Wall Street financial giant Morgan Stanley has recently published a research report suggesting a significantly increased probability that the next-generation console platform from Japanese tech leader Sony (SONY.US), the anticipated PS6 expected in 2028 or later, will adopt a disc-free design.
The Morgan Stanley analyst team maintains an "Overweight" rating on Sony stock, with a target price set at 4,700 yen, implying an approximate 41% upside from Sony's closing price of 3,330 yen on the Japanese market on July 2nd.
The core bullish thesis is not short-term hardware sales but rather the PlayStation ecosystem's evolution from being "console-sales-driven" to being propelled by "digital content, network services, subscriptions, and high lifetime user value."
Morgan Stanley's valuation uses a sum-of-the-parts method, assigning an overall fair EV/EBITDA multiple of about 10.0x based on FY3/28 (the fiscal year ending March 2028) profit forecasts, corresponding to a P/E ratio of approximately 19x on FY3/28 EPS.
The firm forecasts Sony's operating profits for FY3/27e to FY3/29e at 1.70 trillion, 1.839 trillion, and 1.868 trillion yen, respectively, with EPS of 220.9, 241.7, and 245.6 yen.
Its Game & Network Services segment is assigned a 13.0x EV/EBITDA multiple, the highest among its core businesses, reflecting the importance placed on the profitability quality of the PlayStation platform.
PS6 May Phase Out Disc Drives
The key incremental insight in this report stems from Sony Interactive Entertainment's announcement that it will cease production of new PlayStation game discs starting January 2028.
This leads Morgan Stanley to believe the likelihood of the next-gen PS6 launching without a disc drive has risen notably.
The analysts view this not as a simple channel shift but as a structural signal for the next console's business model.
On one hand, Sony's new game lineup will be available exclusively via digital download through the PlayStation Store and retailers, with physical packaging potentially shifting more towards download codes.
On the other hand, removing the disc drive helps reduce the bill of materials cost, providing a buffer for console gross margins, especially amid rising costs for memory and advanced graphics processors.
Reports citing informed sources state that Sony plans to halt production of new PlayStation game discs from January 2028, with around 80% of PlayStation game sales already being digital, corroborating Morgan Stanley's view that the "digital migration ecosystem platform is sufficiently mature."
From a fundamental growth perspective, Sony's strength lies in PlayStation no longer being a simple hardware business but a composite platform with a massive base of active accounts, content consumption, subscription services, and digital store commissions.
Official data shows that as of March 31, 2026, cumulative global shipments of PS5 exceeded 93 million units, with cumulative software sales for PS4 and PS5 surpassing 1.64 billion units.
FY2025 software sales were 317.9 million units, and PlayStation monthly active users reached 125 million.
Further data for Q3 FY2025 indicates PlayStation monthly active users hit a record 132 million in December 2025, with quarterly total gameplay hours increasing year-over-year, PlayStation Store software revenue reaching a quarterly high, and PlayStation Plus contributing significantly to profits due to a higher mix of premium subscriptions.
This forms the core of Morgan Stanley's bullish stance: a hardware sales cycle entering its later stages is not concerning, provided the user base, store revenue, subscription services, and third-party content distribution continue to expand, shifting the profit pool from low-margin hardware to higher-margin, more predictable digital recurring revenue.
The strategic significance of the next-gen platform also lies in Sony potentially using a smaller form factor, reduced hardware complexity, and stronger digital account binding to push PlayStation usage "beyond the living room."
The report notes that removing the disc drive enables a smaller form factor, supporting CEO Hiroki Totoki's goal of expanding PlayStation usage scenarios beyond traditional living room boundaries.
This aligns with Sony's official stance that the PlayStation console is "a gateway to long-term player engagement and lifetime value."
Business materials show that as of March 31, 2025, PlayStation had 124 million MAUs, over 4,000 creators, and over 12,000 games, while the proportion of content and service revenue continued to increase from FY22 to FY24, with services, content, and peripherals forming a more durable and predictable revenue base.
The analysts state that this means if the PS6 moves towards a disc-free, more digital form, Sony's true pursuit is not selling fewer disc drives but strengthening the account system, store traffic, subscription conversion, content distribution, and cross-device usage scenarios, thereby increasing lifetime revenue per active user.
AI Wave May Reshape Valuation Ceiling
In the view of Morgan Stanley and other Wall Street giants, the global AI investment wave actually reinforces the dual aspects of Sony's long-term growth.
In the short term, competition for memory/storage components, GPUs, and advanced chips from AI data centers is driving up game console hardware costs, and Morgan Stanley acknowledges that rising memory prices could pressure game hardware profitability.
However, in the long term, cutting-edge AI technologies, potentially led by AI agents, will enhance Sony's efficiency and monetization capabilities in game development, content production, recommendation distribution, image sensors, and creator toolchains.
Sony's 2026 corporate strategy explicitly aims to make entertainment its core growth driver and expand creativity through AI agents/AI application platforms.
The company stated it will combine its own technology with generative AI to build a creator-centric production environment, validating improvements in video production speed and per-capita productivity in a pilot collaboration with Bandai Namco.
Recent strategic materials emphasize that PlayStation views cutting-edge AI as a crucial tool for enhancing gaming experiences, with Sony AI also advancing game AI research using deep reinforcement learning.
Morgan Stanley emphasizes that Sony's investment narrative is continuously expanding, currently summarizable as: a disc-free PS6 reducing hardware complexity, digital stores and subscriptions improving profit quality, AI tools enhancing content production efficiency, and the vast PlayStation user network giving Sony a dual valuation attribute among Japanese tech stocks—both a "consumer electronics hardware upgrade" story and a "digital entertainment platform compounding" story.
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