Why did second-quarter profit significantly beat expectations?

  • In Sony’s second fiscal quarter, ended September 2026, operating profit from continuing operations was 622.3 billion yen, up 45% year over year, above Goldman Sachs’ original estimate of 510.9 billion yen and Bloomberg consensus of 491.1 billion yen.
  • Operating profit exceeded Goldman Sachs’ forecast by 111.4 billion yen. The film and Game & Network Services businesses contributed 49.5 billion yen and 38.8 billion yen, respectively, in profit above expectations, while I&SS, the image-sensor business, contributed 20.8 billion yen.

What has changed in the PlayStation platform’s profitability?

  • Second-quarter Game & Network Services revenue was 1.2085 trillion yen, above Goldman Sachs’ forecast of 1.0138 trillion yen. In September, PlayStation monthly active users reached 127 million accounts, a record for that month; total gaming hours for the quarter increased 4% year over year.
  • Console shipments for the quarter totaled 2.6 million units, also above Goldman Sachs’ estimate of 1.8 million units. Sony said it offset higher memory-chip prices through promotions, price adjustments and further cost reductions, and expects overall hardware earnings for the fiscal year ending March 2027 to be flat with the prior fiscal year.
  • Excluding the impact of one-off losses, the gaming business’s operating margin rose to 18.2% from 15.3% a year earlier. The company raised its full-year operating profit guidance for the business from 660 billion yen to 700 billion yen, citing third-party game sales, cost improvements and higher Network Services revenue.
  • God of War Laufey has been delayed to between April 2027 and June, reducing the contribution from first-party game sales in the current fiscal year. Even so, full-year guidance for gaming-business earnings was raised. Goldman Sachs sees this as evidence that Sony is further improving the profitability of its PS5 platform.

What gains and constraints did the film and sensor businesses bring?

  • Box-office success for Spider-Man: Brand New Day lifted second-quarter film-business revenue to 513.7 billion yen, above Goldman Sachs’ estimate of 446 billion yen. After the film’s release, sales of related games roughly doubled, while cumulative streams of Sony Music Group songs used in the film exceeded 1 billion plays, illustrating the cross-business benefits of its content.
  • Sony raised its full-year operating profit guidance for the film business from 150 billion yen to 200 billion yen. However, Goldman Sachs expects film-business profit to decline year over year in the next fiscal year as the box-office boost from this film fades. Over the medium to long term, it is positive on growth at Crunchyroll, the anime streaming platform.
  • I&SS second-quarter revenue was 577.6 billion yen, close to Goldman Sachs’ forecast. Benefiting from favorable foreign-exchange rates and cost controls, operating profit reached 154.6 billion yen, above the firm’s estimate of 133.8 billion yen. Sony said the smartphone product market contracted by about 20% year over year from July to September, mainly in the mid- to low-end segments; supply-chain inventories and changes in customers’ product cycles will also alter the distribution of sensor shipments between the first and second halves of the fiscal year.
  • Sony raised its full-year operating profit guidance for I&SS from 420 billion yen to 450 billion yen, including an annual loss of about 16 billion yen caused by the Kumamoto earthquake. The Kumamoto Technology Center has returned to its pre-earthquake operating level.

After the full-year upgrades, how has Goldman Sachs adjusted its assessment?

  • Sony raised its group operating profit guidance for the fiscal year ending March 2027 from 1.72 trillion yen to 1.87 trillion yen, above Goldman Sachs’ previous forecast of 1.7572 trillion yen and Bloomberg consensus of 1.7789 trillion yen.
  • Goldman Sachs raised its operating profit forecasts by 6% to 9% for each fiscal year from 2027 through March 2031, mainly on improved earnings outlooks for the entertainment businesses and I&SS. It also changed its foreign-exchange assumption from 155 yen per U.S. dollar to 160 yen.
  • The firm maintained its Buy rating and raised its 12-month price target from 4700 yen to 4800 yen. Its long-term view rests on monetization of PlayStation game content, add-on content and subscriptions, as well as intellectual-property synergies across gaming, film and music.