Concerns Over PlayStation Clouds Sony's Prospects Despite Record Sale In Q4

Sony Group Corp SONY reported fourth-quarter FY22 sales growth of 35% year-on-year to $23.16 billion, beating the consensus of $17.55 billion. Adjusted EPS of $0.97 beat the consensus of $0.45. 

Segments & Profits: Game & Network Services (G&NS) revenue increased 61.3% Y/Y to ¥1.07 trillion, and operating income declined by 55.4% Y/Y to ¥38.9 billion.

Music revenue rose 18.6% Y/Y to ¥349.5 billion, and operating income increased by 21% Y/Y to ¥60.4 billion. Pictures revenue increased by 15% Y/Y to ¥359 billion, and operating income improved by 40.9% Y/Y to ¥15.5 billion.

Entertainment, Technology & Services (ET&S) revenue was flattish Y/Y to ¥493.8 billion, and operating loss increased by 184.5% Y/Y to ¥(33) billion. Imaging & Sensing Solutions revenue (I&SS) increased by 36.6% Y/Y to ¥348.8 billion, and operating income rose by 196.3% Y/Y to ¥31.7 billion.

Financial Services revenue rose 76.4% Y/Y to ¥493.3 billion, and operating income decreased by 29.5% Y/Y to ¥33.7 billion. Consolidated operating income declined by 7.3% Y/Y to ¥128.5 billion. 

Sony sold 6.3 million PS5 units in the quarter versus 2.0 million a year ago. It held ¥1.48 trillion in cash and equivalents.

Outlook: Sony expects FY24 sales of $88.46 billion (down by 0.3% Y/Y, above the consensus of $73.01 billion for the fiscal year ended March 31, 204. The company expects EPS of $6.46, above the consensus of $4.94.

Sony aims to sell 25 million units of PS5 in the current year (up from 19.1 million in FY22), COO Hiroki Totoki said on a call Friday. But he cautioned that consumer electronics demand will likely remain weak amid the broader economic slowdown.

Sales of the hardware are increasing on par with Sony’s plan. Still, the momentum of software, the lucrative part of the game business, remains weak, implying PlayStation users are not buying new games, Bloomberg cites Hideki Yasuda, an analyst at Toyo Securities.

There were no major new releases from Sony’s in-house game studios in the quarter, which limited growth in the PlayStation division, despite the launch of the PlayStation VR2 headset.

Industry analyst Serkan Toto said, “Everybody is waiting for PlayStation mobile and live-service games: Where are they?” “I expect recovery of the smartphone market won’t come until next fiscal year,” Totoki said. 

Price Action: SONY shares closed higher by 1.39% at $95.12 on Thursday.

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