SANTA MONICA, Calif.--(BUSINESS WIRE)--Activision Blizzard, Inc. (Nasdaq: ATVI) today announced better-than-expected and record fourth-quarter and full-year 2016 results.

Fourth Quarter Calendar Year Prior (in millions, except EPS) 2016 Outlook* 2015 2016 2015 GAAP Net Revenues $ 2,014 $ 1,856 $ 1,353 $6,608 $ 4,664 Impact of GAAP deferrals $ 438 $ 522 $ 765 $(9) $ (43) GAAP EPS $ 0.33 $ 0.05 $ 0.21 $1.28 $ 1.19 Non-GAAP (redefined) EPS** $ 0.65 $ 0.40 $ 0.25 $2.18 $ 1.30 Impact of GAAP deferrals $ 0.27 $ 0.34 $ 0.58 $0.02 $ 0.02 * Prior outlook was provided by the company on November 3, 2016 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 year ended December 31, 2016, Activision Blizzard’s net revenues presented in accordance with Generally Accepted Accounting Principles (“GAAP”) were a record $6.61 billion, as compared with $4.66 billion for 2015, an increase of 42%. GAAP net revenues from digital channels were a record $4.87 billion, growing 94% year-over-year. GAAP operating margin was 21%. GAAP earnings per diluted share were a record $1.28, as compared with $1.19 for 2015, an increase of 8%. On a non-GAAP (redefined) basis, the company’s operating margin was a record 35% and earnings per diluted share were a record $2.18, as compared with $1.30 for 2015, an increase of 68%.

For the quarter ended December 31, 2016, Activision Blizzard’s net revenues presented in accordance with GAAP were an all-time record of $2.01 billion, as compared with $1.35 billion for the fourth quarter of 2015, an increase of 49%. GAAP net revenues from digital channels were an all-time record of $1.45 billion, growing 101% year-over-year. GAAP operating margin for the fourth quarter was 21%. GAAP earnings per diluted share were $0.33, as compared with $0.21 for the fourth quarter of 2015, an increase of 57%. Non-GAAP (redefined) operating margin was a fourth-quarter record 34%. On a non-GAAP (redefined) basis, the company’s earnings per diluted share were an all-time record $0.65, as compared with $0.25 for the fourth quarter of 2015, an increase of 160%.

Activision Blizzard generated a record $2.16 billion in operating cash flow for the year ended December 31, 2016, an increase of 71% year-over-year. For the quarter, operating cash flows were $859 million.

Please refer to the tables at the back 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, “ Our record performance in 2016 further strengthened our position as the world’s leading standalone interactive entertainment company. For the quarter and the year, we delivered our highest revenues, non-GAAP redefined operating margins and earnings per share, well surpassing our own expectations.”

Kotick added, “ The launch of Blizzard’s Overwatch® created a major new franchise, while King’s mobile advertising tests are very promising as the basis for meaningful new revenue streams. We accelerated our efforts in esports and consumer products, enabling more ways to celebrate and connect to our communities. Thanks to the strength of our established franchises and the vitality of our new initiatives, we are well positioned for growth in the years ahead.”

Selected Business Highlights:

Audience Reach

Activision Blizzard had 447 million Monthly Active Users (MAUs) A in the quarter.

in the quarter. Blizzard had its highest annual MAUs A in 2016 at 36 million, up 37% from 2015 and up 87% since 2014. Additionally, Blizzard achieved record fourth-quarter MAUs A of 41 million. Overwatch became Blizzard’s fastest game ever to reach over 25 million players globally. The title broke the previous launch year record for unit sales set by Diablo ® III in 2012 and received 55 “Game of the Year” awards. World of Warcraft ® MAUs A grew 10% in 2016 and over 20% year-over-year in the fourth quarter on the back of the successful third-quarter launch of the expansion, Legion™ . Also, Hearthstone ® had its highest annual MAUs A in 2016, growing more than 20%, in part due to the fourth-quarter expansion, Mean Streets of Gadgetzan™ .

