Interview Synopsis

Ubisoft – H1 FY23 earnings outlook

  • Public Equity
  • Consumer
  • Europe

Ubisoft reported better than expected revenue of EUR 406m vs estimates of EUR 280m, due in part to an upfront payment for a multi-year mobile licensing deal. However, a former executive at the company told Third Bridge Forum they are “very concerned” about the company’s H1 FY23 earnings outlook due to a lack of games in the publishing pipeline.

Can Ubisoft afford to be independent?

In the Interview, the specialist discussed Chinese technology conglomerate Tencent’s increased stake in Ubisoft. They said the move protects the Guillemot family, which owns Ubisoft, for the coming years and could aid the company as it expands into the Chinese gaming market. The specialist believes this is the final nail in the coffin for Vivendi’s plans to take over Ubisoft. However, Tencent’s deal to buy Ubisoft shares at a lower price than the market expected was a “disappointment”, according to the specialist. 

The specialist told us that Ubisoft Connect’s achievements system has not driven microtransactions as expected and has “a long way to go” before it is accepted by players. They said Ubisoft Connect faces competition from Steam and Epic Games. Although Ubisoft is no longer on Steam, the specialist claimed it might need to return to the platform to drive its back catalogue sales. They told us it is unlikely Ubisoft would stop its partnership with Epic Games given the cut Epic Games takes from it is low. 

We heard that Ubisoft+, Ubisoft’s gaming subscription service, is “too small” to be a game-changer for the company. The specialist told us Ubisoft+ is challenged by limited releases and may require a different subscription tier similar in design to Electronic Arts for older games.   

Limited releases is a challenge that feeds into Ubisoft’s H1 FY23 earnings outlook, according to the specialist. They said there are no mega-IP related releases expected, with further delays to Avatar and Skull and Bones. The latter has been in development for almost 10 years and the specialist does not expect it to be released until March next year, creating a “small window of sales” that will appear in 2023. Although the new Mario + Rabbids title has been recently released and the response to it is positive, the specialist believes the game is unlikely to make a material impact on sales given it is “niche” and a Nintendo Switch-only title.  

Although the Guillemot family have succeeded in keeping Ubisoft independent, the specialist questioned whether challenging earnings next year mean it can continue to afford it.

Click here to access all the human insights in the Third Bridge Forum Interview, “Ubisoft – H1 FY23 Earnings Outlook & Ubisoft Connect & Ubisoft+ Analysis”.

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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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