SANTA MONICA, Calif.--(BUSINESS WIRE)--Activision Blizzard, Inc. (Nasdaq: ATVI) today announced better-than-expected and record first-quarter 2017 results.

First Quarter Prior (in millions, except EPS) 2017 Outlook* 2016 GAAP Net Revenues $ 1,726 $ 1,550 $ 1,455 Impact of GAAP deferrals $ (530) $ (500) $ (547) GAAP EPS $ 0.56 $ 0.25 $ 0.48 Non-GAAP (redefined) EPS** $ 0.72 $ 0.51 $ 0.58 Impact of GAAP deferrals $ (0.41) $ (0.33) $ (0.35)

* Prior outlook was provided by the company on February 9, 2017 in its earnings release.

** “Non-GAAP (redefined)” includes the net effect of revenue deferrals accounting treatment on certain of our online enabled products. Please refer to our July 29, 2016 call and materials for additional information.

For the quarter ended March 31, 2017, Activision Blizzard’s net revenues presented in accordance with GAAP were a Q1 record of $1.73 billion, as compared with $1.46 billion for the first quarter of 2016, an increase of 19%. GAAP net revenues from digital channels were a Q1 record of $1.39 billion, growing 50% year-over-year. GAAP operating margin was 29%. GAAP earnings per diluted share were an all-time quarterly record $0.56, as compared with $0.48 for the first quarter of 2016, an increase of 17%.

For the quarter ended March 31, 2017, on a non-GAAP (redefined) basis, Activision Blizzard’s operating margin was 43% and earnings per diluted share were an all-time quarterly record $0.72, as compared with $0.58 for the first quarter of 2016, an increase of 24%.

For the quarter, operating cash flows were a Q1 record of $411 million, up 22% year-over-year.

Please refer to the tables at the end of this press release for a reconciliation of the company’s GAAP and non-GAAP (redefined) results.

Bobby Kotick, Chief Executive Officer of Activision Blizzard, said, “This quarter we delivered record revenues, earnings per share and cash flow, and over-performed guidance.”

Kotick added, "Among the drivers of our results was Overwatch®, which now has over 30 million players globally. The Overwatch League™ is gaining momentum and we're excited to offer our community of players the best professional league experience. Destiny 2 and Call of Duty®: WWII are also coming later this year, and both reveals have been very well received by fans."

Selected Business Highlights:

Audience Reach

Activision Blizzard had 431 million Monthly Active Users (MAUs) A in the quarter.

in the quarter. Blizzard had the biggest Q1 online player community in its history with MAUs A of 41 million, up 58% year-over-year. Overwatch continues to be Blizzard’s fastest growing new franchise, reaching over 30 million players globally less than a year after launch. Overwatch is now the 8 th billion-dollar franchise in Activision Blizzard’s portfolio. Hearthstone ® MAUs A grew year-over-year and quarter-over-quarter, despite no content releases in the first quarter, and recently surpassed the 70 million registered player milestone life-to-date.

of 41 million, up 58% year-over-year. continues to be Blizzard’s fastest growing new franchise, reaching over 30 million players globally less than a year after launch. is now the 8 billion-dollar franchise in Activision Blizzard’s portfolio. MAUs grew year-over-year and quarter-over-quarter, despite no content releases in the first quarter, and recently surpassed the 70 million registered player milestone life-to-date. Activision had 48 million MAUsA in the first quarter, down year-over-year primarily due to expected softness from last year’s Infinite Warfare™ release. Activision expects to release Call of Duty: WWII on November 3, 2017. Last week’s reveal was the most watched livestream in Call of Duty history, and the reveal trailer became the fastest video to reach 10 million views in Call of Duty history. Though early, initial pre-orders for Call of Duty: WWII are off to a very strong start. Activision and its partners at Bungie expect to release Destiny 2 on September 8, 2017 and welcome PC players into the Destiny universe for the first time. Response to the Destiny 2 reveal was very encouraging, and pre-orders are off to a very strong start.

King had 342 million MAUsA for the quarter, down year-over-year, but with better per user engagement and investment. King had two of the top 10 highest-grossing titles in the U.S. mobile app stores for the fourteenth quarter in a row.1

Deep Engagement

Blizzard had record first-quarter time spent, up a double-digit percentage year-over-year. In late January, Overwatch had its fourth seasonal event, Year of the Rooster , to celebrate the lunar new year. The event drove engagement records for the game. Blizzard launched a fifth seasonal event in April, Uprising , including a player-versus-environment game mode which drew record time spent. With a regular content and feature update cadence, World of Warcraft ® time spent grew year-over-year in the first quarter. Hearthstone set a new all-time Daily Active Users (DAUs) B record last month with the release of a new expansion, Journey to Un’Goro ™ . In April, Blizzard also launched Heroes of the Storm ® 2.0 , bringing players back into the game.

had its fourth seasonal event, , to celebrate the lunar new year. The event drove engagement records for the game. Blizzard launched a fifth seasonal event in April, , including a player-versus-environment game mode which drew record time spent. With a regular content and feature update cadence, time spent grew year-over-year in the first quarter. set a new all-time Daily Active Users (DAUs) record last month with the release of a new expansion, . In April, Blizzard also launched , bringing players back into the game. King’s time spent per DAUB is now a record 35 minutes a day, up quarter-over-quarter and year-over-year. King’s DAUB to MAUA ratio is at its highest point since 2013, and DAUsB were steady quarter-over-quarter.