in 2016 at 36 million, up 37% from 2015 and up 87% since 2014. Additionally, Blizzard achieved record fourth-quarter MAUs of 41 million. became Blizzard’s fastest game ever to reach over 25 million players globally. The title broke the previous launch year record for unit sales set by in 2012 and received 55 “Game of the Year” awards. MAUs grew 10% in 2016 and over 20% year-over-year in the fourth quarter on the back of the successful third-quarter launch of the expansion, . Also, had its highest annual MAUs in 2016, growing more than 20%, in part due to the fourth-quarter expansion, Activision had the biggest online player community in its history in 2016, with annual MAUs A of 50 million for the year, up 3% from 2015 and up 23% since 2014. Fourth-quarter MAUs A were 51 million. Call of Duty ® was the number one console franchise globally in 2016, and in North America for the 8 th year in a row. 1 Life-to-date on current-generation consoles, the Call of Duty franchise had 3 of the top 10 games. 1

of 50 million for the year, up 3% from 2015 and up 23% since 2014. Fourth-quarter MAUs were 51 million. was the number one console franchise globally in 2016, and in North America for the 8 year in a row. Life-to-date on current-generation consoles, the franchise had 3 of the top 10 games. On October 28, 2016, Activision Blizzard Studios, in partnership with Netflix, debuted Skylanders ™ Academy , a new TV series celebrating the beloved kids franchise. The second season will be delivered in 2017, and a third season has been ordered by Netflix.

, a new TV series celebrating the beloved kids franchise. The second season will be delivered in 2017, and a third season has been ordered by Netflix. King had 405 million MAUsA for the year and 355 million MAUsA for the quarter, both of which were 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 thirteenth quarter in a row.2

Deep Engagement

In 2016, consumers spent approximately 43 billion hours playing and watching Activision Blizzard content, on par with Netflix and over one-and-a-half times Snapchat.

Blizzard’s fourth-quarter play time surpassed the previous record set in the third quarter. Overwatch had its second and third seasonal events, Halloween Terror and Winter Wonderland, each one driving new records for engagement with the game. World of Warcraft saw an increase in total play time for the quarter, surpassing the Q3 expansion launch quarter and all non-launch quarters in the last four years.

had its second and third seasonal events, Halloween Terror and Winter Wonderland, each one driving new records for engagement with the game. saw an increase in total play time for the quarter, surpassing the Q3 expansion launch quarter and all non-launch quarters in the last four years. King’s time spent per daily active user is now 34 minutes a day, up quarter-over-quarter and year-over-year.

In 2016, Activision Blizzard’s esports network, Major League Gaming, extended its viewer reach on social platforms like Facebook and Instagram by 50% year-over-year. 3

In 2016, Activision hosted a successful Call of Duty World League season, which had a $3.5 million prize pool across 16 hosted events. The 2016 season had 120 million video views and more than twice the time spent viewing compared to last year’s season.

season, which had a $3.5 million prize pool across 16 hosted events. The 2016 season had 120 million video views and more than twice the time spent viewing compared to last year’s season. In November, Blizzard held its 10th BlizzCon® with over 25 thousand attendees, over 10 million people around the world tuning in to the event and a record number of pay-per-view tickets sold through DirecTV. Blizzard also announced the formation of the Overwatch League™ at BlizzCon.

Player Investment

Activision Blizzard revenues from in-game content reached a record $3.6 billion in 2016, more than double the $1.6 billion in 2015. Excluding King, revenues from in-game content grew 30% year-over-year.

Blizzard had record levels of quarterly and full-year in-game revenues, driven by World of Warcraft in-game content and continued strength of Overwatch customization items.

in-game content and continued strength of customization items. Activision had record levels of Q4 and full-year in-game revenues. Call of Duty: Black Ops III add-on revenues outperformed Season Pass and à la carte map packs combined, even with record Season Pass participation.

add-on revenues outperformed Season Pass and à la carte map packs combined, even with record Season Pass participation. King’s fourth-quarter gross bookingsB per paying user increased quarter-over-quarter and year-over-year to record levels. The Candy Crush™ franchise continued its momentum, with increased mobile gross bookings for the quarter and the year compared with 2015.

Company Outlook:

Non-GAAP GAAP Outlook Impact of GAAP (in millions, except EPS) Outlook (redefined) deferralsC CY 2017 Net Revenues $ 6,000 6,000 300 EPS $ 0.72 1.70 0.15 Fully Diluted Shares* 765 765 Q1 2017 Net Revenues $ 1,550 1,550 (500) EPS $ 0.25 0.51 (0.33) Fully Diluted Shares* 760 760 * 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, in order to do year-over-year comparisons, you would add the impact of GAAP deferrals to the Non-GAAP (redefined) metrics.

