Investment Thesis
EA demonstrates strong FCF generation and industry-leading software margins that indicate a fundamentally sound business, but the anomalous 10,658% YoY revenue growth coupled with a 20.9% net income decline suggests significant one-time items or acquisition-related impacts requiring clarification. Tight current ratios present a minor liquidity concern.
Strengths
- Exceptional free cash flow generation ($2.5B with 33.8% FCF margin) demonstrates high-quality, cash-backed earnings
- Industry-leading gross margins (79%) and healthy operating margins (15.4%) reflect strong pricing power and operational leverage typical of prepackaged software
- Conservative capital structure (0.09x debt-to-equity) with excellent interest coverage (21.9x) provides financial stability and flexibility
Risks
- Anomalous revenue-to-earnings disconnect (10,658% YoY growth vs. 20.9% net income decline) indicates substantial one-time costs, acquisition integration expenses, or amortization charges obscuring underlying performance
- Tight current ratio (1.05x) and quick ratio (1.04x) suggest limited working capital cushion and reduced operational flexibility
- Diluted EPS declined 17.4% YoY despite massive revenue expansion, signaling potential margin compression or material non-recurring charges that may persist
Key Metrics to Watch
- Reconciliation of revenue growth drivers (organic vs. acquisition) and breakdown of non-recurring charges impacting net income
- Operating cash flow trend and working capital efficiency to validate FCF quality and current ratio trends
- Gross and operating margin sustainability as acquisition integrations conclude
Financial Metrics
Revenue
7.5B
Net Income
887.0M
EPS (Diluted)
$3.51
Free Cash Flow
2.5B
Total Assets
13.1B
Cash
2.9B
Profitability Ratios
Gross Margin
79.0%
Operating Margin
15.4%
Net Margin
11.8%
ROE
13.1%
ROA
6.8%
FCF Margin
33.8%
Balance Sheet & Liquidity
Current Ratio
1.05x
Quick Ratio
1.04x
Debt/Equity
0.09x
Debt/Assets
48.5%
Interest Coverage
21.92x
Long-term Debt
633.0M
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-12T07:04:55.178101 |
Data as of: 2026-03-31 |
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