Player Investment

Blizzard’s revenues from in-game content grew more than 25% year-over-year, driven by revenues from World of Warcraft in-game content and continued strength of Overwatch customization items.

in-game content and continued strength of customization items. Activision expects to release a new content offering for Call of Duty: Black Ops 3 fans, Zombies Chronicles , on May 16, 2017. The remastered collection of the franchise’s most beloved Zombies content will be available first on PlayStation 4.

fans, , on May 16, 2017. The remastered collection of the franchise’s most beloved Zombies content will be available first on PlayStation 4. King’s first-quarter gross bookingsC per paying user grew for the 7th quarter in a row to a new record. The Candy Crush™ franchise showed continued stability with mobile bookings up quarter-over-quarter. Also, King has entered into a promising publishing partnership with PlayStudios to enter the social casino genre.

Company Outlook:



(in millions, except EPS) GAAP

Outlook Non-GAAP

Outlook

(redefined) Impact of GAAP

deferralsD CY 2017 Net Revenues $ 6,100 6,100 230 EPS $ 0.88 1.80 0.08 Fully Diluted Shares* 767 767 Q2 2017 Net Revenues $ 1,425 1,425 (225 ) EPS $ 0.15 0.38 (0.11 ) Fully Diluted Shares* 764 764

* Fully diluted weighted average shares include participating securities and dilutive options on a weighted average basis.

As referenced on our July 29, 2016 call, if you would like to calculate Non-GAAP metrics as previously defined, you would add the impact of GAAP deferrals to the Non-GAAP (redefined) metrics.

Currency Assumptions for 2017 Outlook:

$1.09 USD/Euro for current outlook (vs. average of $1.11 for 2016 and $1.11 for 2015); and

$1.28 USD/British Pound Sterling for current outlook (vs. average of $1.36 for 2016 and $1.53 for 2015).

Debt Repayment and Cash Dividend:

During the first quarter, we prepaid $500 million of our term loan. Also, the company declared a cash dividend of $0.30 per common share to be paid on May 10th to shareholders of record at the close of business on March 30, 2017.

Conference Call:

Today at 4:30 p.m. EDT, Activision Blizzard’s management will host a conference call and Webcast to discuss the company’s results for the quarter ended March 31, 2017 and management’s outlook for the remainder of the calendar year. The company welcomes all members of the financial and media communities and other interested parties to visit the “Investor Relations” area of www.activisionblizzard.com to listen to the conference call via live Webcast or to listen to the call live by dialing into 888-510-1785 in the U.S. with passcode 5731344.

About Activision Blizzard:

Activision Blizzard, Inc., a member of the S&P 500, is the world's most successful standalone interactive entertainment company. We delight hundreds of millions of monthly active users around the world through franchises including Activision's Call of Duty®, Destiny and Skylanders®, Blizzard Entertainment's World of Warcraft®, Overwatch®, Hearthstone®, Diablo®, StarCraft®, and Heroes of the Storm®, and King's Candy Crush™, Pet Rescue™, Bubble Witch™ and Farm Heroes™. The company is one of the Fortune "100 Best Companies To Work For®". Headquartered in Santa Monica, California, Activision Blizzard has operations throughout the world, and its games are played in 196 countries. More information about Activision Blizzard and its products can be found on the company's website, www.activisionblizzard.com.

1 U.S. ranking for Apple App Store and Google Play Store combined, per App Annie Intelligence for first quarter 2017.

A Monthly Active User (“MAU”) Definition: We monitor MAUs as a key measure of the overall size of our user base. MAUs are the number of individuals who played a particular game in a given month. We calculate average MAUs in a period by adding the total number of MAUs in each of the months in a given period and dividing that total by the number of months in the period. An individual who plays two of our games would be counted as two users. In addition, due to technical limitations, for Activision Publishing and King, an individual who plays the same game on two platforms or devices in the relevant period would be counted as two users. For Blizzard, an individual who plays the same game on two platforms or devices in the relevant period would generally be counted as a single user.

B Daily Active Users (“DAU”) Definition: DAUs are defined and measured using the same methodology as we use for MAUs but on a daily basis.