Currency Assumptions for 2017 Outlook:

$1.08 USD/Euro for current outlook (vs. average of $1.11 for 2016 and $1.11 for 2015)

$1.25 USD/British Pound Sterling for current outlook (vs. average of $1.36 for 2016 and $1.53 for 2015)

Capital Allocation:

The company also announced that its Board of Directors authorized a new 2-year stock repurchase program under which the company is authorized to repurchase up to $1 billion of its outstanding common stock during the period from February 13, 2017 through February 12, 2019.

The Board of Directors also approved a repayment of up to $500 million of the company’s outstanding debt during 2017, of which $139 million has already been repaid during the first quarter.

The Board of Directors also declared a cash dividend of $0.30 per common share, payable on May 10, 2017 to shareholders of record at the close of business on March 30, 2017, which represents a 15% increase from 2016.

Conference Call:

Today at 4:30 p.m. EST, Activision Blizzard’s management will host a conference call and Webcast to discuss the company’s results for the quarter ended December 31, 2016 and management’s outlook for 2017. 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 888-395-3237 in the U.S. with passcode 9509569.

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 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 Based on data from the NPD Group and GfK Chart-Track

2 U.S. ranking for Apple App Store and Google Play Store combined, per App Annie Intelligence for fourth quarter 2016

3 Per internal tracking

A Monthly Active User (“MAU”) Definition: We monitor MAUs as a key measure of the overall size of our user base and their regular engagement with our portfolio of games. 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 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.

C 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 in this press release 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; (4) statements relating to the acquisition of King and expected impact of that transaction, including without limitation, the expected impact on Activision Blizzard, Inc.'s future financial results; and (5) 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: uncertainties as to whether and when Activision Blizzard will be able to realize the anticipated financial benefits from the acquisition of King; 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 hardware platforms; the amount of our debt and the limitations imposed by the covenants in the agreements governing our debt; 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; 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, 2015.

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 December 31, Year Ended December 31, 2016 2015 2016 2015 Net revenues Product sales $ 696 $ 711 $ 2,196 $ 2,447 Subscription, licensing and other revenues1 1,318 642 4,412 2,217 Total net revenues 2,014 1,353 6,608 4,664 Costs and expenses Cost of revenues—product sales: Product costs 313 343 741 872 Software royalties, amortization, and intellectual property licenses 80 98 331 370 Cost of revenues—subscription, licensing, and other: Game operations and distribution costs 230 82 851 274 Software royalties, amortization, and intellectual property licenses 153 15 471 69 Product development 285 193 958 646 Sales and marketing 380 289 1,210 734 General and administrative 148 83 634 380 Total costs and expenses 1,589 1,103 5,196 3,345 Operating income 425 250 1,412 1,319 Interest and other expense (income), net 43 49 214 198 Loss on extinguishment of debt 82 — 92 — Income before income tax expense 300 201 1,106 1,121 Income tax expense 46 42 140 229 Net income $ 254 $ 159 $ 966 $ 892 Basic earnings per common share 2 $ 0.34 $ 0.22 $ 1.30 $ 1.21 Weighted average common shares outstanding 744 733 740 728 Diluted earnings per common share 2 $ 0.33 $ 0.21 $ 1.28 $ 1.19 Weighted average common shares outstanding assuming dilution 757 744 754 739

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 approximately 1 million and 3 million for the three months and year ended December 31, 2016 respectively, and 6 million and 8 million for the three months and year ended December 31, 2015 respectively. For the three months and year ended December 31, 2016, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate earnings per common share, assuming dilution, was $253 million and $962 million, respectively, as compared to total net income of $254 million and $966 million, respectively, for the same period. For the three months and year ended December 31, 2015, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate earnings per common share, assuming dilution, was $158 million and $881 million, respectively, as compared to total net income of $159 million and $892 million, respectively, for the same period.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in millions) December 31,

2016 December 31,

2015 Assets Current assets Cash and cash equivalents $ 3,245 $ 1,823 Accounts receivable, net 732 679 Inventories, net 49 128 Software development 412 336 Other current assets 392 421 Total current assets 4,830 3,387 Cash in escrow — 3,561 Software development 54 80 Property and equipment, net 258 189 Deferred income taxes, net 283 275 Other assets 401 177 Intangible assets, net 1,858 482 Goodwill 9,768 7,095 Total assets $ 17,452 $ 15,246 Liabilities and Shareholders' Equity Current liabilities Accounts payable $ 222 $ 284 Deferred revenues 1,628 1,702 Accrued expenses and other liabilities 806 625 Total current liabilities 2,656 2,611 Long-term debt, net 4,887 4,074 Deferred income taxes, net 44 10 Other liabilities 746 483 Total liabilities 8,333 7,178 Shareholders' equity Common stock — — Additional paid-in capital 10,442 10,242 Treasury stock (5,563 ) (5,637 ) Retained earnings 4,869 4,096 Accumulated other comprehensive loss (629 ) (633 ) Total shareholders’ equity 9,119 8,068 Total liabilities and shareholders’ equity $ 17,452 $ 15,246

