Electronic Arts (EA) 8-K Ea Reports Strong Q1 Results

Exhibit 99.1

EA REPORTS STRONG Q1 RESULTS

Net Revenue up 22 Percent; Net Income up 32 Percent

NCAA Football Sales Well Ahead of Last Year / Madden NFL Pre-Orders at Record Levels

REDWOOD CITY, CA – July 22, 2004 – Electronic Arts (NASDAQ: ERTS) today announced financial results for the fiscal first quarter ended June 30, 2004.

Net revenue for the first quarter was $432 million, up 22 percent as compared with $353 million for the fiscal quarter ended June 30, 2003. Sales were driven byHarry Potter and the Prisoner of Azkaban^™,EA SPORTS^™ Fight Night2004 andUEFA Euro 2004, each reaching platinum status (over one million units sold) in the quarter.Need for Speed^™ Underground andMVP Baseball^™ 2004 had continued strong sales. Life-to-date sales ofNeed for Speed Underground have now exceeded 7 million units.

Net income for the quarter was $24 million, a 32 percent increase compared to the same period a year ago. Diluted earnings per share were $0.08 as compared with $0.06 for the prior year.

Non-GAAP net income for the quarter, excluding certain items, was $25 million. Non-GAAP diluted earnings per share were $0.08. (Please see Non-GAAP Financial Measures and reconciliation information included in this release.)

Trailing twelve month operating cash flow was $638 million as compared to $673 million for the same period a year ago. The decline was primarily a result of the timing of sales during the quarter.

“We are off to a great start in our new fiscal year,” said Larry Probst, Chairman and Chief Executive Officer. “We received five Game Critics Awards for Best of E3 – a record for any company and three of our first quarter releases went platinum. NCAA Football’s week one sales are tracking over 50 percent ahead of last year, and Madden NFL’s pre-orders are at record levels. We continue to extend our lead by creating great entertainment while building for the next generation of technology.”

“EA delivered on both the top and bottom lines while making significant investments in next generation technology,” said Warren Jenson, Chief Financial and Administrative Officer. “Even with a 43 percent increase in research and development expense, we were able to increase our net income by over 30 percent in the quarter.”

Highlights for the Quarter (comparisons are to the quarter ended June 30, 2003)

• EA won five Game Critics Awards: Best of E3 2004:Best Fighting Game –Def Jam^® Fight for NY^™; Best Racing Game –Burnout^® 3: Takedown^™; Best Simulation Game –The Sims^™ 2; Best Sports Game –Madden NFL 2005; Best Strategy Game –The Lord of the Rings^™: The Battle for Middle-earth^™.

• EA reached an agreement with Microsoft whereby EA SPORTS and EA GAMES^™Nation will support XboxLive^™.

• Net revenue: North America – up 6 percent to $211 million; Europe – up 49 percent to $190 million; Asia Pacific – up 22 percent to $18 million; Japan – up 6 percent to $13 million. Reported net revenue increased by approximately $13 million or 4 percent due to changes in foreign currency rates.

• Gross margin was 59.1 percent – up 1.5 points from 57.6 percent.

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• Operating income was $25 million – compared to $22 million.Operating margin was 6 percent – flat year-over-year.

• EA was the number one publisher in the U.S. on current generation consoles. Based on dollar sales in the U.S., EA had three of the top-ten-selling titles.

• EA was the number one publisher in the U.S. on the PC. Based on dollar sales in the U.S. for April and May, EA had four of the top-twenty-selling titles.

Business Outlook

The following forward-looking statements reflect expectations as of July 22, 2004. Results may be materially different and are affected by many factors, such as changes in foreign exchange rates, development delays, the overall global economy, the popular appeal of our products, our ability to secure key licenses and other risk factors detailed in this release and in our annual and quarterly SEC filings.

Fiscal Second Quarter Expectations – Ending September 30, 2004

• Net revenue is expected to be between $680 and $715 million – up 28 to 35 percent year-over-year.

• Diluted earnings per share are expected to be between $0.28 and $0.34 – up 12 to 36 percent year-over-year.

Fiscal Year Expectations – Ending March 31, 2005

• Net revenue is expected to be between $3.3 and $3.4 billion – up 12 to 15 percent year-over-year.

• Diluted earnings per share are expected to be between $2.00 and $2.10 – as compared with $1.87 for fiscal 2004.