C Gross bookings is an operating metric that represents the total cash spent by players in the period for the purchase of virtual items. King uses gross bookings to evaluate its results of operations, generate future operating plans and assess performance. Gross bookings is the total price paid by players, which includes indirect taxes (sales tax or value added tax etc.), platform providers fees, and King’s share of revenues.

D Net effect of accounting treatment from revenue deferrals on certain of our online enabled products. Some of our games’ online functionality represents an essential component of gameplay and, as a result, a more-than-inconsequential separate deliverable. As a result, we recognize revenues attributed to these game titles over their estimated service periods, which is generally less than a year. The related cost of revenues is deferred and recognized as an expense as the related revenues are recognized. Impact from changes in deferrals refers to the net effect from revenue deferrals accounting treatment for the purposes of revenues, and together with the related cost of revenues deferrals treatment and the related tax impacts for the purposes of EPS. Internally, management excludes the impact of this change in deferred revenues and related cost of revenues when evaluating the company’s operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. Management believes this is appropriate because doing so enables an analysis of performance based on the timing of actual transactions with our customers. In addition, management believes excluding the change in deferred revenues and the related cost of revenues provides a much more timely indication of trends in our operating results.

Non-GAAP (as previously defined) and Non-GAAP (redefined) Financial Measures: In accordance with the updated Compliance and Disclosure Interpretations issued by the SEC staff on May 17, 2016, beginning with the reporting of our second-quarter 2016 results, we have reported our financial results and provided our outlook using GAAP and non-GAAP (redefined). We have historically provided Non-GAAP (as previously defined) financial measures. The only difference between the two measures is the inclusion (Non-GAAP (redefined)) or exclusion (Non-GAAP (as previously defined)) of the impact from revenue deferrals accounting treatment on certain of our online enabled products. Please see materials from July 29, 2016 call for further details.

Non-GAAP Financial Measures: As a supplement to our financial measures presented in accordance with Generally Accepted Accounting Principles (“GAAP”), Activision Blizzard presents certain non-GAAP measures of financial performance. These non-GAAP financial measures are not intended to be considered in isolation from, as a substitute for, or as more important than, the financial information prepared and presented in accordance with GAAP. In addition, these non-GAAP measures have limitations in that they do not reflect all of the items associated with the company’s results of operations as determined in accordance with GAAP.

Activision Blizzard provides net income (loss), earnings (loss) per share and operating margin data and guidance both including (in accordance with GAAP) and excluding (non-GAAP) certain items. When relevant, the company also provides constant FX information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. In addition, Activision Blizzard provides EBITDA (defined as GAAP net income (loss) before interest (income) expense, income taxes, depreciation and amortization) and adjusted EBITDA (defined as non-GAAP operating margin (see non-GAAP financial measure below) before depreciation). The non-GAAP financial measures exclude the following items, as applicable in any given reporting period and our outlook:

expenses related to stock-based compensation;

the amortization of intangibles from purchase price accounting;

fees and other expenses related to the King acquisition, inclusive of related debt financings, and refinancing of long-term debt, including penalties and the write off of unamortized discount and deferred financing costs;

restructuring charges;

other non-cash charges from reclassification of certain cumulative translation adjustments into earnings as required by GAAP; and

the income tax adjustments associated with any of the above items (tax impact on Non-GAAP pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income under ASC 740, which employs an annual effective tax rate method to the results).

In the future, Activision Blizzard may also consider whether other items should also be excluded in calculating the non-GAAP financial measures used by the company. Management believes that the presentation of these non-GAAP financial measures provides investors with additional useful information to measure Activision Blizzard’s financial and operating performance. In particular, the measures facilitate comparison of operating performance between periods and help investors to better understand the operating results of Activision Blizzard by excluding certain items that may not be indicative of the company’s core business, operating results or future outlook. Internally, management uses these non-GAAP financial measures, along with others, in assessing the company’s operating results, and measuring compliance with the requirements of the company’s debt financing agreements, as well as in planning and forecasting.

Activision Blizzard’s non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles, and the terms non-GAAP net income, non-GAAP earnings per share, non-GAAP operating margin, and non-GAAP or adjusted EBITDA do not have a standardized meaning. Therefore, other companies may use the same or similarly named measures, but exclude different items, which may not provide investors a comparable view of Activision Blizzard’s performance in relation to other companies.

Management compensates for the limitations resulting from the exclusion of these items by considering the impact of the items separately and by considering Activision Blizzard’s GAAP, as well as non-GAAP, results and outlook, and by presenting the most comparable GAAP measures directly ahead of non-GAAP measures, and by providing a reconciliation that indicates and describes the adjustments made.

