Sony targets double-digit profit growth despite slowdown in PlayStation 5 sales

Sony, the Japanese entertainment powerhouse, has announced its expectations for a significant increase in annual profits, bolstered by robust revenue growth in several business sectors during the fourth quarter. This positive outlook comes despite challenges posed by a downturn in PlayStation 5 sales and a surge in memory prices, which have impacted hardware sales. In the fourth quarter, Sony reported hardware sales plummeting to 110 billion yen, a stark decline from 183 billion yen during the same period last year. However, the company found some relief in strong performances from its image sensor and music divisions. Notably, PlayStation 5 sales dropped to 1.5 million units, down from 2.8 million a year prior. Looking ahead, Sony forecasts a 13% increase in net profit for the financial year ending in March 2027, projecting earnings of 1.16 trillion yen compared to 1.03 trillion yen this year. Additionally, the company plans to initiate a share buyback program worth up to 500 billion yen over the next year. Despite these moves, Sony's stock saw a minor decline of 0.5% by market close on May 8. The ongoing memory price crisis poses a significant challenge for Sony, as memory components are crucial for the PlayStation 5. The company is facing a supply crunch, exacerbated by memory manufacturers prioritizing orders from AI data centers, which has constrained availability. Earlier this year, Sony announced it would increase prices for the PlayStation 5 for the second time in less than a year due to these economic pressures. Despite the challenges, Sony estimates that the impact of rising memory costs on its 2026 financial forecasts will be limited to around 30 billion yen. Furthermore, the company anticipates maintaining similar hardware profitability in the upcoming financial year compared to the past 12 months. In its earnings presentation, Sony noted that while memory market conditions are affecting smartphone sales, mobile sensor sales exceeded expectations, driven primarily by strong demand from a key customer. The future of PlayStation 5 sales is closely tied to Sony's ability to manage memory costs effectively. Following a 23% drop in stock value since the beginning of 2026, Sony's shares have seen a shift after previously enjoying yearly gains exceeding 20% for three consecutive years. Operating profit for the fourth quarter fell short of expectations, partly due to losses linked to its abandoned electric vehicle venture with Honda and impairments from the acquisition of game developer Bungie. For the upcoming financial year, Sony predicts a slight dip in revenue, estimating around 12.3 trillion yen, down from this year’s 12.5 trillion yen.