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in millions) Year Ended December 31, 2016 2015 Cash flows from operating activities: Net income $ 966 $ 892 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes (9 ) (27 ) Provision for inventories 42 43 Depreciation and amortization 829 95 Amortization of capitalized software development costs and intellectual property licenses1 321 399 Premium payment for early redemption of note 63 — Amortization of debt discount, financing costs, and non-cash write-off due to extinguishment of debt 50 7 Stock-based compensation expense2 147 92 Other 4 — Changes in operating assets and liabilities, net of effect from business acquisitions: Accounts receivable, net 84 (40 ) Inventories 32 (54 ) Software development and intellectual property licenses (362 ) (350 ) Other assets (10 ) 21 Deferred revenues (35 ) (27 ) Accounts payable (50 ) (25 ) Accrued expenses and other liabilities 83 233 Net cash provided by operating activities 2,155 1,259 Cash flows from investing activities: Proceeds from maturities of available-for-sale investments — 145 Purchases of available-for-sale investments — (145 ) Acquisition of business, net of cash acquired (4,588 ) (46 ) Release (deposit) of cash in escrow 3,561 (3,561 ) Capital expenditures (136 ) (111 ) Other investing activities (14 ) 2 Net cash used in investing activities (1,177 ) (3,716 ) Cash flows from financing activities: Proceeds from issuance of common stock to employees 106 106 Tax payment related to net share settlements on restricted stock rights (115 ) (83 ) Dividends paid (195 ) (170 ) Proceeds from debt financing 6,925 — Repayment of long-term debt (6,104 ) (250 ) Payment of debt discount and financing costs (54 ) (7 ) Premium payment for early redemption of note (63 ) — Proceeds received from shareholder settlement — 202 Net cash provided by (used in) financing activities 500 (202 ) Effect of foreign exchange rate changes on cash and cash equivalents (56 ) (366 ) Net increase (decrease) in cash and cash equivalents 1,422 (3,025 ) Cash and cash equivalents at beginning of period 1,823 4,848 Cash and cash equivalents at end of period $ 3,245 $ 1,823 1 Excludes deferral and amortization of stock-based compensation expense. 2 Includes the net effects of capitalization, deferral, and amortization of stock-based compensation expense.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL INFORMATION (Amounts in millions) Three Months Ended Year over Year Three Months Ended Year over Year December 31, March 31, June 30, September 30, December 31, % Increase March 31, June 30, September 30, December 31, % Increase 2014 2015 2015 2015 2015 (Decrease) 2016 2016 2016 2016 (Decrease) Cash Flow Data Operating Cash Flow $ 1,205 $ 223 $ 144 $ (171 ) $ 1,063 (12 )% $ 337 $ 503 $ 456 $ 859 (19 )% Capital Expenditures 17 21 28 46 16 (6 ) 27 44 28 37 131 Non-GAAP Free Cash Flow1 1,188 202 116 (217 ) 1,047 (12 ) 310 459 428 822 (21 ) Operating Cash Flow - TTM2 1,331 1,401 1,433 1,401 1,259 (5 ) 1,373 1,732 2,359 2,155 71 Capital Expenditures - TTM2 107 91 94 112 111 4 117 133 115 136 23 Non-GAAP Free Cash Flow - TTM2 $ 1,224 $ 1,310 $ 1,339 $ 1,289 $ 1,148 (6 )% $ 1,256 $ 1,599 $ 2,244 $ 2,019 76 %