Cautionary Note Regarding Forward-looking Statements: The statements contained herein that are not historical facts are forward-looking statements, including, but not limited to, statements about (1) projections of revenues, expenses, income or loss, earnings or loss per share, cash flow or other financial items; (2) statements of our plans and objectives, including those related to releases of products and services; (3) statements of future financial or operating performance; and (4) statements of assumptions underlying such statements. The company generally uses words such as “outlook,” “forecast,” “will,” “could,” “should,” “would,” “to be,” “plan,” “plans,” “believes,” “may,” “might,” “expects,” “intends,” “intends as,” “anticipates,” “estimate,” “future,” “positioned,” “potential,” “project,” “remain,” “scheduled,” “set to,” “subject to,” “upcoming” and other similar expressions to help identify forward-looking statements. Forward-looking statements are subject to business and economic risk, reflect management’s current expectations, estimates and projections about our business, and are inherently uncertain and difficult to predict.

The company cautions that a number of important factors could cause Activision Blizzard's actual future results and other future circumstances to differ materially from those expressed in any forward-looking statements. Such factors include, but are not limited to: the diversion of management time and attention to issues relating to the operations of our acquired or newly started businesses; sales levels of Activision Blizzard’s titles, products and services; concentration of revenue among a small number of titles; Activision Blizzard’s ability to predict consumer preferences, including interest in specific genres, and preferences among platforms; the amount of our debt and the limitations imposed by the covenants in the agreements governing our debt; the adoption rate and availability of new hardware (including peripherals) and related software; counterparty risks relating to customers, licensees, licensors and manufacturers; maintenance of relationships with key personnel, customers, financing providers, licensees, licensors, manufacturers, vendors, and third-party developers, including the ability to attract, retain and develop key personnel and developers that can create high-quality titles, products and services; risks relating to the expansion into new businesses, including the potential impact on our existing businesses; changing business models within the video game industry, including digital delivery of content and the increased prevalence of free-to-play games; product delays or defects; competition, including from other forms of entertainment; rapid changes in technology and industry standards; possible declines in software pricing; product returns and price protection; the identification of suitable future acquisition opportunities and potential challenges associated with geographic expansion; the seasonal and cyclical nature of the interactive entertainment market; the outcome of current or future tax disputes; the impact of litigation risks and associated costs; protection of proprietary rights; shifts in consumer spending trends; capital market risks; applicable regulations; domestic and international economic, financial and political conditions and policies; tax rates and foreign exchange rates; the impact of the current macroeconomic environment; and the other factors identified in “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016.

The forward-looking statements in this press release are based on information available to the company at this time and we assume no obligation to update any such forward-looking statements. Although these forward-looking statements are believed to be true when made, they may ultimately prove to be incorrect. These statements are not guarantees of our future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and may cause actual results to differ materially from current expectations.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Amounts in millions, except per share data) Three Months Ended March 31, 2017 2016 Net revenues Product sales $ 509 $ 645 Subscription, licensing, and other revenues 1 1,217 810 Total net revenues 1,726 1,455 Costs and expenses Cost of revenues—product sales: Product costs 143 169 Software royalties, amortization, and intellectual property licenses 88 128 Cost of revenues—subscription, licensing, and other: Game operations and distribution costs 232 142 Software royalties, amortization, and intellectual property licenses 122 52 Product development 225 175 Sales and marketing 246 168 General and administrative 177 160 Total costs and expenses 1,233 994 Operating income 493 461 Interest and other expense (income), net 40 52 Income before income tax expense 453 409 Income tax expense 27 46 Net income $ 426 $ 363 Basic earnings per common share 2 $ 0.57 $ 0.49 Weighted average common shares outstanding 749 735 Diluted earnings per common share 2 $ 0.56 $ 0.48 Weighted average common shares outstanding assuming dilution 761 749

1 Subscription, licensing, and other revenues represent revenues from World of Warcraft subscriptions, licensing royalties from our products and franchises, value-added services, downloadable content, microtransactions, and other miscellaneous revenues. 2 The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. We had, on a weighted-average basis, participating securities of less than a million and approximately 4 million for the three months ended March 31, 2017, and 2016, respectively. For the three months ended March 31, 2017, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate earnings per common share, assuming dilution, was $426 million, as compared to total net income of $426 million, for the same period. For the three months ended March 31, 2016, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate earnings per common share, assuming dilution, was $360 million, as compared to total net income of $363 million, for the same period.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Amounts in millions) March 31,

