Sony Corp raised its outlook for the current fiscal year, thanks to robust sales of the PlayStation console and a stake in recently listed Spotify Technology SA. Net income will be 500 billion yen ($4.5 billion) on sales of 8.6 trillion yen through next March, the Tokyo-based company said. The prior forecast called for 480 billion yen and 8.3 trillion yen. Sony cited higher-than-anticipated game sales for the revenue revision, while the recent market debut of the music-streaming service added cash to the bottom line.
The company also reported a strong June quarter, with operating profit of 195 billion yen sharply exceeding average projections for 145.4 billion yen. That should come as a relief to investors, who were caught flat-footed in April when new Chief Executive Officer Kenichiro Yoshida unveiled a pessimistic full-year forecast, sending shares tumbling. The stock has recovered since as investors grew more optimistic about Sony’s prospects.
The PlayStation unit was again the standout. Its revenue climbed 36 per cent during the quarter and operating profit nearly quintupled, riding stronger-than-expected sales of new games including God of War and Detroit: Become Human. More titles were also sold digitally through its PlayStation Network, which generates higher profit margins than through brick-and-mortar stores.
That gave Sony confidence to bump its expectations for the gaming division’s full-year revenue by 15 per cent, and raise the outlook for operating profit by 32 per cent. It also raised its forecast for PS4 unit sales to 17 million from 16 million.
“Games are doing even better than the analysts’ consensus,” said Masahiko Ishino, an analyst at Tokai Tokyo Securities. “There isn’t one big surprise from all this, but at the end of the day it’s a fairly strong result.”
Revenue rose 5.1 per cent to 1.95 trillion yen, topping the forecast for 1.87 trillion yen. In April, the company sold about a fifth of its stake in Spotify when the music streaming giant went public. Sony recorded a one-time gain of 53.9 billion yen from the sale. The remaining shares have a fair value of 95.3 billion yen, and Sony hasn’t said if or when it could sell its remaining holding.
Here’s a look at how Sony’s individual businesses performed:
Games: Operating profit rose from a year earlier to 83.5 billion yen. During the quarter, the company had few surprises to share at the Electronic Entertainment Expo (E3) and also angered gamers over its lack of cross-platform play for Fortnite. In April, researcher Newzoo predicted that mobile games will account for more than half of the gaming industry’s revenue this year, while consoles will fall to 25 per cent. Music: Streaming continued to grow, with Spotify last week announcing monthly active users had grown to 180 million, topping estimates. That boosted royalties received by Sony, sending operating profit up 28 per cent from a year ago to 32.1 billion yen. The unit also got a lift from the on-going popularity of mobile game Fate/Grand Order. Chips: Operating profit fell 47 per cent to 29.1 billion yen. Cooling demand for smartphones was the primary driver in Sony’s weaker-than-expected full-year forecast in April. Sony is the largest supplier of camera chips to phone makers including Apple Inc and last week unveiled a new chip that quadruples megapixel quality. “If you look past one-time items and just focus on their core business, it is still growing profits,” Masahiro Wakasugi, an analyst at Bloomberg Intelligence, said prior to the release.