Sony Group Corp’s (6758.T) has reported record operating profits for the year ended March 2023, which was largely driven by its music and microchip units. Despite this success, Sony’s annual profit outlook for the current business year fell short of market expectations, causing a drop of up to 4.8% in the company’s shares.
The company has projected a profit decline of 3.2% to 1.17 trillion yen ($8.55 billion) for the current year. This has missed the average estimate of a 1.275 trillion yen profit by analysts. The slow recovery in profitability in the video game unit is the primary reason behind this.
According to Atul Goyal, an analyst at Jefferies, Sony’s outlook is “overly conservative.” The PlayStation 5 (PS5) game consoles and game software are likely to benefit from pent-up demand, he said in a note to clients. Sony had struggled to meet the demand for PS5 during the COVID-19 pandemic due to supply chain issues. However, President Hiroki Totoki said on Friday that the company was now ready to deliver the consoles without keeping customers waiting.
Sony aims to sell a record-breaking 25 million units of the PS5 in the year to next March. While this target may seem ambitious, Sony’s past success in the gaming industry and the pent-up demand for PS5 indicate that the company may achieve it.
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In the past, Sony has dominated the gaming industry with its PlayStation consoles. The PS5, launched in November 2020, was highly anticipated by gamers worldwide. However, supply chain issues caused by the pandemic had resulted in a shortage of the console, leading to disappointed customers.
Despite these challenges, the PS5 has sold over 7.8 million units as of March 31, 2021, making it the fastest-selling console in Sony’s history. The strong demand for the console, coupled with a robust performance in its music and microchip units, resulted in Sony’s record operating profit for the year ended March 2023.
Looking forward, Sony aims to build on this success and continue dominating the gaming industry. The company plans to release several exclusive games for the PS5, which could drive sales and revenue. Additionally, Sony’s strong brand image and loyal customer base provide it with a significant advantage over its competitors.
However, the slow recovery in profitability in the video game unit may hinder Sony’s plans for growth. The video game industry is highly competitive, with established players such as Microsoft and Nintendo vying for market share. Sony must continue to innovate and deliver high-quality products to stay ahead of its competitors.
In conclusion, while Sony’s annual profit outlook fell short of market expectations, the company’s record operating profit for the year ended March 2023 is a testament to its strength and resilience. Sony’s plans to sell 25 million units of the PS5 in the year to next March are ambitious but achievable, given the pent-up demand for the console. The company must continue to innovate and deliver high-quality products to maintain its position as a dominant player in the gaming industry.
