Sony Dives Most in Months After Gaming Slump Spurs Outlook Cut

(Bloomberg) – Sony Group Corp. fell 7% after the Tokyo-based tech giant cut its profit outlook, reflecting the impact of recession fears on the global gaming industry.

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The stock slipped the most in nearly six months in early trading. Sony said on Friday it now expects operating profit of 1.11 trillion yen ($8.3 billion) for this fiscal year, up from 1.16 trillion yen previously. The Games and Network Services Group, which houses the PlayStation business, accounted for the full overhaul, taking a 16% cut from 305 billion yen to 255 billion yen.

Sony drops out as games remain a concern after results: Street Wrap

Sony also revised its outlook on costs related to the Bungie Inc. acquisition, weak yen and lower expectations for third-party software sales on the platform.

The company’s games business was disappointing in the April-June quarter with 47.1 million PlayStation 4 and 5 titles sold, down from 63.6 million a year earlier. Playtime on PlayStation products fell 15% in the quarter, Chief Financial Officer Hiroki Totoki said, and PlayStation Plus members fell slightly to 47.3 million.

“While they could blame weaker PS5 sales growth of just over 4% year-over-year, the real reason appears to be the higher development costs the company has incurred through its aggressive acquisition of game developers,” said Amir Anvarzadeh at Asymmetric Advisors. “What we think is crucial going forward is how much its newly launched game streaming service, where users have access to hundreds of older games, will eat away at its game software sales.”

Read more: Sony cuts earnings outlook on weaker PlayStation outlook

Investors had been looking for signs that Sony could ride out the current macroeconomic uncertainty by relying on businesses beyond the key arm of PlayStation. But the company also cut its sales forecast for the image sensor sector.

Supply chain issues will likely continue to trouble electronics makers this year as the re-emergence of Covid infections and Russia’s invasion of Ukraine affect shipping, production capacity and cost. materials. South Korean giant Samsung Electronics Co. said last week that it was adjusting its forecast on a near-daily basis due to the high degree of geopolitical volatility and economic uncertainty.

Sony’s April-June operating profit of 307 billion yen beat average estimates of 286.7 billion. Movies and music results were boosted by the weak yen and Sony said it now expects revenue from its music division to rise due to the positive currency impact. Revenues from streaming services and anime content helped sustain the strong results.

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