Key Takeaway:
- PS5 sales drop 46% as Sony pivots toward high-margin software growth.
- Rising chip costs and hardware aging drive a 6% revenue decline.
- Massive buyback and GTA VI launch aim to boost investor confidence.
Sony Group Corporation forecast a 6% decline in annual gaming sales on Friday as aging PlayStation 5 hardware demand and rising memory chip prices pressure its gaming business, even as the company expects higher profits from software sales.
Sony said gaming sales for the financial year ending March 2027 are expected to fall to 4.42 trillion yen ($28 billion). The company attributed the decline to lower PlayStation 5 hardware sales and rising component costs tied to a surge in memory chip prices. The ongoing PS5 sales decline has become a major concern for investors as the console enters a mature phase of its lifecycle.
The Tokyo-based company said operating profit in its gaming division is projected to rise 30% due to stronger first-party software sales and the absence of an impairment loss recorded a year earlier.
Sony sold 1.5 million PS5 consoles during the fourth quarter, down 46% from the same period last year. The PS5 is now in its sixth year on the market, and Sony said its outlook includes investment in a next-generation gaming platform. Analysts believe the sharp PS5 sales decline reflects weaker consumer demand and higher pricing pressure across global markets.
The company also noted that hardware sales depend on securing memory components at “reasonable prices,” while hardware profitability is expected to remain largely unchanged from a year earlier.
PS5 Sales Slow as Hardware Costs Increase
Investors remain concerned about rising memory chip prices and supply chain disruptions linked to the Iran war, which are affecting electronics manufacturers worldwide, including Nintendo Co., Ltd..
In March, Sony raised PS5 prices for the second time in less than a year, including a $100 increase in the United States. The company said earlier this year it had secured enough memory supply to manage the year-end shopping season. The continued PS5 sales decline has also increased pressure on Sony to rely more heavily on software and subscription revenue streams.
Sony’s shares recovered from earlier losses and closed up about 1% in Tokyo after the company announced plans to buy back up to 230 million shares worth as much as 500 billion yen.
The broader group reported operating profit of 1.45 trillion yen for the year ended March, up 13.4% from a year earlier but below analysts’ consensus estimate of 1.56 trillion yen.
Sony Bets on Software Growth and Share Buyback
Sony said it expects stronger profits from its pictures and semiconductor businesses, while forecasting lower profits from its music unit.
The company has increasingly positioned itself as an entertainment-focused group with operations spanning gaming, films, anime and music. However, investor concerns about the long-term impact of artificial intelligence and limited near-term growth catalysts have weighed on its stock in recent months.
Sony also recently abandoned plans to launch electric vehicles with Honda Motor Co., Ltd., marking a retreat from a high-profile mobility partnership announced several years ago.
Analysts See ‘GTA VI’ as Key Growth Driver
Analysts said the launch of Grand Theft Auto VI in November could provide a major boost to Sony’s gaming ecosystem and potentially offset the ongoing PS5 sales decline through stronger user engagement and software purchases.
“I am more optimistic than Sony and think the market is underestimating the impact of ‘GTA VI,’” said Serkan Toto.
Amir Anvarzadeh of Asymmetric Advisors said in a note that Sony’s earnings could benefit from higher-margin software sales and stronger user engagement tied to the game’s release.
Sony said in February that it had secured the minimum amount of memory needed for the critical holiday sales period, while Nintendo previously said the chip-price surge had not yet significantly affected its earnings.
