Sony Disappointed With Its Latest Profit Slump But Provided An Optimistic Guidance

On Wednesday, Sony Group Corporation SONY reported its July-September quarter results that reflected the troubles the chip business has found itself in, and even Sony who supplies Apple AAPL with its semiconductors for its revived iPhone wasn’t an exception. On Tuesday, Nintendo Co Ltd NTDOY also reported its fiscal second quarter results, delivering better-than-expected top and bottom lines. Meanwhile, Microsoft Corporation MSFT continues to reorganize its Xbox teams following its $69 billion acquisition of Activision Blizzard, the gaming industry’s biggest deal to date, while also announcing the arrival of AI characters to its console.

Sony Disappointed With Its Fiscal Second Quarter Results

For the September quarter, Sony reported revenue grew 8% YoY to 2.8 trillion yen ($18.5 billion) while LSEG survey of analysts expected 2.87 trillion yen. But operating profit slumped 29% due to 263 billion Japanese yen or $1.74 billion, a far cry from LSEG’s estimate of 304.4 billion yen. The drop was attributed to the weakened imaging sensor business, as well as declines in profit generated by financial services and entertainment, technology, and services businesses. The profit in its chip division alone tanked 37% due to increased expenses and weaker sales of image sensors used to build smartphones. But during the quarter, Sony sold 4.9 million PlayStation 5 units, up from previous quarter’s 3.3 million units as console wars against Microsoft and Nintendo continue.

Yet, Sony Delivered A Positive Outlook

Despite disappointing results, Sony maintained its target and even lifted its sales outlook as it expects a boost at its video game, music and imaging and sensing solutions businesses. Sony maintained its PlayStation 5 target to ship 25 million units this year while raising its full year forecast as it now guided for total sales of 12.4 trillion yen, up from the previous target of 12.2 trillion yen due to benefiting from positive foreign exchange rates as the Japanese yen has significantly weakened versus the dollar and most of Sony’s income is outside the U.S. Sony also lifted its full-year forecast for the gaming segment by nearly 5% to 190 billio yen, while also maintaining its profit forecast. All in all, Sony guided for full-year operating profit at 1.17 trillion yen while raising its sales and net income forecasts by 2%.

Meanwhile, Nintendo Scored A Few Hits Over The Latest Months

Nintendo continues to attract gamers despite abstaining from the cutting-edge graphics Sony and Microsoft betted on. With its latest earnings report, Nintendo hiked its operating profit guidance for the financial year ending March by 11% to 500 billion yen which equates to about $3.32 billion. Through incremental hardware updates and software releases, Nintendo managed to extend the lifecycle of its hybrid home/portable device. For the full year, Nintendo maintained its reasonable forecast of 15 million consoles which would present a 16.5% YoY decline. However, Sony and Nintendo will be collaborating through a live-action adaption of Zelda. Through its movie division, Sony will be co-financing and distributing Nintendo’s iconic franchise which could open new collaboration opportunities. 

Sony’s Identity Continues To Evolve But So Does Its Competition

From being the Walkman creator, the Japanese tech conglomerate has expanded its identity to an entertainment giant with games, movies and music under its umbrella, along with being a leading maker of image sensors. But with Microsoft having become a gaming juggernaut since getting Activision Blizzard under its belt, Sony is in for a tough battle as it fights for its place in the future of gaming.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.