2017 December 31,

2016 Assets Current assets Cash and cash equivalents $ 3,248 $ 3,245 Accounts receivable, net 344 732 Inventories, net 48 49 Software development 370 412 Other current assets 346 392 Total current assets 4,356 4,830 Software development 74 54 Property and equipment, net 245 258 Deferred income taxes, net 371 283 Other assets 439 401 Intangible assets, net 1,673 1,858 Goodwill 9,763 9,768 Total assets $ 16,921 $ 17,452 Liabilities and Shareholders' Equity Current liabilities Accounts payable $ 150 $ 222 Deferred revenues 1,153 1,628 Accrued expenses and other liabilities 936 806 Total current liabilities 2,239 2,656 Long-term debt, net 4,393 4,887 Deferred income taxes, net 41 44 Other liabilities 812 746 Total liabilities 7,485 8,333 Shareholders' equity Common stock — — Additional paid-in capital 10,555 10,442 Treasury stock (5,563 ) (5,563 ) Retained earnings 5,069 4,869 Accumulated other comprehensive loss (625 ) (629 ) Total shareholders’ equity 9,436 9,119 Total liabilities and shareholders’ equity $ 16,921 $ 17,452

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES (Amounts in millions, except per share data) Three Months Ended March 31, 2017 Net Revenues Cost of Revenues

- Product Sales:

Product Costs Cost of Revenues

- Product Sales:

Software

Royalties and

Amortization Cost of Revenues

- Subs/Lic/Other:

Game Operations

and Distribution

Costs Cost of Revenues

- Subs/Lic/Other:

Software

Royalties and

Amortization Product

Development Sales and

Marketing General and

Administrative Total Costs and

Expenses GAAP Measurement $ 1,726 $ 143 $ 88 $ 232 $ 122 $ 225 $ 246 $ 177 $ 1,233 Share-based compensation1 — — (4 ) — — (12 ) (4 ) (13 ) (33 ) Amortization of intangible assets2 — — — — (111 ) — (77 ) (2 ) (190 ) Fees and other expenses related to the King Acquisition3 — — — — — — — (4 ) (4 ) Restructuring costs4 — — — — — — — (11 ) (11 ) Other non-cash charges5 — — — — — — — (16 ) (16 ) Non-GAAP (redefined) Measurement $ 1,726 $ 143 $ 84 $ 232 $ 11 $ 213 $ 165 $ 131 $ 979 Net effect of deferred revenues and related cost of revenues6 $ (530 ) $ (58 ) $ (68 ) $ (4 ) $ (4 ) $ — $ — $ — $ (134 ) Operating

Income Net Income Basic Earnings

per Share Diluted Earnings

per Share GAAP Measurement $ 493 $ 426 $ 0.57 $ 0.56 Share-based compensation1 33 33 0.04 0.04 Amortization of intangible assets2 190 190 0.25 0.25 Fees and other expenses related to the King Acquisition3 4 9 0.01 0.01 Restructuring costs4 11 11 0.01 0.01 Other non-cash charges5 16 16 0.02 0.02 Income tax impacts from items above7 — (139 ) (0.18 ) (0.18 ) Non-GAAP (redefined) Measurement $ 747 $ 546 $ 0.73 $ 0.72 Net effect of deferred revenues and related cost of revenues6 $ (396 ) $ (310 ) $ (0.41 ) $ (0.41 )

1 Includes expenses related to share-based compensation. 2 Reflects amortization of intangible assets from purchase price accounting. 3 Reflects fees and other expenses related to the acquisition of King Digital Entertainment ("King Acquisition"), inclusive of related debt financings and integration costs. 4 Reflects restructuring charges incurred, primarily severance costs. 5 Reflects a non-cash accounting charge to reclassify certain cumulative translation losses into earnings due to the substantial liquidation of certain of our foreign entities. 6 Reflects the net effect from deferral of revenues and (recognition) of deferred revenues, along with related cost of revenues, on certain of our online enabled products, including the effects of taxes. 7 Reflects the income tax impact associated with the above items. Tax impact on non-GAAP (redefined) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

The GAAP and non-GAAP (redefined) earnings per share information is presented as calculated. The sum of these measures, as presented, may differ due to the impact of rounding.

For purposes of calculating earnings per share, we had, on a weighted-average basis, common shares outstanding of 749 million, participating securities of less than a million, and dilutive shares of 12 million during the three months ended March 31, 2017.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES (Amounts in millions, except per share data) Three Months Ended March 31, 2016 Net Revenues Cost of Revenues

- Product Sales:

Product Costs Cost of Revenues

- Product Sales:

Software

Royalties and

Amortization Cost of Revenues

- Subs/Lic/Other:

Game Operations

and Distribution

Costs Cost of Revenues

- Subs/Lic/Other:

