Sony raises annual profit outlook

29 October, 2020 12:00 AM printer

TOKYO: Sony on Wednesday raised its annual profit outlook after reporting a surprise second-quarter profit increase, as its gaming business continued to capture “nesting” demand driven by COVID-19 lockdown measures.

The upward revision also partly reflects a robust start for Japanese animated film Demon Slayer, co-distributed by Sony’s music unit, which has been shattering box-office records in Japan since its Oct 16 release, report agencies.

Higher revenue from gaming and entertainment content gives validation to Chief Executive Kenichiro Yoshida’s strategy to increase recurring revenue streams that cushion the impact of volatile hardware sales cycles.

July-September profit reached 317.76 billion yen (US$3 billion), up 13.9 per cent from 278.96 billion yen in the same period a year prior, the entertainment and electronics firm said in a statement.

The result compared with the 197.55 billion yen average of 11 analyst estimates compiled by Refinitiv.

Sony raised its annual profit forecast to 700 billion yen from an earlier estimate of 620 billion yen. That compared with the 672.33 billion yen consensus of 24 analysts.

The firm now forecasts its gaming division to post annual profit of 300 billion yen, from the previously estimated 240 billion yen. Consumers’ shift to gaming software downloads and online subscription services during lockdown boosted profit despite the PlayStation 4 console coming to the end of its lifecycle.

Such high-margin online revenue is likely to help Sony’s gaming business stay profitable this year, outweighing massive marketing and production costs associated with the launch next month of the PlayStation 5 (PS5) console.

Meanwhile, Sony cut the outlook for its sensor business by 38 per cent to 81 billion yen, after tighter US curbs on Huawei banned global suppliers from selling it chips - such as Sony’s - made using US technology without a special licence.

The Chinese smartphone maker was Sony’s second-largest image sensor customer after Apple, accounting for about 20 per cent of its US$10 billion in sensor revenue, according to analyst estimates.