Non-GAAP Financial Measures

Electronic Arts uses non-GAAP measures of operating income, net income and diluted earnings per share. These non-GAAP measures exclude the following items, including the related tax effect, from the Company’s statement of operations:

• Amortization of intangibles

• Restructuring and asset impairment charges

• Other-than-temporary impairment of investments in affiliates

• Charges for acquired in-process technology

The Company believes that excluding these items is useful for illustrating and explaining operating results and comparisons to prior periods. Management considers these non-GAAP measures in its decision-making to facilitate more relevant operating comparisons.

A reconciliation of GAAP operating income to non-GAAP operating income; GAAP net income to non-GAAP net income; and GAAP diluted earnings per share to non-GAAP diluted earnings per share are included as part of the supplemental disclosures to this release.

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Conference Call

Electronic Arts will host a conference call on July 22, 2004 at 1:30 pm PT (4:30 pm ET) to review the results for the Company’s first quarter ended June 30, 2004. Listeners may access the conference call live via webcast (http://investor.ea.com). A webcast archive of the conference call will be available for one year at http://investor.ea.com.

Some statements set forth in this release, including those under the heading “Business Outlook,” contain forward-looking statements that involve risks and uncertainties. Statements including words such as “anticipate”, “believe” or “expect” and statements in the future tense are forward-looking statements. These forward-looking statements are subject to business and economic risks and actual events or actual future results could differ materially from those set forth in the forward-looking statements due to such risks and uncertainties. Some of the factors which could cause our results to differ materially from our expectations include the following: our ability to predict consumer preferences among competing hardware platforms; the seasonality and cyclical nature of the interactive game segment; timely development and release of our products; our ability to secure licenses to valuable entertainment properties on favorable terms; consumer spending trends; our ability to attract and retain key personnel; adoption of new accounting regulations and standards; potential regulation of our products in key territories; developments in the law regarding protection of our products; fluctuations in foreign exchange rates; and other factors described in our Annual Report on Form 10-K for the year ended March 31, 2004. We do not intend to update these forward-looking statements, including those made under the “Business Outlook” heading.

Note to Editors: EA SPORTS, EA GAMES, Need for Speed, MVP Baseball, John Madden Football and The Sims are trademarks or registered trademarks of Electronic Arts Inc. in the U.S. and/or other countries. Burnout is a registered trademark and TakeDown is trademark of Criterion Software Limited. The Lord of the Rings and the names of the characters, items, events and places therein are trademarks of The Saul Zaentz Company d/b/a Tolkien Enterprises under license to New Line Productions, Inc. Def Jam^® and Fight For NY^™ and all associated logos and marks are used under license from DJR Holdings, LLC and Simcoh, LLC. The UEFA word, and the UEFA EURO 2004^™ Official Logo are protected by trademarks and copyright. All rights reserved. NFL is a registered trademark of the National Football League. NCAA is a registered trademark of the National Collegiate Athletic Association. HARRY POTTER and all related characters and elements are trademarks of and^© Warner Bros. Entertainment Inc. Harry Potter Publishing Rights^© JKR. All other trademarks are the property of their respective owners.

For additional information, please contact:

Karen Sansot	Jeff Brown
Director, Investor Relations	Vice President, Corporate Communications
650-628-5597	650-628-7922

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ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share data)

	Three Months Ended June 30
	2004		2003
Net revenue	$	431,641	$	353,381
Cost of goods sold		176,755		149,963
Gross profit		254,886		203,418
Operating expenses:
Marketing and sales		63,220		59,084
General and administrative		35,054		30,760
Research and development		130,642		91,122
Amortization of intangibles		622		680
Restructuring charges		388		—
Total operating expenses		229,926		181,646
Operating income		24,960		21,772
Interest and other income, net		9,159		4,849
Income before provision for income taxes		34,119		26,621
Provision for income taxes		9,894		8,253
Net income	$	24,225	$	18,368
Class A common stock:
Net income:
Diluted	$	24,225	$	18,368
Basic	$	24,225	$	18,368
Earnings per share:
Diluted	$	0.08	$	0.06
Basic	$	0.08	$	0.06
Number of shares used in computation:
Diluted		315,576		299,632
Basic		302,238		289,910

Non-GAAP Results (in thousands, except per share data)

The following table shows the Company’s non-GAAP results reconciled to the Generally Accepted Accounting Principles (“GAAP”) Condensed Consolidated Statements of Operations. The Company’s non-GAAP results do not include amortization of intangibles, restructuring charges, asset impairment charges, other-than-temporary impairment of investments in affiliates and charges for acquired in-process technology. The tax impact of the remaining items is calculated on a consolidated effective tax rate of 29% and 31% for the three months ending June 30, 2004 and 2003, respectively.

