Sony’s quarterly profit topped analyst expectations thanks to strong sales of PlayStation games and growth in its music business, which also benefited from a one-time gain on share sales of Spotify Technology.
Operating profit was ¥195-billion (US$1.75-billion) in the June quarter, the Tokyo-based company said Tuesday, compared to analysts’ average projections for ¥145.4-billion. Net income also topped their prediction at ¥226.5-billion; the company raised its fiscal full-year forecast for net income by ¥20-billion to ¥500-billion.
The strong quarter should come as a relief to investors, who were caught flatfooted in April when new CEO Kenichiro Yoshida unveiled a dour full-year forecast, sending shares tumbling. The stock has recovered since then as strong sales of a new God of War game and growth in music streaming reassured shareholders the new boss can probably beat his projections.
“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. “How much the new games added to profit growth this quarter is important to gauge the rest of the year.”
Revenue rose 5.1% to ¥1.95-trillion, topping the forecast for ¥1.87-trillion. Sony also raised its outlook for sales to ¥8.6-trillion from ¥8.3-trillion, citing higher-than-expected videogame sales.
In April, the company sold about a fifth of its 5.7% stake in Spotify when the music streaming giant went public. Sony recorded a one-time gain of ¥53.9-billion from the sale and said its remaining shares have a fair value of ¥95.3-billion. 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: The popularity of first-party title God of War helped Sony in the quarter. Operating profit rose from a year earlier to ¥83.5-billion. 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%.
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% from a year ago to ¥32.1-billion. The unit also got a lift from the ongoing popularity of mobile game Fate/Grand Order.
Chips: Operating profit fell 47% to ¥29.1-billion. Cooling demand for smartphones was the primary driver in Sony’s weaker-than-expected full-year forecast in April. Sony is the largest industry supplier of camera chips to phone makers including Apple and last week unveiled a new chip that quadruples megapixel quality. — Reported by Yuji Nakamura and Yuki Furukawa, (c) 2018 Bloomberg LP