Sony Group Corporation (NYSE: SNE)

Sony Group Corporation's financial performance for fiscal year 2025 showed strong profit growth despite modest revenue challenges. Total sales and financial services revenue declined slightly by 0.5% to ¥12.96 trillion, primarily due to a significant reduction in Financial Services revenue, which decreased by ¥838.6 billion year-over-year. However, when excluding the Financial Services segment, Sony's other business segments collectively achieved a 6.9% increase in sales to ¥12.04 trillion.

The company demonstrated impressive profitability improvement with operating income increasing by 16.4% to ¥1.41 trillion. This growth was driven by strong performance across multiple business segments, particularly in Game & Network Services, Music, and Imaging & Sensing Solutions. The operating margin improved significantly to 10.9% from 9.3% in the prior year, reflecting effective cost management and higher value-added product offerings.

Net income attributable to Sony Group Corporation's stockholders reached ¥1.14 trillion, representing a 17.6% increase from the previous year. This translated to basic earnings per share of ¥188.71, up 19.7% year-over-year (adjusted for the five-for-one stock split that took effect in October 2024). The higher growth rate in EPS compared to net income reflects the impact of the company's share repurchase program, which reduced the average number of outstanding shares.

Sony's balance sheet remained strong with total assets increasing by 3.5% to ¥35.29 trillion. The cash position improved significantly, with cash and cash equivalents rising to ¥2.98 trillion, an increase of ¥1.07 trillion from the previous year. This substantial improvement in cash reserves provides the company with enhanced financial flexibility for strategic investments, share repurchases, and potential acquisitions.

Return on equity (ROE) attributable to Sony Group Corporation's stockholders improved to 14.5% from 13.7% in the prior year, demonstrating the company's continued ability to generate increasing returns for shareholders while maintaining a strong equity base. Additionally, the ratio of equity attributable to Sony Group Corporation's stockholders to total assets increased to 23.2% from 22.2%, indicating a slight improvement in the company's capital structure.

Game & Network Services was a standout performer with revenue increasing 9.4% to ¥4.67 trillion and operating income surging by 42.9% to ¥414.8 billion. The segment benefited from strong performance in Digital Software and Add-on Content (+18.4% to ¥2.29 trillion) and Network Services (+22.8% to ¥669.9 billion), which offset a 6.5% decline in Hardware and Others. This performance reflects Sony's continued success in monetizing its gaming ecosystem through digital content and subscription services.

Music segment delivered robust results with revenue growing 13.8% to ¥1.84 trillion and operating income increasing 18.4% to ¥357.3 billion. All categories within the segment showed strong growth, with Recorded Music streaming up 11.2%, Music Publishing up 16.2%, and Visual Media and Platform up 20.9%. The segment's performance was driven by continued growth in streaming revenue and successful content releases.

Pictures segment showed modest revenue growth of 0.9% to ¥1.51 trillion, while operating income remained relatively flat at ¥117.3 billion (-0.4%). Motion Pictures revenue increased by 12.6%, which was largely offset by a 16.7% decrease in Television Productions revenue. Media Networks revenue increased by 9.0%, contributing to the segment's overall stability.

Entertainment, Technology & Services segment experienced a slight decline in revenue of 1.8% to ¥2.41 trillion, but managed to increase operating income by 1.9% to ¥190.9 billion. The segment faced challenges in Televisions (-9.6%) and Audio and Video (-5.0%) categories, while Still and Video Cameras showed modest growth of 3.4%. Mobile Communications revenue declined by 6.7%, reflecting continued competitive pressures in the smartphone market.

Imaging & Sensing Solutions segment delivered strong performance with revenue growing 12.2% to ¥1.80 trillion and operating income surging 34.9% to ¥261.1 billion. The segment benefited from increased demand for image sensors in high-end smartphones and growing applications in automotive and industrial markets. The substantial improvement in profitability demonstrates the success of Sony's strategy to focus on higher value-added image sensor products.

Financial Services segment experienced a significant decline in revenue, decreasing 47.4% to ¥931.4 billion, with operating income falling 24.8% to ¥130.5 billion. This decline was primarily due to a substantial reduction in financial services revenue, particularly in Other financial services revenue which decreased by ¥875.4 billion. It's worth noting that Sony has announced plans to execute a partial spin-off of Sony Financial Group Inc. in October 2025, which will result in this segment being classified as a discontinued operation from Q1 FY2026.

