Key Takeaways
- Sony Group will report fiscal fourth-quarter earnings early Tuesday morning Eastern Time.
- Investors will likely be looking for updates on the profitability of its gaming division, which took a hit in the third quarter as promotions for PlayStation 5 ate into profits.
- Sony has also been linked to bids for Paramount along with Apollo Global Management in recent weeks as the bidding for the media conglomerate continues.
Multinational electronics and media company Sony Group (SONY) is set to report earnings early Tuesday morning Eastern Time for the fourth quarter of fiscal 2023, along with results for the full year.
Investors will likely be looking for updates from Sony’s gaming division after it lowered projections for PlayStation 5 sales and gaming segment revenue over the rest of fiscal 2023 in its third-quarter report.
Analysts expect Sony’s revenue to decrease to 2.9 trillion yen ($18.61 billion) from 3.06 trillion yen ($19.7 billion) in the year-ago period. However, net income could increase to 136.95 billion yen ($880.35 million) or 131.53 yen (84 cents) per share compared to last year’s 128.2 billion yen ($822.72 million), or 103.53 yen (67 cents) per share.
| Analyst Estimates for Q4 2023 | Q3 2023 | Q4 2022 | |
| Revenue | 2.9 trillion yen ($18.61 billion) | 3.75 trillion yen ($24.09 billion) | 3.06 trillion yen ($19.7 billion) |
| Diluted Earnings Per Share (EPS) | 131.53 yen (84 cents) | 294.82 yen ($1.90) | 103.53 yen (67 cents) |
| Net Income | 136.95 billion yen ($880.35 million) | 363.92 billion yen ($2.34 billion) | 128.2 billion yen ($822.72 million) |
Key Metric: Gaming Profitability
Sony said in its third-quarter report that profitability in the gaming division, its largest in terms of revenue, took a hit in the quarter as promotions for PlayStation 5 ate into profits. Although PlayStation 5 sales reached a record high for quarterly unit sales of the console in the third quarter, sales still fell short of the company’s target, and Sony revised its full-year sales projection down to 21 million from 25 million units.
Sony also lowered its gaming segment revenue projection for the full fiscal year of 2023 to 4.15 trillion yen ($26.68 billion), down from 4.36 trillion yen ($27.98 billion) previously. That compared to 3.64 trillion yen ($23.44 billion) in 2022.
Jefferies analysts said in note earlier this month that Sony’s margins in the games division were “unacceptably low,” and called Sony’s explanation that hardware costs have not fallen as much as the company thought they would “insufficient.”
However, the analysts suggested earlier in March that Sony could still be one of their top picks long term as supply for key parts of the PS5 supply chain improve, allowing costs to come down and profitability to increase.
Business Spotlight: Acquisition Speculation Around Paramount
Sony’s name has also been connected to the months of bidding for Paramount Global (PARA), in the wake of a report last month that Sony and private equity firm Apollo Global Management have been in negotiations about making a joint bid for the media conglomerate.
The New York Times reported Wednesday that Sony and Apollo could break up the conglomerate if their bid is successful, selling off many of the company’s television channels like CBS and MTV, with Sony potentially keeping only the movie studio to fold into its own entertainment division.
Shari Redstone, Paramount’s majority shareholder, would reportedly prefer to sell the company to another entity that would keep it whole, but a compelling enough offer could convince her otherwise, The New York Times suggested.
Sony’s American depositary receipts (ADRs) are down about 19% so far in 2024 amid concerns about the PS5’s lagging profitability and few high-profile game releases, trading around $76.36 as of 11 a.m. ET Monday.