	Three Months Ended June 30
	2004			2003
Net income	$	24,225		$	18,368
Amortization of intangibles		622			680
Restructuring charges		388			—
Income taxes effect on the above items		(293	)		(211	)
Non-GAAP net income	$	24,942		$	18,837
Class A common stock:
Non-GAAP diluted earnings per share	$	0.08		$	0.06
Number of shares used in diluted earnings per share computation		315,576			299,632

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ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

	June 30 2004		March 31, 2004(a)
ASSETS
Current assets:
Cash, cash equivalents and short-term investments	$	2,369,276	$	2,414,346
Marketable equity securities		2,088		1,225
Receivables, net of allowances of $121,496 and $154,682, respectively		169,620		211,916
Inventories		53,033		55,143
Deferred income taxes		84,560		84,312
Other current assets		163,221		161,867
Total current assets		2,841,798		2,928,809
Property and equipment, net		292,867		298,073
Investment in affiliates		14,951		14,332
Goodwill		91,576		91,977
Other intangibles, net		18,190		18,468
Long-term deferred income taxes		42,650		40,755
Other assets		68,205		71,612
Total Assets	$	3,370,237	$	3,464,026
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	65,556	$	114,087
Accrued and other liabilities		520,432		630,138
Total current liabilities		585,988		744,225
Other liabilities		37,654		41,443
Total liabilities		623,642		785,668
Stockholders’ equity:
Common stock		3,035		3,015
Paid-in capital		1,210,939		1,153,680
Retained earnings		1,525,409		1,501,184
Accumulated other comprehensive income		7,212		20,479
Total stockholders’ equity		2,746,595		2,678,358
Total Liabilities and Stockholders’ Equity	$	3,370,237	$	3,464,026

^(a) Derived from audited financial statements.

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ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

	Three Months Ended June 30
	2004			2003
OPERATING ACTIVITIES
Net income	$	24,225		$	18,368
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		16,207			13,223
Equity in net income of investment in affiliates		(483	)		—
Loss (gain) on sale of property, equipment and marketable equity securities		(2,333	)		53
Stock-based compensation		225			194
Tax benefit from exercise of stock options		12,778			20,143
Change in assets and liabilities:
Receivables, net		36,823			55,798
Inventories		956			8,136
Other assets		(75	)		6,557
Accounts payable		(47,558	)		(46,063	)
Accrued and other liabilities		(106,601	)		(110,720	)
Net cash used in operating activities		(65,836	)		(34,311	)
INVESTING ACTIVITIES
Capital expenditures		(26,109	)		(12,187	)
Proceeds from sale of property and equipment		15,433			38
Purchase of investment in affiliates		(250	)		—
Proceeds from sale of investment in affiliate		—			8,467
Purchase of short-term investments		(1,557,305	)		(731,176	)
Proceeds from maturities and sales of short-term investments		572,253			557,746
Purchase of minority interest		—			(2,513	)
Acquisition of subsidiary, net of cash acquired		(12	)		—
Net cash used in investing activities		(995,990	)		(179,625	)
FINANCING ACTIVITIES
Proceeds from sale of common stock through employee stock plans and other plans		44,276			72,865
Repayment of Class B notes receivable		—			135
Dividend to joint venture		—			(2,587	)
Net cash provided by financing activities		44,276			70,413
Effect of foreign exchange on cash and cash equivalents		836			4,225
Decrease in cash and cash equivalents		(1,016,714	)		(139,298	)
Beginning cash and cash equivalents		2,149,885			949,995
Ending cash and cash equivalents		1,133,171			810,697
Short-term investments		1,236,105			811,376
Ending cash, cash equivalents and short-term investments	$	2,369,276		$	1,622,073

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ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations

(in millions, except per share data)

The following tables show the Company’s non-GAAP results reconciled to the Generally Accepted Accounting Principles (“GAAP”) Condensed Consolidated Statements of Operations. The Company’s non-GAAP results do not include amortization of intangibles, restructuring charges, asset impairment charges, other-than-temporary impairment of investments in affiliates, charges for acquired in-process technology and their related income tax effect. The three months and year ended March 31, 2004 also exclude the impact of a one-time income tax adjustment.

