Sony Group raised its annual forecasts after first-quarter net profit climbed faster than expected, driven by growth in earnings from its music and image-sensor businesses, even as its game division remained lackluster.
The strong results come as the Japanese electronics and entertainment company has been boosting its entertainment content and laying the groundwork to capitalize on its expertise in image-sensing technology in the era of artificial intelligence.
Operating profit for the music business increased 14% thanks to higher revenues from streaming services and live events. The image-sensor business more than doubled its operating profit owing to increased sales for mobile products.
Revenue for its game business was largely flat, though U.S. tariff refunds and a positive impact from foreign-exchange rates helped segment earnings. A weaker yen boosts the value of profits earned overseas in yen terms.
Total game playtime fell 4% during the quarter. Sony said user engagement remained solid, noting that the year-earlier period benefited from season updates to major titles and new hits.
Chief Financial Officer Lin Tao said she is hopeful that game user engagement will improve, with big titles slated for release toward the latter half of the fiscal year. "I'm not worried," Tao said. Action-adventure games "Marvel's Wolverine" and "God of War Laufey" are lined up in coming months.
The company has spent billions of dollars on acquisitions in recent years to beef up its entertainment content--while relinquishing control of businesses in other areas.
In May, Sony agreed to acquire Recognition Music Group's full catalog, a collection of more than 45,000 pop songs from artists ranging from Rihanna to Fleetwood Mac. The deal was made through Sony's venture with Singapore's sovereign-wealth fund GIC. It spun off its financial business in October.
Sony has also sought to strengthen other areas, including its camera business. On Thursday, it said it offered to acquire Japanese camera-lens maker Tamron, a deal Sony said would create growth opportunities.
The Japanese company in May said it planned to form a joint venture with Taiwan Semiconductor Manufacturing Co. to develop and produce next-generation image sensors. The move is aimed at limiting Sony's capital expenditure as it prepares for greater demand for "eyes" for machines in the age of AI.
Despite solid earnings, Sony's shares have been weighed by worries that consumers will spend more time with AI tools than with videogames, movies or other forms of entertainment that have traditionally generated significant profit for Sony.
Concerns about higher costs of memory chips used in game consoles have also dragged the stock down. Its shares closed 0.6% lower after the results, bringing year-to-date losses to 5.9%.
Sony Group said Friday that net profit climbed 32% from a year earlier to 342.16 billion yen, equivalent to $2.15 billion, for the three months ended June. That beat the estimate of Y262.6 billion in a poll of analysts by data provider Visible Alpha. Revenue rose 8.2% to Y2.838 trillion.
For the fiscal year ending March 2027, it now expects revenue to increase 0.2% to Y12.500 trillion and net profit to climb 17% to Y1.210 trillion, driven partly by the strength of its entertainment and image-sensor businesses. The company previously projected revenue of Y12.300 trillion and net profit of Y1.160 trillion.
Comments