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 March 31, 2014, three months ended June 30, 2014, and three months ended September 30, 2014 was $153 million, $112 million, and $(139) million, respectively. Capital Expenditures for the three months ended March 31, 2014, three months ended June 30, 2014, and three months ended September 30, 2014, was $37 million, $25 million, and $28 million, respectively.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES (Amounts in millions, except per share data) Three Months Ended December 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 $ 2,014 $ 313 $ 80 $ 230 $ 153 $ 285 $ 380 $ 148 $ 1,589 Stock-based compensation1 — — (4 ) — (2 ) (13 ) (3 ) (18 ) (40 ) Amortization of intangible assets2 — — (5 ) — (127 ) — (78 ) (2 ) (212 ) Fees and other expenses related to acquisitions3 — — — — — — — (4 ) (4 ) Non-GAAP (redefined) Measurement $ 2,014 $ 313 $ 71 $ 230 $ 24 $ 272 $ 299 $ 124 $ 1,333 Net effect of deferred revenues and related cost of revenues4 $ 438 $ 102 $ 99 $ 5 $ (6 ) $ — $ — $ — $ 200 Operating

Income Net Income Basic Earnings

per Share Diluted Earnings

per Share GAAP Measurement $ 425 $ 254 $ 0.34 $ 0.33 Stock-based compensation1 40 40 0.05 0.05 Amortization of intangible assets2 212 212 0.28 0.28 Fees and other expenses related to acquisitions3 4 6 0.01 0.01 Loss on extinguishment of debt5 — 82 0.11 0.11 Income tax impacts from items above6 — (98 ) (0.13 ) (0.13 ) Non-GAAP (redefined) Measurement $ 681 $ 496 $ 0.66 $ 0.65 Net effect of deferred revenues and related cost of revenues4 $ 238 $ 200 $ 0.27 $ 0.27

1 Includes expenses related to stock-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 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 loss on extinguishment of debt. 6 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 December 31, 2016, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate non-GAAP (redefined) earnings per common share, assuming dilution, was $495 million, as compared to total net income of $496 million, for the same period.

For purposes of calculating earnings per share, we had, on a weighted-average basis, common shares outstanding of 744 million, participating securities of approximately 1 million, and dilutive shares of 13 million during the three months ended December 31, 2016.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES (Amounts in millions, except per share data) Year Ended December 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 $ 6,608 $ 741 $ 331 $ 851 $ 471 $ 958 $ 1,210 $ 634 $ 5,196 Stock-based compensation1 — — (20 ) (2 ) (2 ) (47 ) (15 ) (73 ) (159 ) Amortization of intangible assets2 — — (8 ) — (424 ) — (266 ) (8 ) (706 ) Fees and other expenses related to acquisitions3 — — — — — — — (47 ) (47 ) Non-GAAP (redefined) Measurement $ 6,608 $ 741 $ 303 $ 849 $ 45 $ 911 $ 929 $ 506 $ 4,284 Net effect of deferred revenues and related cost of revenues4 $ (9 ) $ (39 ) $ 3 $ 12 $ 5 $ — $ — $ — $ (19 ) Operating

Income Net Income Basic Earnings

per Share Diluted Earnings

per Share GAAP Measurement $ 1,412 $ 966 $ 1.30 $ 1.28 Stock-based compensation1 159 159 0.21 0.21 Amortization of intangible assets2 706 706 0.95 0.93 Fees and other expenses related to acquisitions3 47 54 0.07 0.07 Loss on extinguishment of debt5 — 92 0.12 0.12 Income tax impacts from items above6 — (327 ) (0.44 ) (0.43 ) Non-GAAP (redefined) Measurement $ 2,324 $ 1,650 $ 2.22 $ 2.18 Net effect of deferred revenues and related cost of revenues4 $ 10 $ 20 $ 0.03 $ 0.02

1 Includes expenses related to stock-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 loss on extinguishment of debt. 6 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 year ended December 31, 2016, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate non-GAAP (redefined) earnings per common share, assuming dilution, was $1,643 million, as compared to total net income of $1,650 million, for the same period.

For purposes of calculating earnings per share, we had, on a weighted-average basis, common shares outstanding of 740 million, participating securities of approximately 3 million, and dilutive shares of 14 million during the year ended December 31, 2016.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES

(Amounts in millions, except per share data) Three Months Ended December 31, 2015 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 $ 1,353 $ 343 $ 98 $ 82 $ 15 $ 193 $ 289 $ 83 $ 1,103 Stock-based compensation1 — — (5 ) — — (5 ) (2 ) (10 ) (22 ) Amortization of intangible assets2 — — (7 ) — — — — — (7 ) Fees and other expenses related to acquisitions3 — — — — — — — (5 ) (5 ) Non-GAAP (redefined) Measurement $ 1,353 $ 343 $ 86 $ 82 $ 15 $ 188 $ 287 $ 68 $ 1,069 Net effect of deferred revenues and related cost of revenues4 $ 765 $ 131 $ 86 $ 1 $ (7 ) $ — $ — $ — $ 211 Operating