	Q1 FY04			Q2 FY04			Q3 FY04			Q4 FY04			Q1 FY05
QUARTERLY RESULTS								��
Operating Income
GAAP operating income	$	22		$	102		$	558		$	94		$	25
Adjustments:
Amortization of intangibles		—			1			1			1			1
Restructuring charges		—			—			—			9			—
Asset impairment charges		—			—			—			—			—
Total adjustments		—			1			1			10			1
Non-GAAP operating income	$	22		$	103		$	559		$	104		$	26
Non-GAAP operating income margin - % of net revenue		6	%		19	%		38	%		17	%		6	%
Net Income
GAAP net income	$	18		$	77		$	392		$	90		$	24
Adjustments:
Amortization of intangibles		1			—			1			1			1
Restructuring charges		—			—			—			9			—
Asset impairment charges		—			—			—			—			—
Other-than-temporary impairment of investment in affiliates		—			—			—			—			—
Income taxes effect on the above items		—			—			—			(3	)		—
Income tax adjustment		—			—			—			(20	)		—
Total adjustments		1			—			1			(13	)		1
Non-GAAP net income	$	19		$	77		$	393		$	77		$	25
Non-GAAP net income margin - % of net revenue		5	%		15	%		27	%		13	%		6	%
GAAP diluted earnings per share	$	0.06		$	0.25		$	1.26		$	0.29		$	0.08
Non-GAAP diluted earnings per share	$	0.06		$	0.25		$	1.26		$	0.25		$	0.08
Number of shares used in diluted earnings per share computation		300			308			311			313			316
TRAILING TWELVE MONTH RESULTS
Operating Income
GAAP operating income	$	472		$	503		$	691		$	776		$	779
Adjustments:
Amortization of intangibles		6			5			4			3			4
Restructuring charges		15			15			7			9			9
Asset impairment charges		66			66			64			—			—
Total adjustments		87			86			75			12			13
Non-GAAP operating income	$	559		$	589		$	766		$	788		$	792
Non-GAAP operating income margin - % of net revenue		22	%		23	%		27	%		27	%		26	%
Net Income
GAAP net income	$	328		$	354		$	496		$	577		$	583
Adjustments:
Amortization of intangibles		7			5			4			3			3
Restructuring charges		15			15			7			10			9
Asset impairment charges		66			66			64			—			—
Other-than-temporary impairment of investment in affiliates		10			10			—			—			—
Income taxes effect on the above items		(31	)		(30	)		(22	)		(4	)		(3	)
Income tax adjustment		—			—			—			(20	)		(20	)
Total adjustments		67			66			53			(11	)		(11	)
Non-GAAP net income	$	395		$	420		$	549		$	566		$	572
Non-GAAP net income margin - % of net revenue		16	%		16	%		19	%		19	%		19	%
GAAP diluted earnings per share	$	1.11		$	1.19		$	1.60		$	1.87		$	1.88
Non-GAAP diluted earnings per share	$	1.34		$	1.41		$	1.77		$	1.84		$	1.84

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ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

($ in millions, except per share data, SKU count and Headcount)

	Q1 FY04			Q2 FY04			Q3 FY04			Q4 FY04			Q1 FY05			YOY % Growth
CONSOLIDATED FINANCIAL DATA
Net revenue		353			530			1,475			598			432		22	%
Net revenue - trailing twelve months (“TTM”)		2,503			2,580			2,822			2,957			3,035		21	%
Gross profit		203			316			962			372			255		25	%
Gross margin - % of net revenue		58	%		60	%		65	%		62	%		59	%
Gross profit - TTM		1,423			1,486			1,780			1,854			1,906		34	%
Gross margin - TTM % of net revenue		57	%		58	%		63	%		63	%		63	%
Operating income		22			102			558			94			25		15	%
Operating income margin - % of net revenue		6	%		19	%		38	%		16	%		6	%
Operating income - TTM		472			503			691			776			779		65	%
Operating income margin - TTM % of net revenue		19	%		19	%		24	%		26	%		26	%
Net income		18			77			392			90			24		32	%
Diluted earnings per share	$	0.06		$	0.25		$	1.26		$	0.29		$	0.08		33	%
Net income - TTM		328			354			496			577			583		78	%
Diluted earnings per share - TTM	$	1.11		$	1.19		$	1.60		$	1.87		$	1.88		69	%
Non-GAAP operating income(a)		22			103			559			104			26		16	%
Non-GAAP operating income margin - % of net revenue		6	%		19	%		38	%		17	%		6	%
Non-GAAP operating income - TTM(a)		559			589			766			788			792		42	%
Non-GAAP operating income margin - TTM % of net revenue		22	%		23	%		27	%		27	%		26	%
Non-GAAP net income(a)		19			77			393			77			25		32	%
Non-GAAP diluted earnings per share(a)	$	0.06		$	0.25		$	1.26		$	0.25		$	0.08		33	%
Non-GAAP net income - TTM(a)		395			420			549			566			572		45	%
Non-GAAP diluted earnings per share - TTM(a)	$	1.34		$	1.41		$	1.77		$	1.84		$	1.84		37	%
CASH FLOW DATA
Operating cash flow		(34	)		63			79			562			(66	)	(92)	%
Operating cash flow - TTM		673			657			538			669			638		(5)	%
Capital expenditures		12			17			27			34			26		114	%
Capital expenditures - TTM		63			65			81			90			104		65	%
BALANCE SHEET DATA
Cash, cash equivalents and short term investments		1,622			1,734			1,825			2,414			2,369		46	%
Marketable equity securities		1			1			2			1			2		72	%
Receivables, net		37			203			837			212			170		356	%
Inventories		26			39			65			55			53		103	%
OTHER
Employees		4,017			4,180			4,528			4,773			4,813		20	%
Diluted Class A weighted-average shares		300			308			311			313			316