Software Royalties and

Amortization Product

Development Sales and

Marketing General and

Administrative Total Costs and

Expenses GAAP Measurement $ 1,455 $ 169 $ 128 $ 142 $ 52 $ 175 $ 168 $ 160 $ 994 Share-based compensation1 — — (8 ) — — (10 ) (3 ) (23 ) (44 ) Amortization of intangible assets2 — — (1 ) (1 ) (46 ) — (33 ) (1 ) (82 ) Fees and other expenses related to the King Acquisition3 — — — — — — — (34 ) (34 ) Non-GAAP (redefined) Measurement $ 1,455 $ 169 $ 119 $ 141 $ 6 $ 165 $ 132 $ 102 $ 834 Net effect of deferred revenues and related cost of revenues4 $ (547 ) $ (83 ) $ (88 ) $ (5 ) $ (2 ) $ — $ — $ — $ (178 ) Operating

Income Net Income Basic Earnings

per Share Diluted Earnings

per Share GAAP Measurement $ 461 $ 363 $ 0.49 $ 0.48 Share-based compensation1 44 44 0.06 0.06 Amortization of intangible assets2 82 82 0.11 0.11 Fees and other expenses related to the King Acquisition3 34 34 0.05 0.05 Income tax impacts from items above5 — (82 ) (0.11 ) (0.11 ) Non-GAAP (redefined) Measurement $ 621 $ 441 $ 0.59 $ 0.58 Net effect of deferred revenues and related cost of revenues4 $ (369 ) $ (268 ) $ (0.36 ) $ (0.35 )

1 Includes expenses related to share-based compensation. 2 Reflects amortization of intangible assets from purchase price accounting. 3 Reflects fees and other expenses related to the King Acquisition, inclusive of related debt financings and integration costs. 4 Reflects the net effect from deferral of revenues and (recognition) of deferred revenues, along with related cost of revenues, on certain of our online enabled products, including the effects of taxes. 5 Reflects the income tax impact associated with the above items. Tax impact on non-GAAP (redefined) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

The GAAP and non-GAAP (redefined) earnings per share information is presented as calculated. The sum of these measures, as presented, may differ due to the impact of rounding.

The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. For the three months ended March 31, 2016, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate non-GAAP (redefined) earnings per common share, assuming dilution, was $438 million, as compared to total net income of $441 million, for the same period.

For purposes of calculating earnings per share, we had, on a weighted-average basis, common shares outstanding of 735 million, participating securities of approximately 4 million, and dilutive shares of 14 million during the three months ended March 31, 2016.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES FINANCIAL INFORMATION For the Three Months Ended March 31, 2017 and 2016 (Amounts in millions) Three Months Ended March 31, 2017 March 31, 2016 $ Increase

(Decrease) % Increase

(Decrease) Amount % of Total1 Amount % of Total1 Net Revenues by Distribution Channel Digital online channels2 $ 1,386 80 % $ 926 64 % $ 460 50 % Retail channels 270 16 482 33 (212 ) (44 ) Other3 70 4 47 3 23 49 Total consolidated net revenues $ 1,726 100 % $ 1,455 100 % $ 271 19 Change in deferred revenues4 Digital online channels2 $ (320 ) $ (129 ) Retail channels (206 ) (418 ) Other3 (4 ) — Total changes in deferred revenues $ (530 ) $ (547 )

1 The percentages of total are presented as calculated. Therefore, the sum of these percentages, as presented, may differ due to the impact of rounding. 2 Net revenues from digital online channels represent revenues from digitally distributed subscriptions, licensing royalties, value-added services, downloadable content, microtransactions, and products. 3 Net revenues from Other include revenues from our Major League Gaming, studios, and distribution businesses. 4 Reflects the net effect from deferral of revenues and (recognition) of deferred revenues on certain of our online enabled products.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES FINANCIAL INFORMATION For the Three Months Ended March 31, 2017 and 2016 (Amounts in millions) Three Months Ended March 31, 2017 March 31, 2016 $ Increase

(Decrease) % Increase

(Decrease) Amount % of Total1 Amount % of Total1 Net Revenues by Platform Console $ 615 36 % $ 765 53 % $ (150 ) (20) % PC 566 33 400 27 166 42 Mobile and ancillary2 475 28 243 17 232 95 Other3 70 4 47 3 23 49 Total consolidated net revenues $ 1,726 100 % $ 1,455 100 % $ 271 19 Change in deferred revenues4 Console $ (375 ) $ (437 ) PC (147 ) (99 ) Mobile and ancillary2 (4 ) (11 ) Other3 (4 ) — Total changes in deferred revenues $ (530 ) $ (547 )

1 The percentages of total are presented as calculated. Therefore, the sum of these percentages, as presented, may differ due to the impact of rounding. 2 Net revenues from mobile and ancillary include revenues from mobile devices, as well as non-platform specific game related revenues, such as standalone sales of toys and accessories from the Skylanders franchise and other physical merchandise and accessories. 3 Net revenues from Other include revenues from our Major League Gaming, studios, and distribution businesses. 4 Reflects the net effect from deferral of revenues and (recognition) of deferred revenues on certain of our online enabled products.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES FINANCIAL INFORMATION For the Three Months Ended March 31, 2017 and 2016 (Amounts in millions) Three Months Ended March 31, 2017 March 31, 2016 $ Increase