Income Net Income Basic Earnings

per Share Diluted Earnings

per Share GAAP Measurement $ 250 $ 159 $ 0.22 $ 0.21 Stock-based compensation1 22 22 0.03 0.03 Amortization of intangible assets2 7 7 0.01 0.01 Fees and other expenses related to acquisitions3 5 5 0.01 0.01 Income tax impacts from items above5 — (9 ) (0.02 ) (0.01 ) Non-GAAP (redefined) Measurement $ 284 $ 184 $ 0.25 $ 0.25 Net effect of deferred revenues and related cost of revenues4 $ 554 $ 438 $ 0.59 $ 0.58

1 Includes expenses related to stock-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 December 31, 2015, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate non-GAAP (redefined) earnings per common share, assuming dilution, was $183 million, as compared to total net income of $184 million, for the same period.

For purposes of calculating earnings per share, we had, on a weighted-average basis, common shares outstanding of 733 million, participating securities of approximately 6 million, and dilutive shares of 11 million during the three months ended December 31, 2015.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES

(Amounts in millions, except per share data) Year Ended December 31, 2015 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 $ 4,664 $ 872 $ 370 $ 274 $ 69 $ 646 $ 734 $ 380 $ 3,345 Stock-based compensation1 — — (12 ) — (3 ) (25 ) (9 ) (43 ) (92 ) Amortization of intangible assets2 — — (11 ) — — — — — (11 ) Fees and other expenses related to acquisitions3 — — — — — — — (5 ) (5 ) Non-GAAP (redefined) Measurement $ 4,664 $ 872 $ 347 $ 274 $ 66 $ 621 $ 725 $ 332 $ 3,237 Net effect of deferred revenues and related cost of revenues4 $ (43 ) $ (51 ) $ (50 ) $ 17 $ 2 $ — $ — $ — $ (82 ) Operating

Income Net Income Basic Earnings

per Share Diluted Earnings

per Share GAAP Measurement $ 1,319 $ 892 $ 1.21 $ 1.19 Stock-based compensation1 92 92 0.13 0.12 Amortization of intangible assets2 11 11 0.02 0.02 Fees and other expenses related to acquisitions3 5 5 0.01 0.01 Income tax impacts from items above5 — (30 ) (0.05 ) (0.04 ) Non-GAAP (redefined) Measurement $ 1,427 $ 970 $ 1.32 $ 1.30 Net effect of deferred revenues and related cost of revenues4 $ 39 $ 19 $ 0.02 $ 0.02

1 Includes expenses related to stock-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 year ended December 31, 2015, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate non-GAAP (redefined) earnings per common share, assuming dilution, was $958 million, as compared to total net income of $970 million, for the same period.

For purposes of calculating earnings per share, we had, on a weighted-average basis, common shares outstanding of 728 million, participating securities of approximately 8 million, and dilutive shares of 11 million during the year ended December 31, 2015.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION For the Three Months and Year Ended December 31, 2016 and 2015

(Amounts in millions) Three Months Ended December 31, 2016 December 31, 2015 $ Increase

(Decrease) % Increase

(Decrease) Amount % of Total1 Amount % of Total1 Net Revenues by Distribution Channel Digital online channels2 $ 1,454 72 % $ 724 54 % $ 730 101 % Retail channels 372 18 462 34 (90 ) (19 ) Other3 188 9 167 12 21 13 Total consolidated net revenues $ 2,014 100 % $ 1,353 100 % $ 661 49 Change in deferred revenues4 Digital online channels2 $ 61 $ 56 Retail channels 369 709 Other3 8 — Total changes in deferred revenues $ 438 $ 765 Year Ended December 31, 2016 December 31, 2015 $ Increase

(Decrease) % Increase

(Decrease) Amount % of Total1 Amount % of Total1 Net Revenues by Distribution Channel Digital online channels2 $ 4,865 74 % $ 2,502 54 % $ 2,363 94 % Retail channels 1,386 21 1,806 39 (420 ) (23 ) Other3 357 5 356 8 1 — Total consolidated net revenues $ 6,608 100 % $ 4,664 100 % $ 1,944 42 Change in deferred revenues4 Digital online channels2 $ 351 $ 126 Retail channels (368 ) (169 ) Other3 8 — Total changes in deferred revenues $ (9 ) $ (43 )

