Sony posted strong annual earnings growth despite a sharp drop in fourth-quarter revenue, fueled largely by its entertainment divisions and a strategic share buyback. But the company also warned of headwinds ahead, including tariffs, soft PlayStation hardware sales, and a flat profit outlook that came in below expectations.
Annual net profit climbed 18% to ¥1.14 trillion ($7.32 billion), even as fourth-quarter revenue dropped 24% year-over-year to ¥2.63 trillion ($16.88 billion), missing analyst forecasts. The decline was led by its Gaming and Entertainment, Technology & Services (ET&S) segments. PlayStation 5 sales slipped 4.2%, while ET&S revenue, which includes TVs, audio equipment, and cameras, fell 9.1%.
The Music and Pictures divisions helped cushion the revenue dip. Music brought in more than $3 billion, up nearly 10% year-over-year. Pictures revenue rose 2% to $2.67 billion, boosted by titles like “Paddington in Peru,” which grossed nearly $200 million, and “One of Them Days,” which generated over $50 million during its theatrical run.
Operating income for the quarter came in at ¥203.6 billion ($1.31 billion), beating analyst expectations of ¥192.2 billion but still down 11% from the previous year. Quarterly net income rose 5% to ¥197.7 billion ($1.27 billion).
Sony announced a share buyback of up to ¥250 billion ($1.7 billion), which helped push its stock up 3.5% in Wednesday trading. It also confirmed plans to spin off its financial unit, distributing slightly more than 80% of the new company’s stock to shareholders. The unit will be classified as a discontinued operation starting this quarter.
The company projected operating profit for the fiscal year ending March 2026 to rise just 0.3% to ¥1.28 trillion ($8.22 billion), significantly below analyst estimates of ¥1.5 trillion. It cited a ¥100 billion ($642 million) expected hit from U.S. tariffs as a key factor. That projection does not yet include potential benefits from the U.S.-China tariff rollback announced on May 12. The U.S. agreed to reduce tariffs on China from 145% to 30%, while China will cut tariffs on U.S. goods from 125% to 10%.
Sony executives said they plan to manage the tariff impact by stockpiling inventory in the U.S., reallocating shipments globally, and selectively raising prices. The company already increased PlayStation 5 prices in Europe, Australia, and New Zealand in April, citing inflation and exchange rate pressures.
New CEO Hiroki Totoki, who stepped into the role on April 1, said entertainment accounted for 61% of consolidated sales last quarter. He emphasized continued investment in content and plans to increase active users and per-user spend on the PS5 platform.
Sony’s business mix continues to shift away from legacy hardware toward content and services. But with tariff uncertainty, hardware softness, and conservative forward guidance, the company still faces challenges in the quarters ahead.
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