Sony raises outlook after music, software help beat earnings

(Bloomberg) — Sony Group Corp. raised its revenue and profit forecast for the fiscal year through March after a successful quarter for its music and gaming software divisions.

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The Japanese entertainment giant said its operating profit for the three months ending in June was 279.1 billion yen ($1.9 billion), beating the consensus estimate of 273.9 billion yen and the company’s profit. previous year of 253 billion yen. Sales for the fiscal year are now expected to reach 12.6 trillion yen, with 1.3 trillion yen in operating profit, both slightly increased.

The main PlayStation division has seen a rise in the popularity of online multiplayer and original games such as Helldivers 2, although its biggest boost has come from favorable exchange rates, Sony said in its report on Wednesday. The company sold 2.4 million units of the old PlayStation 5 console, significantly below the 3 million expected by analysts.

“PlayStation’s business is not as good as the numbers suggest because its profits and revenues have been inflated by the weak yen,” said Morningstar Investment director Kazunori Ito. “Sony said hardware sales would slow starting this fiscal year, but it appears the pace is much faster than we had anticipated.”

Its music business segment contributed the largest share of profit in the quarter, thanks to its catalog of best-selling artists and the growing overseas popularity of Japanese-made anime, which also falls under the music group. The company saw higher revenues from merchandising and live events, as well as higher revenues from streaming services like Spotify. It revised its sales forecast for games and music by 3%.

“The music segment has become an ideal income-generating unit that would make other companies jealous,” said Hideki Yasuda, an analyst at Toyo Securities. “The segment is expected to continue to expand in the near future.”

Sony’s image sensor production yield improved and the company said it saw an increase in unit sales during the period. The global smartphone market accelerated its return to growth in the June quarter, with shipments increasing 6%, market observer IDC reported in July. Customers of Sony, Xiaomi Corp. and Vivo, were the leaders in the expansion of their units sold.

But analysts warn that the Tokyo-based company could face a new set of challenges if the yen resumes its advance. The company earns much of its revenue overseas, including sales of consoles and image sensors, as well as entertainment licensing, and the yen’s prolonged weakness in recent years has helped bolster its results.

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(Updates with analyst comment in fourth paragraph)

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