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 and Year Ended December 31, 2016 and 2015

(Amounts in millions) Three Months Ended December 31, 2016 December 31, 2015 $ Increase

(Decrease) % Increase

(Decrease) Amount % of Total1 Amount % of Total1 Net Revenues by Platform Console $ 586 29 % $ 655 48 % $ (69 ) (11 )% PC2 704 35 385 28 319 83 Mobile and ancillary3 536 27 146 11 390 NM Other4 188 9 167 12 21 13 Total consolidated net revenues $ 2,014 100 % $ 1,353 100 % $ 661 49 Change in deferred revenues5 Console $ 499 $ 705 PC2 (68 ) 57 Mobile and ancillary3 (1 ) 3 Other4 8 — Total changes in deferred revenues $ 438 $ 765 Year Ended December 31, 2016 December 31, 2015 $ Increase

(Decrease) % Increase

(Decrease) Amount % of Total1 Amount % of Total1 Net Revenues by Platform Console $ 2,453 37 % $ 2,391 51 % $ 62 3 % PC2 2,124 32 1,499 32 625 42 Mobile and ancillary3 1,674 25 418 9 1,256 NM Other4 357 5 356 8 1 — Total consolidated net revenues $ 6,608 100 % $ 4,664 100 % $ 1,944 42 Change in deferred revenues5 Console $ (184 ) $ (22 ) PC2 135 (56 ) Mobile and ancillary3 32 35 Other4 8 — Total changes in deferred revenues $ (9 ) $ (43 )

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 PC include revenues that were historically shown as Online. 3 Net revenues from mobile and ancillary include revenues from handheld, mobile and tablet 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. 4 Net revenues from Other include revenues from our Major League Gaming, studios, and distribution businesses. 5 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 and Year Ended December 31, 2016 and 2015

(Amounts in millions) Three Months Ended December 31, 2016 December 31, 2015 $ Increase

(Decrease) % Increase

(Decrease) Amount % of Total1 Amount % of Total1 Net Revenues by Geographic Region Americas $ 1,012 50 % $ 659 49 % $ 353 54 % EMEA2 693 34 522 39 171 33 Asia Pacific 309 15 172 13 137 80 Total consolidated GAAP net revenues $ 2,014 100 % $ 1,353 100 % $ 661 49 Change in deferred revenues3 Americas $ 275 $ 447 EMEA2 163 277 Asia Pacific — 41 Total changes in net revenues $ 438 $ 765 Year Ended December 31, 2016 December 31, 2015 $ Increase

(Decrease) % Increase

(Decrease) Amount % of Total1 Amount % of Total1 Net Revenues by Geographic Region Americas $ 3,423 52 % $ 2,409 52 % $ 1,014 42 % EMEA2 2,221 34 1,741 37 480 28 Asia Pacific 964 15 514 11 450 88 Total consolidated GAAP net revenues $ 6,608 100 % $ 4,664 100 % $ 1,944 42 Change in deferred revenues3 Americas $ (32 ) $ (55 ) EMEA2 (13 ) (20 ) Asia Pacific 36 32 Total changes in net revenues $ (9 ) $ (43 )

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 and Year Ended December 31, 2016 and 2015

(Amounts in millions) Three Months Ended December 31, 2016 December 31, 2015 $ Increase

(Decrease) % Increase

(Decrease) Amount % of Total1 Amount % of Total1 Segment net revenues: Activision2 $ 1,151 51 % $ 1,492 76 % $ (341 ) (23 )% Blizzard3 669 30 459 24 210 46 King4 436 19 — — 436 NM Reportable segments total 2,256 100 % 1,951 100 % 305 16 Reconciliation to consolidated net revenues: Other segments5 196 167 Net effect from deferral of net revenues6 (438 ) (765 ) Consolidated net revenues $ 2,014 $ 1,353 $ 661 49 % Segment income from operations: Activision2 $ 479 $ 626 $ (147 ) (23 )% Blizzard3 273 177 96 54 King4 156 — 156 NM Reportable segments total 908 803 105 13 Reconciliation to consolidated operating income and consolidated income before income tax expense Other segments5 11 35 Net effect from certain revenues deferrals accounting treatment6 (238 ) (554 ) Stock-based compensation expense (40 ) (22 ) Amortization of intangible assets (212 ) (7 ) Fees and other expenses related to acquisitions7 (4 ) (5 ) Consolidated operating income 425 250 175 70 Interest and other expense (income), net 43 49 Loss on extinguishment of debt 82 — Consolidated income before income tax expense $ 300 $ 201 $ 99 49 % Operating margin from total reportable segments 40.2 % 41.2 % Year Ended December 31, 2016 December 31, 2015 $ Increase

