EA is a contracting, lower-quality, higher-risk Services-Prepackaged Software company. Revenue is contracting with no margin improvement — the thesis depends on a catalyst to reverse the trajectory. The company ranks in the top quartile of its sector (95th percentile), supporting relative conviction. In technology, product cycle timing and TAM expansion define the asymmetry of outcomes — the investment case is balanced between opportunities and risks.
Why this works
The data supports the bull thesis — multiple quality and momentum signals align.
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Sector: Technology | Industry: Services-Prepackaged Software
Final Verdict: ▲ BUY (Conviction Score: 62/100)
EA operates a high-margin software or platform model within the technology sector. Gross margins above 60% typically indicate recurring subscription revenue, scalable cloud infrastructure, or intellectual-property-driven economics that compound over time. In an industry where R&D spending determines the next decade of competitive positioning, EA's margin structure suggests the business has already crossed the scale inflection point.
EA is currently positioned as a contracting, lower-quality asset. At $7.6B in TTM revenue, the company faces revenue headwinds (-6.1% CAGR). Margins are under pressure (-12.3pp operating margin contraction).
Quarterly Momentum:
Composite Scorecard:
| Dimension | Score | Assessment |
|---|---|---|
| Overall Health | 68/100 | Moderate |
| Quality Focus | 76/100 | High |
| Safety | 63/100 | Moderate |
| Durability | 68/100 | Average |
| Shareholder Value | 82/100 | Strong |
EA's growth profile faces challenges:
Revenue Growth: The company is maintaining a modest -6.1% CAGR, with TTM revenue reaching $7.6B.
Margin Expansion: Margins face pressure. Operating margins have contracted by 12.3pp to the current level, while Gross Margins declined by 3.7pp.
Cash Flow Powerhouse: The company generated $3.4B in Free Cash Flow, resulting in a healthy FCF margin of 96.0%.
Earnings quality analysis — the discipline of separating sustainable cash-backed profits from accounting-driven earnings — is critical for long-term investment conviction. The "Quality" profile of EA is solid:
Earnings Quality: Rated as Excellent (cash > earnings), with an Operating Cash Flow to Net Income ratio of 2000.0%. This indicates that earnings are backed by hard cash rather than accounting maneuvers.
Value Creation: While ROIC has seen a recent decline of 6.5% (Δ-9.9pp), the company is marginally creating value. vs. sector median: +0.1pp.
Piotroski F-Score: 5/9 — Moderate financial health.
Solvency: The company is maintaining stable leverage. Debt-to-Equity stands at 0.00x, which is quite conservative
Liquidity: Current ratio of 0.93x indicates tight liquidity. Short-term obligations may require attention.
Bankruptcy Risk: The Altman Z-Score stands at 0.00. The company is in the 'Distress Zone' — monitor closely.
Refinancing Risk: Rated as Low (25/100). Given its financial position, the company is well-shielded from interest rate spikes.
Fundamental Beta: 0.52 (defensive, P5). The company exhibits low systematic risk — stable earnings, conservative leverage, and ample liquidity suggest resilience during market downturns.
Technology companies are growth-duration assets — their macro sensitivity runs primarily through discount rates and corporate capex budgets. Rising rates compress multiples while decelerating corporate spending reduces billings growth. EA exhibits a moderate sensitivity profile:
No macro sensitivity data available for this ticker.
Shareholder Returns: EA currently returns 73% of FCF to shareholders via dividends (6%) and buybacks (67%). The company actively returns capital to shareholders, signaling management confidence in cash flow durability and limited high-ROIC reinvestment opportunities. (Stock-Based Compensation: 9.4% of revenue — elevated SBC dilutes per-share economics and overstates reported profitability)
Share Buybacks: The company is actively reducing share count (-5.7%), returning value through buybacks.
Insider Sentiment: Net Selling. There has been net selling activity (approx. $302,475) by insiders like Canfield Stuart (EVP & Chief Financial Officer). The lack of recent insider buying is notable.
Within the Technology sector (Services-Prepackaged Software), EA ranks as follows:
Competitive Assessment: EA demonstrates sector-leading fundamentals, suggesting durable competitive advantages — whether through brand, scale, technology, or regulatory positioning — that justify a premium allocation within Technology exposure.
| Metric | Status | Rating |
|---|---|---|
| Growth | -6.1% CAGR | Declining |
| Quality | OCF/NI 2000% | Elite |
| Risk | Z-Score 0.00 | Distress |
| Regime Fit | Unknown | Adequate |
| Composite Health | 68/100 | Moderate |
| Sector Rank | 95th percentile | Top Quartile |
Synthesis: EA offers an attractive risk/reward profile within Technology (95th percentile). The composite health score (68/100) confirms fundamental adequacy, operational stability and quality earnings support a constructive stance. The thesis remains balanced — conviction is moderate rather than emphatic.
Verdict: ▲ BUY
Conviction Score: 62/100
Recommended Action: Accumulate on weakness. Target market weight. Multiple quality signals align.
Conviction Drivers: Positive: +Quality, +CapEff, +EarningsQuality, +LowLeverage, +SectorLeader | Negative: -DecliningRevenue, -MarginCompression, -FFQuality, -DistressRisk, -CashBurn, -Dilution (anchored to Health: 68/100)
EA is a contracting, lower-quality, higher-risk Services-Prepackaged Software company. Revenue is contracting with no margin improvement — the thesis depends on a catalyst to reverse the trajectory. The company ranks in the top quartile of its sector (95th percentile), supporting relative conviction. In technology, product cycle timing and TAM expansion define the asymmetry of outcomes — the investment case is balanced between opportunities and risks.
This investment memo for EA (Technology — Services-Prepackaged Software) was generated using quantitative analysis of 4 quarterly SEC filings spanning 2024-09 to 2025-12. Models applied: Beneish M-Score, Piotroski F-Score, Altman Z-Score, Fama-French factor analysis, composite health scoring (v2.1), macro regime sensitivity, insider activity analysis, and labor efficiency metrics. Latest filing: 2025-12-31. All data sourced from SEC EDGAR XBRL filings.
Institutional, 13F Holdings & Large Shareholder Filings
| Fund | Shares | Value |
|---|---|---|
| Vanguard Group | 28.8M | $5.9T |
| Soros Fund Management | 428K | $87.5B |
| Bridgewater Associates | 20K | $4.1B |
Last 90 days
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EA Current | 68 | — | |
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