First Quarter Results

Net revenue for the first quarter was $413M, up 13 percent as compared with $365M for the prior year. Sales were driven primarily by 2006 FIFA World Cup, Battlefield 2: Modern Combat, Need for Speed Most Wanted, The Sims 2 and EA SPORTS Fight Night Round 3.

Gross profit for the quarter was $245 million up 14 percent year-over-year. This increase was more than offset by the expensing of stock-based compensation. The Company adopted Statement of Financial Accounting Standards (SFAS) No. 123R "Share-Based Payment" in the quarter.

Net loss for the quarter was $81 million as compared with $58 million for the prior year. Diluted loss per share was $0.26 as compared with $0.19.

Non-GAAP net loss was $38 million as compared with $55 million a year ago. Non-GAAP diluted loss per share was $0.12 as compared with $0.18. (Please see Non-GAAP Financial Measures and reconciliation information included in this release.)

Trailing twelve month operating cash flow was $589 million as compared with $669 million a year ago. The Company ended the quarter with cash, cash equivalents and marketable securities of $2.4 billion.

"We're pleased to be the leading publisher on the Xbox 360," said Larry Probst, Chairman and Chief Executive Officer. "We are on schedule with strong support for the launch of PlayStation 3 and we have increased our development efforts for the Nintendo DS and Wii."

"We look forward to our slate of fall launches and the excitement surrounding next-generation software," said Warren Jenson, Chief Financial and Administrative Officer. "While the risks of this technology transition remain very real -- our franchises are well-positioned for the opportunities ahead."

Highlights (comparisons are to the quarter ended June 30, 2005)

• Net revenue: North America -- up 14 percent to $209 million; Europe -- up 17 percent to $169 million; Asia -- down five percent to $35 million.
• Movements in foreign currency rates negatively impacted net revenue by $10 million, or three percent.
• Cellular handset net revenue was $33 million -- up $32 million.
• 2006 FIFA World Cup was the number one title in the UK and Germany across all platforms for the months of May and June.
• SPORE won three Game Critic Awards at E3 -- Best Original Game, Best PC Game and Best Simulation Game.
• Life-to-date, EA is the number one publisher on the Xbox 360 video game and entertainment system in both North America and Europe.
• EA extended its exclusive relationship with the PGA TOUR® and its non-exclusive licenses with the NHL® and NHL Players Association.
• EA completed its acquisition of Mythic Entertainment, the critically acclaimed developer of massively multiplayer online games, in July.

Business Outlook

The following forward-looking statements, as well as those made above, reflect expectations as of August 1, 2006. Results may be materially different and are affected by many factors, such as: the timely release of next-generation hardware and the ability of console manufacturers to produce an adequate supply of consoles to meet demand, development delays on EA's products, changes in foreign exchange rates, the overall global economy, the popular appeal of EA's products, competition in the industry, EA's effective tax rate and other factors detailed in this release and in EA's annual and quarterly SEC filings. For example, EA's expectations for the fiscal year ending March 31, 2007 are dependent on the successful launch of the PlayStation 3 and the Wii in the 2006 holiday season.

Fiscal Second Quarter Expectations -- Ending September 30, 2006

• Net revenue is expected to be between $635 and $685 million.
• GAAP diluted loss per share is expected to be between ($0.28) and ($0.22).
• Non-GAAP diluted loss per share is expected to be roughly breakeven. Expected non-GAAP diluted loss per share excludes the following items from expected GAAP diluted loss per share: approximately $0.10 of estimated stock-based compensation, approximately $0.04 of amortization of intangible assets, approximately $0.02 of estimated restructuring charges related to the reorganization and establishment of an International Publishing Headquarters in Geneva and approximately $0.09 related to our acquisitions of Mythic Entertainment and Digital Illusions.

Fiscal Year Expectations -- Ending March 31, 2007

• Net revenue is expected to be between $2.8 and $3.0 billion.
• GAAP diluted loss per share is expected to be between ($0.30) and breakeven.
• Non-GAAP diluted earnings per share are expected to be between $0.35 and $0.65. Expected non-GAAP diluted earnings per share excludes the following items from expected GAAP diluted loss per share: approximately $0.31 of estimated stock-based compensation, approximately $0.15 of amortization of intangible assets, approximately $0.05 of estimated restructuring charges related to the reorganization and establishment of an International Publishing Headquarters in Geneva and approximately $0.14 related to our acquisitions of Mythic Entertainment and Digital Illusions.