(Decrease) % Increase

(Decrease) Amount % of Total1 Amount % of Total1 Segment net revenues: Activision2 $ 2,220 36 % $ 2,700 63 % $ (480 ) (18 )% Blizzard3 2,428 39 1,565 37 863 55 King4 1,586 25 — — 1,586 NM Reportable segments total 6,234 100 % 4,265 100 % 1,969 46 Reconciliation to consolidated net revenues: Other segments5 365 356 Net effect from deferral of net revenues6 9 43 Consolidated net revenues $ 6,608 $ 4,664 $ 1,944 42 % Segment income from operations: Activision2 $ 788 $ 868 $ (80 ) (9 )% Blizzard3 1,013 561 452 81 King4 537 — 537 NM Reportable segments total 2,338 1,429 909 64 Reconciliation to consolidated operating income and consolidated income before income tax expense Other segments5 (4 ) 37 Net effect from certain revenues deferrals accounting treatment6 (10 ) (39 ) Stock-based compensation expense (159 ) (92 ) Amortization of intangible assets (706 ) (11 ) Fees and other expenses related to acquisitions7 (47 ) (5 ) Consolidated operating income 1,412 1,319 93 7 Interest and other expense (income), net 214 198 Loss on extinguishment of debt 92 — Consolidated income before income tax expense $ 1,106 $ 1,121 $ (15 ) (1 )% Operating margin from total reportable segments 37.5 % 33.5 %

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.

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; stock-based compensation expense; amortization of intangible assets as a result of purchase price accounting; and fees and other expenses (including legal fees, costs, expenses and accruals) related to acquisitions and financings.

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 December 31, 2016

(Amounts in millions) Trailing Twelve

Months Ended March 31,

2016 June 30,

2016 September 30,

2016 December 31,

2016 December 31,

2016 GAAP Net Income1 $ 363 $ 151 $ 199 $ 254 $ 966 Interest and other expense (income), net 52 66 53 43 214 Loss on extinguishment of debt — — 10 82 92 Provision for income taxes1 46 16 32 46 140 Depreciation and amortization 107 233 243 246 829 EBITDA 568 466 537 671 2,241 Stock-based compensation expense2 44 41 33 40 159 Fees and other expenses related to acquisitions3 34 4 4 4 47 Adjusted EBITDA (redefined) $ 646 $ 511 $ 574 $ 715 $ 2,447 Change in deferred net revenues and related cost of revenues4 $ (369 ) $ 108 $ 33 $ 238 $ 10

1 We recognized $27 million, $24 million, $12 million, and $18 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 March 31, June 30, September 30, and December 31, 2016, respectively. 2 Includes expenses related to stock-based compensation. 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.

Trailing twelve months are presented as calculated. Therefore the sum of the four quarters, as presented, may differ due to the impact of rounding.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES Outlook for the Three Months Ending March 31, 2017 and Year Ending December 31, 2017

GAAP to Non-GAAP (redefined) Reconciliation

(Amounts in millions, except per share data) Outlook for the

Three Months Ending

March 31, 2017 Outlook for the

Year Ending

December 31, 2017 Net Revenues1 $ 1,550 $ 6,000 Change in deferred revenues2 $ (500 ) $ 300 Earnings Per Diluted Share (GAAP) $ 0.25 $ 0.72 Excluding the impact of: Stock-based compensation3 0.06 0.25 Amortization of intangible assets4 0.24 0.99 Fees and other expenses related to acquisitions5 0.02 0.03 Restructuring costs6 0.02 0.05 Other non-cash charges7 0.02 0.02 Income tax impacts from items above8 (0.10 ) (0.35 ) Earnings Per Diluted Share (Non-GAAP redefined) $ 0.51 $ 1.70 Net effect of deferred net revenues and related cost of revenues on Earnings Per Diluted Share9 $ (0.33 ) $ 0.15

1 Net Revenues represent 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 stock-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, related to our continued transition to digital. 7 Reflects non-cash accounting charges of $14 million to reclassify certain amounts included in our cumulative translation adjustments into earnings as required by GAAP for the three months ending March 31, 2017 and for the year ending December 31, 2017. 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, with the exception of certain outstanding equity grants which are set to expire this year if not exercised. 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.