(Decrease) % Increase

(Decrease) Amount % of Total1 Amount % of Total1 Net Revenues by Geographic Region Americas $ 929 54 % $ 753 52 % $ 176 23 % EMEA2 554 32 521 36 33 6 Asia Pacific 243 14 181 12 62 34 Total consolidated net revenues $ 1,726 100 % $ 1,455 100 % $ 271 19 Change in deferred revenues3 Americas $ (309 ) $ (293 ) EMEA2 (162 ) (194 ) Asia Pacific (59 ) (60 ) Total changes in deferred revenues $ (530 ) $ (547 )

1 The percentages of total are presented as calculated. Therefore, the sum of these percentages, as presented, may differ due to the impact of rounding. 2 EMEA consists of the Europe, Middle East, and Africa geographic regions. 3 Reflects the net effect from deferral of revenues and (recognition) of deferred revenues on certain of our online enabled products.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES FINANCIAL INFORMATION For the Three Months Ended March 31, 2017 and 2016 (Amounts in millions) Three Months Ended March 31, 2017 March 31, 2016 $ Increase

(Decrease) % Increase

(Decrease) Amount % of Total1 Amount % of Total1 Segment net revenues: Activision2 $ 215 19 % $ 360 42 % $ (145 ) (40) % Blizzard3 441 39 294 34 147 50 King4 474 42 207 24 267 129 Reportable segments total 1,130 100 % 861 100 % 269 31 Reconciliation to consolidated net revenues: Other segments5 66 47 Net effect from deferral of net revenues6 530 547 Consolidated net revenues $ 1,726 $ 1,455 $ 271 19 % Segment income (loss) from operations: Activision2 $ 24 $ 99 $ (75 ) (76) % Blizzard3 166 86 80 93 King4 166 67 99 148 Reportable segments total 356 252 104 41 Reconciliation to consolidated operating income and consolidated income before income tax expense: Other segments5 (5 ) — Net effect from certain revenues deferrals accounting treatment6 396 369 Share-based compensation expense (33 ) (44 ) Amortization of intangible assets (190 ) (82 ) Fees and other expenses related to the King Acquisition7 (4 ) (34 ) Restructuring costs8 (11 ) — Other non-cash charges9 (16 ) — Consolidated operating income 493 461 32 7 Interest and other expense (income), net 40 52 Consolidated income before income tax expense $ 453 $ 409 $ 44 11 % Operating margin from total reportable segments 31.5 % 29.3 %

1 The percentages of total are presented as calculated. Therefore, the sum of these percentages, as presented, may differ due to the impact of rounding. 2 Activision Publishing (“Activision”) — publishes interactive entertainment products and content. 3 Blizzard Entertainment, Inc. (“Blizzard”) — publishes interactive entertainment products and online subscription-based games. 4 King Digital Entertainment plc (“King”) — publishes interactive mobile entertainment products. 5 Other includes other income and expenses from operating segments managed outside the reportable segments, including our Major League Gaming, studios, and distribution businesses. Other also includes unallocated corporate income and expenses. 6 Reflects the net effect from (deferral) of revenues and recognition of deferred revenues, along with related cost of revenues, on certain of our online enabled products. 7 Reflects fees and other expenses related to the King Acquisition, inclusive of related debt financings and integration costs. 8 Reflects restructuring charges incurred, primarily severance costs. 9 Reflects a non-cash accounting charge to reclassify certain cumulative translation losses into earnings due to the substantial liquidation of certain of our foreign entities.

Our operating segments are consistent with the manner our operations are reviewed and managed by our Chief Executive Officer, who is our chief operating decision maker (“CODM”). The CODM reviews segment performance exclusive of: the impact of the change in deferred revenues and related cost of revenues with respect to certain of our online-enabled games; share-based compensation expense; amortization of intangible assets as a result of purchase price accounting; fees and other expenses (including legal fees, costs, expenses and accruals) related to acquisitions and financings; certain restructuring costs; and other non-cash charges.

