Buoyed by the launch of The Sims 3 and a surge in digital revenues, game giant Electronic Arts (NSDQ: ERTS) turned in performance for its fiscal Q1 that beat the Street’s expectations.

Sales increased by 34 percent year-over-year to reach $816 million; analysts were expecting just $728 million. And EA’s still in the red—with a net loss of $6 million, or 2 cents per share—but it’s almost breaking even. That’s a far cry from the $135 million loss last year, and even the $120 million loss for the previous quarter. The improved performance sent its shares up by over 4 percent in after-hours trading.

All about digital: EA is trying to lead the pack when it comes to cracking the monetization code for online gaming and digital distribution—and it’s overall digital revenue came in at $124 million, up 38 percent year-over-year.

Take The Sims 3. Fans gobbled up 3.7 million copies of the life-simulation game, but it launched with a strong strong online component as well: players got a free $10 credit for the virtual goods store by registering their game. (Traffic to the site topped the one million unique visitors mark in June, per Compete).

EA also said it would be launching an online-only version of its Tiger Woods PGA Tour franchise later this year—with subscription fees and virtual goods sales driving revenue, not actual disc sales.

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• Earnings: EA Posts Smaller Net Loss Than Analysts Anticipated