Sony's cash flow performance was particularly strong in fiscal year 2025, with net cash provided by operating activities increasing 69.1% to ¥2.32 trillion. This substantial improvement was driven by higher operating income, favorable working capital changes, and disciplined management of cash conversion cycles across business segments. The significant increase in operating cash flow demonstrates Sony's enhanced ability to convert profits into cash, a critical indicator of financial health.

Net cash used in investing activities increased by 13.6% to ¥930.1 billion, reflecting continued investments in strategic growth areas, including content assets, particularly in the Music and Pictures segments, as well as capital expenditures to support innovation and capacity expansion in the Imaging & Sensing Solutions segment. During the fiscal year, Sony established a new joint venture in the Music segment, which acquired interests in companies that own certain music and other assets, with the consideration of ¥133.1 billion reflected in investing cash flows.

Free cash flow (calculated as operating cash flow minus investing cash flow) reached ¥1.39 trillion, a significant increase of 151.9% from the previous year. This robust free cash flow generation provides Sony with enhanced financial flexibility to invest in future growth initiatives, return capital to shareholders, and strengthen its balance sheet.

The company's balance sheet further strengthened with total assets increasing 3.5% to ¥35.29 trillion. Cash and cash equivalents rose substantially by 56.3% to ¥2.98 trillion, providing a solid liquidity buffer. The equity attributable to Sony Group Corporation's stockholders increased by 7.8% to ¥8.18 trillion, resulting in an improvement in the equity ratio to 23.2% from 22.2% in the prior year.

Sony continued its shareholder return initiatives with dividend payments totaling ¥115.3 billion and share repurchases of ¥285.5 billion during fiscal year 2025. The company has announced a new share repurchase program of up to ¥250 billion for fiscal year 2026, demonstrating its commitment to returning value to shareholders while maintaining financial flexibility for strategic investments.

Sony's strategic initiatives are focused on leveraging its diverse business portfolio to drive sustainable growth and enhance shareholder value. Key strategic developments include:

Financial Services Spin-off

On May 14, 2025, Sony's Board of Directors announced plans to execute a partial spin-off of Sony Financial Group Inc. (SFGI), a wholly-owned subsidiary engaged in the Financial Services business, as of October 1, 2025. Sony plans to distribute slightly more than 80% of SFGI shares to Sony Group Corporation shareholders through dividends in kind, while retaining slightly less than 20% ownership. Following this transaction, SFGI will become an affiliate accounted for using the equity method rather than a consolidated subsidiary. This strategic move aims to enhance management focus and capital allocation efficiency for both the core entertainment and technology businesses and the financial services operations.

Fiscal Year 2026 Outlook

For fiscal year 2026 (ending March 31, 2026), Sony provided the following outlook for its continuing operations:

• Sales expected to be ¥11.70 trillion, a 2.9% decrease compared to FY2025 excluding Financial Services
• Operating income forecast at ¥1.28 trillion, a 0.3% increase compared to FY2025 excluding Financial Services
• Net income attributable to Sony Group Corporation's stockholders projected at ¥930 billion, a 12.9% decrease compared to FY2025 excluding Financial Services

The forecast includes the estimated impact from the series of changes in U.S. tariff policy, calculated based on announced reciprocal tariff rates and temporary suspensions. However, it does not include the impact of the partial removal and temporary suspension of additional and reciprocal tariffs on China announced on May 12, 2025.

Capital Allocation Strategy

Sony continues to prioritize balanced capital allocation across growth investments, shareholder returns, and maintaining financial flexibility:

• Approved a new share repurchase program of up to 100 million shares (maximum) or ¥250 billion, effective from May 15, 2025 to May 14, 2026
• Announced annual dividends of ¥25 per share for fiscal year 2026 (reflecting the five-for-one stock split)
• Maintaining strategic investments in content IP, technology development, and strategic acquisitions to support long-term growth

Sony's strategic focus remains on strengthening its position in entertainment content (games, music, pictures), enhancing its technology leadership in key areas such as image sensors, and maintaining operational excellence across its diversified business portfolio. The company continues to emphasize innovation and adaptation to changing market dynamics while maintaining disciplined financial management.