute account takeover attacks against our players. We anticipate such activity 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 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 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, support or host our products and services. 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- 48 Table of Contents party hosted environments, the performance of upgrades and maintenance on our systems, and effectively scaling our technological infrastructure to accommodate online demand for our products and services. 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. 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 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. 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 talent 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 talent are located. We also engage with talent through contracted services. 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. If we cannot successfully recruit, train, motivate, attract and retain qualified talent, develop and maintain a healthy culture, replace key talent following their departure or experience disruption in our contracted services, our reputation, brand and culture may be negatively impacted, products and services may be delayed and our business will be impaired. Our global workforce is primarily non-unionized, but we have unions and works councils outside of the United States. In the United States, there has been an increase in prominence in certain sectors of workers exercising their right to form or join a union. If significant employee populations were to unionize or if we experience labor disruptions, we could experience operational changes that may materially impact our business. 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 and any deterioration in the businesses of our significant partners could disrupt and harm our business. 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 and set the rates that we must pay to provide our products and services through their online channels, and change their fee structures or adopt different fee structures for their online channels. These partners also control the information technology systems through which online sales of our products and service 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 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. LEGAL AND COMPLIANCE RISKS Government regulations applicable to us may negatively impact our business. 49 Table of Contents 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, including content moderation and transparency, advertising, information security, intellectual property, antitrust, competition, sanctions, taxation and tariffs, 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. Enforcement of 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 products and services are subject to new laws or regulations or evolving interpretations and application of existing laws and regulations. The industry s adoption of 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 increased scrutiny on these business models and limited or restricted the sale of our products and services in certain territories. We are integrating artificial intelligence technologies into our business and development processes, and it is possible that we could become subject to new regulations, or the interpretation of existing regulations that could negatively impact our operational and financial results. Our products and services allow players to connect with each other and create and share user-generated content. Such interactions and content may be objectionable or offensive 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 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 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, marketing, publication 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 products and services can be offered. Adoption and enforcement of ratings systems, censorship, restrictions on publication or 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 are subject to complex and prescriptive regulations, and consumer sensitivity, regarding data privacy practices. We are subject to global data privacy, data protection, security and consumer-protection laws and regulations. These laws and regulations are emerging and evolving and the interpretation, application and enforcement 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 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/or cause our financial results to be materially affected. We may be subject to claims of infringement of third-party intellectual property rights. 50 Table of Contents 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. 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, 2026, international net revenue comprised 60 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. 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 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 Senior Notes outstanding, as well as a Credit Facility. While the Credit Facility is currently undrawn, we may use the proceeds of any future borrowings for general corporate purposes. This indebtedness 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 repayment of indebtedness 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 Credit Facility requires us to maintain compliance with a debt to EBITDA ratio. Our ability to 51 Table of Contents 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 new issuances or any potential refinancing of existing issuances. 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. 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 the ultimate tax determination is uncertain for many transactions. Our effective income tax rate is based in part on our corporate operating structure and how 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 have a material impact on our effective income tax rate and cash taxes. 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 our corporate structure, or changes in applicable accounting rules, as well as other factors. Changes to enacted U.S. federal, state or international tax laws, as well as changes to interpretations of existing tax laws, 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. For example, the European Union and other countries, including Switzerland, have enacted or have committed to enact global minimum taxes, commonly referred to as Pillar II, as proposed by the Organization for Economic Cooperation and Development, which could impact our provision for income taxes and cash taxes. Our effective tax rate also could be adversely affected by changes in the measurement of our deferred income taxes, including the need for valuation allowances against deferred tax assets. Our valuation allowances, in turn, are impacted by several factors with respect to our business, industry, and the macroeconomic environments, including changing interest rates and tax laws. 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. 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. The guidance about the applicability of these new taxes to our business is limited and significant uncertainty exists 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 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 conflicts, inflation, slower growth, recession and other macroeconomic conditions have had, and 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 been impacted by events such as immigration policies and the adoption or expansion of trade restrictions, including tariffs and economic sanctions, that may have a material impact on our operations and financial results. For example, the imposition of tariffs by the U.S. government on imported goods and any retaliatory tariffs from foreign governments could result in increased costs and uncertainty that may negatively affect global economic conditions and activity and negatively affect our business and the businesses of our partners. 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 products and services, changes in 52 Table of Contents consumer demographics, the availability and popularity of other forms of entertainment, and critical reviews and public tastes and preferences, among other factors 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), changes in securities analysts estimates of our future financial performance, ratings or recommendations, the failure of our capital return programs to meet analysts and investors expectations, the announcement of, or speculation related to, mergers and acquisitions activity and integration of acquisitions, 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 fluctuations could adversely affect the market price of our common stock. The market price of our common stock is sensitive to our ability to forecast our financial and operating results and meet these projections and the expectations of analysts and investors. Forecasting future financial and operating results in our industry is inherently challenging, including with respect to products and services that historically have provided relatively stable financial results, such as our live services, annualized sports titles, and our console, PC and mobile catalog titles. The financial projections we may provide to the public, any changes to those projections, or the failure to meet these projections or the expectations of analysts and investors may adversely affect the market price of our common stock. 53 Table of Contents Item 2.Unregistered Sales of Equity Securities and Use of Proceeds In May 2024, the Company s Audit Committee, upon delegation from the Company s Board of Directors, authorized a program to repurchase up to $5.0 billion of our common stock. This program expires on May 9, 2027. 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 of our common stock under this program and it may be modified, suspended or discontinued at any time. During the second quarter of fiscal year 2026, we suspended repurchase activity under this program in contemplation of the Merger detailed in Note 1 Description of Business and Basis of Presentation. Item 3.Defaults Upon Senior Securities None. Item 4.Mine Safety Disclosures Not applicable. Item 5. Other Information Rule 10b5-1 Plans During the three months ended June 30, 2026, the following EA directors and/or officers entered into or terminated trading plans intended to satisfy the requirements of Rule 10b5-1(c) of the Exchange Act as part of managing their EA equity holdings ( 10b5-1 Plan ). On May 27, 2026, Mala Singh, EA s Chief People Officer, adopted a 10b5-1 Plan. Up to an aggregate 23,361 shares of our common stock may be sold under this plan with sales occurring periodically from the estimated selling start date of August 26, 2026 through July 30, 2027.