Sony’s annual second-quarter performance exceeded expectations, and the profit of the game business “halved”

Image credit: Unsplash

Reporter | Peng Xin

Affected by the depreciation of the yen and the growth of the audio-visual business, Sony, a major Japanese consumer electronics manufacturer, was better than expected in the second quarter of the fiscal year (as of the end of September). On the afternoon of November 1, Sony announced its second-quarter financial results, showing that sales were 2.75 trillion yen, up 16% year-on-year; operating profit was 344 billion yen, up 8% year-on-year, better than analysts’ consensus estimate of 2,807. The net profit attributable to shareholders of the company was 264 billion yen, a year-on-year increase of 24%; the diluted earnings per share was 212.29 yen, compared with 170.26 yen in the same period last year.

In terms of business segments, the game and network service business (G&NS), which is responsible for the sales of PlayStation series game consoles and software, is Sony’s largest business, with revenue of 720.7 billion yen in the quarter, compared with 645.4 billion yen in the same period last year, accounting for the total. 27.24% of revenue; Entertainment, Technology and Services (ET&S), which includes consumer electronics such as TVs, digital cameras and smartphones, was the second largest business with sales of JPY 677 billion, compared with JPY 581.9 billion in the same period last year Yen; Imaging and Sensing Solutions (I&SS) sales were 398.4 billion yen, compared to 278.3 billion yen in the same period last year, which mainly supplies semiconductor components such as image sensors for smartphones such as the iPhone; sales in the music division 359.3 billion yen, compared with 271.6 billion yen in the same period last year; sales of film and television divisions were 337.5 billion yen, compared with 260.7 billion yen in the same period last year; financial services sales were 304.5 billion yen, compared with 368.4 billion in the same period last year JPY.

It is worth noting that since a considerable part of Sony’s revenue from games, consumer electronics, film and television music, etc. comes from outside the Japanese market, the weak yen this year has had a greater impact on Sony Group’s revenue. Sony mentioned in the financial report that businesses including games, music, film and television, and image sensors benefited from exchange rate changes, and sales achieved varying degrees of growth.

Second-quarter profit at Sony’s games business “halved” to 42.1 billion yen due to higher game development costs and the acquisition of external studios. As of September 30, PS5 global shipments have reached 25 million units, and PS5 shipments totaled 3.3 million units in the second quarter, the same as last year. With the strengthening of the dollar, Sony has also raised the price of PS5 game consoles in markets such as China, Europe and Japan, and supply chain problems such as chip shortages have eased, reducing losses on PS5 hardware. Sony CFO Hiroki Toshio said that Sony plans to sell more than 18 million PS5 game consoles in the current fiscal year (as of March 2023) and achieve a sales target of 23 million PS5 units in the next fiscal year. During the traditional Christmas shopping season, Sony will launch new games such as God of War: Ragnarok.

The gaming business has been a growth engine for Sony over the past few years, but this segment of revenue growth is slowing. As the risk of economic recession increases, consumers are at risk of declining game spending. From the perspective of the second quarter, Sony’s game sales and member subscriptions both declined. The total sales of PS4 and PS5 games in the second quarter were 62.5 million copies. Version sales accounted for 63% of the total sales, a year-on-year decrease of 13.9 million copies, of which 6.7 million were Sony first-party games, a year-on-year decrease of 900,000 copies. The number of PS+ members was 45.4 million, a decrease of 1.8 million compared to the same period last year. Monthly active users were 102 million, down slightly from 104 million a year ago.

A weaker yen boosted sales of Sony’s image sensors for iPhones and other smartphones, with reports of better-than-expected sales of two high-end models, the iPhone 14 Pro and iPhone 14 Pro Max, including smartphone parts suppliers such as Murata It also said that demand for high-end mobile phones is still strong. High-end models need to use more cameras and image sensors, thus boosting sales of Sony-related products.

The global mobile phone market is in a stage of declining demand. According to data released by market research firm Counterpoint Research, the global smartphone shipments from July to September were 301 million units, down 12% from the same period last year. Shipments have declined for five consecutive quarters, and consumer sentiment has cooled due to inflation and recession fears. Among the top 5 manufacturers, OPPO and vivo shipments decreased by more than 20%, and only Apple increased by 2%, maintaining positive growth.

A weaker yen and a stronger dollar boosted Sony’s film and television business, which posted an operating profit of $202 million in the second quarter, down 30 percent from a year earlier. Sony said second-quarter profit was hurt by a drop in the number of movies licensed for the streaming service and higher marketing costs.

Looking ahead to the full year, Sony raised its full-year operating profit forecast from 1.11 trillion yen to 1.16 trillion yen, in line with market expectations. At the same time, Sony also raised the estimated value of net profit for the year from 800 billion yen to 840 billion yen, and the estimated value of market analysts was 838.87 billion yen; the estimated value of net sales for the year was increased from 115,000. 100 million yen, raised to 11.60 trillion yen, higher than the median forecast of 11.2 trillion yen by market analysts.

Sony shares rose 0.62 percent to 10,050 yen on Tuesday.