^(a) Please see attached Unaudited Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations.

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ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

($ in millions, except per share data, SKU count and Headcount)

	Q1 FY04		Q2 FY04		Q3 FY04		Q4 FY04		Q1 FY05		YOY % Growth
GEOGRAPHIC REVENUE MIX
North America Revenue	199		358		753		299		211		6	%
Revenue outside North America	154		172		722		299		221		43	%
Europe Revenue	128		145		658		249		190		49	%
Asia Pacific Revenue	14		18		43		22		18		22	%
Japan Revenue	12		9		21		28		13		6	%
Net Revenue	353		530		1,475		598		432		22	%
GEOGRAPHIC REVENUE MIX - as a % of Net Revenue
North America Revenue	56	%	68	%	51	%	50	%	49	%
Revenue outside North America	44	%	32	%	49	%	50	%	51	%
Europe Revenue	36	%	27	%	45	%	41	%	44	%
Asia Pacific Revenue	4	%	3	%	3	%	4	%	4	%
Japan Revenue	4	%	2	%	1	%	5	%	3	%
Net Revenue	100	%	100	%	100	%	100	%	100	%
PLATFORM REVENUE MIX
Sony PlayStation 2	118		221		732		244		162		37	%
PC	80		93		220		76		67		(17)	%
Xbox	31		69		205		80		57		81	%
Nintendo GameCube	21		25		104		50		26		25	%
Game Boy Advance	2		4		57		14		18		663	%
Co-publishing and Distribution	72		92		122		112		67		(6)	%
Subscription Services	14		11		12		13		13		(9)	%
Advertising, Programming, Licensing and Other	15		15		23		9		22		50	%
Net Revenue	353		530		1,475		598		432		22	%
PLATFORM REVENUE MIX - as a % of Net Revenue
Sony PlayStation 2	33	%	42	%	49	%	41	%	38	%
PC	23	%	18	%	15	%	13	%	15	%
Xbox	9	%	13	%	14	%	13	%	13	%
Nintendo GameCube	6	%	5	%	7	%	9	%	6	%
Game Boy Advance	1	%	1	%	4	%	2	%	4	%
Co-publishing and Distribution	20	%	17	%	8	%	19	%	16	%
Subscription Services	4	%	2	%	1	%	2	%	3	%
Advertising, Programming, Licensing and Other	4	%	2	%	2	%	1	%	5	%
Net Revenue	100	%	100	%	100	%	100	%	100	%
Platform SKU Release Mix
Sony PlayStation 2	3		6		11		4		3		0	%
PC	2		10		7		1		3		50	%
Xbox	2		5		11		3		3		50	%
Nintendo GameCube	3		4		9		3		1		(67)	%
Game Boy Advance	—		1		9		—		1		N/A
Online and Other	—		2		1		—		—		N/A
Total SKUs	10		28		48		11		11		10	%

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ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Fact Sheet for Q1 Fiscal 2005

Q1 Product Releases	Platform
•      EA SPORTS™ Fight Night 2004	PlayStation®2
•      UEFA Euro 2004™	PlayStation 2
•      Harry Potter and the Prisoner of Azkaban™	PlayStation 2
•      EA SPORTS Fight Night 2004	Xbox®
•      UEFA Euro 2004	Xbox
•      Harry Potter and the Prisoner of Azkaban	Xbox
•      Harry Potter and the Prisoner of Azkaban	Nintendo GameCube™
•      The Sims™ Mega Deluxe (compilation title)	PC
•      UEFA Euro 2004	PC
•      Harry Potter and the Prisoner of Azkaban	PC
•      Harry Potter and the Prisoner of Azkaban	Game Boy® Advance
All trademarks are the property of their respective owners.

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