Our operating segments are also consistent with our internal organization structure, the way we assess operating performance and allocate resources, and the availability of separate financial information. We do not aggregate operating segments.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES EBITDA and Adjusted EBITDA For the Trailing Twelve Months Ended March 31, 2017 (Amounts in millions) Trailing Twelve

Months Ended June 30,

2016 September 30,

2016 December 31,

2016 March 31,

2017 March 31,

2017 GAAP Net Income1 $ 151 $ 199 $ 254 $ 426 $ 1,030 Interest and other expense (income), net 66 53 43 40 202 Loss on extinguishment of debt — 10 82 — 92 Provision for income taxes1 16 32 46 27 121 Depreciation and amortization 233 243 246 224 946 EBITDA 466 537 671 717 2,391 Share-based compensation expense2 41 33 40 33 147 Fees and other expenses related to the King Acquisition3 4 4 4 4 16 Restructuring costs4 — — — 11 11 Other non-cash charges5 — — — 16 16 Adjusted EBITDA (redefined) $ 511 $ 574 $ 715 $ 781 $ 2,581 Change in deferred net revenues and related cost of revenues6 $ 108 $ 33 $ 238 $ (396 ) $ (17 )

1 We recognized $24 million, $12 million, $18 million, and $69 million of excess tax benefits from share-based payments as an income tax benefit in the provision for income taxes for the three months ended June 30, 2016, September 30, 2016, December 31, 2016, and March 31, 2017, respectively. 2 Includes expenses related to share-based compensation. 3 Reflects fees and other expenses related to the King Acquisition, inclusive of related debt financings and integration costs. 4 Reflects restructuring charges incurred, primarily severance costs. 5 Reflects a non-cash accounting charge to reclassify certain cumulative translation losses into earnings due to the substantial liquidation of certain of our foreign entities. 6 Reflects the net effect from deferral of revenues and (recognition) of deferred revenues, along with related cost of revenues, on certain of our online enabled products.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL INFORMATION (Amounts in millions) Three Months Ended March 31, June 30, September 30, December 31, March 31, Year over Year %

Increase

(Decrease) 2016 2016 2016 2016 2017 Cash Flow Data Operating Cash Flow $ 337 $ 503 $ 456 $ 859 $ 411 22 % Capital Expenditures 27 44 28 37 21 (22 ) Non-GAAP Free Cash Flow1 310 459 428 822 390 26 Operating Cash Flow - TTM2 1,373 1,732 2,359 2,155 2,229 62 Capital Expenditures - TTM2 117 133 115 136 130 11 Non-GAAP Free Cash Flow - TTM2 $ 1,256 $ 1,599 $ 2,244 $ 2,019 $ 2,099 67 %

1 Non-GAAP free cash flow represents operating cash flow minus capital expenditures. 2 TTM represents trailing twelve months. Operating Cash Flow for the three months ended June 30, 2015, three months ended September 30, 2015, and three months ended December 31, 2015, was $144 million, $(171) million, and $1,063 million, respectively. Capital Expenditures for the three months ended June 30, 2015, three months ended September 30, 2015, and three months ended December 31, 2015, was $28 million, $46 million, and $16 million, respectively.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES Outlook for the Three Months Ending June 30, 2017 and Year Ending December 31, 2017 GAAP to Non-GAAP (redefined) Reconciliation (Amounts in millions, except per share data) Outlook for the Outlook for the Three Months Ending Year Ending June 30, 2017 December 31, 2017 Net Revenues1 $ 1,425 $ 6,100 Change in deferred revenues2 $ (225 ) $ 230 Earnings Per Diluted Share (GAAP) $ 0.15 $ 0.88 Excluding the impact of: Share-based compensation3 0.06 0.23 Amortization of intangible assets4 0.24 0.99 Fees and other expenses related to the King Acquisition5 0.01 0.03 Restructuring costs6 — 0.04 Other non-cash charges7 — 0.02 Income tax impacts from items above8 (0.07 ) (0.38 ) Earnings Per Diluted Share (Non-GAAP redefined) $ 0.38 $ 1.80 Net effect of deferred net revenues and related cost of revenues on Earnings Per Diluted Share9 $ (0.11 ) $ 0.08

1 Net Revenues represents the revenue outlook for both GAAP and Non-GAAP (redefined) as they are measured the same. 2 Reflects the net effect from deferral of revenues and (recognition) of deferred revenues on certain of our online enabled products. 3 Reflects expenses related to share-based compensation. 4 Reflects amortization of intangible assets from purchase price accounting, including intangible assets from the King Acquisition. 5 Reflects fees and other expenses related to the King Acquisition, inclusive of related debt financings and integration costs. 6 Reflects our planned restructuring charges, primarily severance costs. 7 Reflects a non-cash accounting charge incurred during the three months ended March 31, 2017 to reclassify certain cumulative translation losses into earnings due to the substantial liquidation of certain of our foreign entities. 8 Reflects the income tax impacts associated with the above items. Due to the inherent uncertainties in share price and option exercise behavior, we do not generally forecast excess tax benefits or tax shortfalls. 9 Reflects the net effect from deferral of revenues and (recognition) of deferred revenues, along with related cost of revenues, on certain of our online enabled products, including the effect of taxes.

The per share adjustments and the GAAP and Non-GAAP (redefined) earnings per share information are presented as calculated. Therefore, the sum of these measures, as presented, may differ due to the impact of rounding.