Activision Blizzard's third-quarter financial results contained slightly disappointing declines for the parent company of Activision, Blizzard Entertainment, and King. But strong sales numbers for Call of Duty: Modern Warfare II are giving the impression that a rebound for the first-person shooter series is imminent, and Activision Blizzard's financials will likely rocket upward in the months ahead.

In the three-month period ending September 30, 2022, Activision Blizzard pulled in $1.78 billion in net revenue, down 14 percent year-over-year from last year's $2.06 billion in net revenue in the same time period. Operating income declined 41 percent year-over-year from $824 million to $485 million. Monthly average users—a key metric Activision Blizzard loves to tout in these reports—dropped five percent year over year, with only 368 million logging into Activision Blizzard's games in this three-month period.

What's interesting about Activision Blizzard's report is that those declines—and its possible incoming boost in fortunes—all come back to Call of Duty. The company stated that the weaker financial performance reflects "reduced engagement" following the "weaker reception for last year's premium release in the cycle." 

Last year's premium Call of Duty release is of course, Call of Duty: Vanguard, which isn't explicitly named in the text. We know now that Sledgehammer Games' World War II-themed title failed to meet sales expectations (though we still don't entirely know why). However Call of Duty: Modern Warfare II is now the fastest Call of Duty game to cross $1 billion in sales, managing to hit that threshold in just 10 days.

There's other good metrics for Modern Warfare II as well. The game "set new franchise engagement records" for the series, and hours played in the first 10 days were "more than 40% above the prior franchise record." None of those metrics are part of the third-quarter results, but they speak strongly for how well the company will do in the fourth quarter (which overlaps with the holiday season, a good time to be selling Call of Duty).

If Activision Blizzard's narrative holds up, what we're looking at is a decline in overall company performance due to one poorly-received Call of Duty title, followed by a rebound that shows interest in the series is still going strong. That interest will likely manifest again when the company releases Call of Duty: Warzone 2.0 next week, and Call of Duty: Warzone Mobile in 2023.

Other Activision Blizzard metrics of note

While Call of Duty's best days may lie ahead, developers at Blizzard Entertainment and King deserve credit for growing year-over-year in the third quarter. Blizzard's net revenue rose 11 percent to $543 billion, and King's revenue rose 6 percent to $692 million.

Blizzard's numbers were driven by Diablo Immortal and the release of World of Warcraft: Dragonflight, while King raked in cash through new player-versus-player features in Candy Crush. The latter franchise has now climbed to over 200 million monthly active users after a decade of operation.

In-game net bookings (revenue earned through sales of in-game goods) rose 13 percent year-over-year to $1.36 billion, though overall net bookings were down 2 percent at $1.83 billion.

Activision Blizzard's stock has ticked upward since the release of these results yesterday, and is currently trading at $71.83 per share. Elsewhere, the company's acquisition by Microsoft is being scrutinized by European Union regulators, and the company is still navigating legal action brought by the State of California, former employees, and the US Department of Justice.

The first two groups are suing over accusations of sexual misconduct and harassment allegedly allowed to spread at the company, while the Department of Justice is running an antitrust probe looking at the company's esports leagues.