Gaming stocks got killed after earnings

Key Points
  • EA cited "intense competition" in the space as contributing to a revenue miss.
  • Take-Two Interactive reported quarterly earnings Wednesday morning. 
  • Both companies are keeping an eye on threats from free-to-play games like "Fortnite."
Gamers play the video game 'Star Wars Battlefront II' developed by DICE, Criterion Games and Motive Studios and published by Electronics Arts on Sony PlayStation game consoles PS4 Pro during the 'Paris Games Week' on October 31, 2017 in Paris, France.
Chesnot | Getty Images

Video game stocks got killed Wednesday after two of the top companies in the space reported quarterly earnings.

Shares of EA tanked 13 percent Wednesday, a day after the company cited "intense competition" in the space as contributing to a revenue miss for its fiscal third quarter of 2019.

Take-Two Interactive, which reported quarterly earnings Wednesday morning, fell nearly 14 percent in early trading.

The company reported GAAP net revenue of $1.249 billion and GAAP net income per diluted share of $1.57.

The reports appeared to drag Activision Blizzard lower as well. The company doesn't report its quarterly earnings until next week, but the stock fell 10 percent Wednesday.

EA's Chief Executive Andrew Wilson said heightened competition in the gaming space dented the company's sales during the quarter. Gaming companies are seeing a particular threat from free-to-play games like the wildly popular "Fortnite."

"Our [Battlefield V] launch didn't resonate as strongly as we would have liked it to with players, and we were never truly able to catch up," Wilson said on the company's earnings call Tuesday. "And as our competitors continued to build momentum, whether that was 'Fortnite' or 'Red Dead Redemption 2' or 'Call of Duty,' we continued to stall from where we needed to be."

Take-Two, for its part, said its title launches outperformed expectations. In October, the company launched "Red Dead Redemption 2," which it says sold more units in the first eight days than the original title sold in its first eight years.

"We don't see [a competitive environment] at all," CEO Strauss Zelnick told CNBC's "Squawk on the Street" Wednesday. "We are not seeing any competitive headwinds at all as long as we deliver quality."

Zelnick said the company admires "big hits" out of other companies, like "Fortnite," but isn't concerned about new free-to-play threats.

"In terms of a console title being made available free-to-play. Remember that 'Fortnite' came about in a roundabout way," Zelnick said on the company's earnings call. "I think that's sort of a standalone experience. I think it's hard to replicate and it would probably be ill-advised to try to replicate it. ... I'm not worried at all about someone else establishing a free-to-play approach."

Clarification: This story has been updated to remove an incorrect metric around Take-Two Interactive's fiscal third quarter 2019 earnings report. Take-Two Interactive's earnings per share figure is not comparable to estimates.

WATCH: Electronic Arts missed earnings benchmark

Electronic Arts misses earnings benchmark
Electronic Arts misses earnings benchmark