Q2 2025 Sony Group Corp Earnings Call

November 11, 2025

Speaker #1: Since it's time, we'd like to start the Sony Group Corporation's FY 2025 Q2 consolidated financial results presentation. This is Ishii from PR. I'll be the emcee.

Operator: Since it's time, we'd like to start the Sony Group Corporation's FY 2025 Q2 consolidated financial results presentation. This is Ishii from PR. I'll be the emcee. Today we will present the FY 2025 Q2 financial results as well as the full-year forecast from Lin Tao, the CFO, Corporate Executive Officer. We will have questions and answers after that. The total time will be 70 minutes. Lin Tao's financial results will be presented in English based on the prerecorded video, which will be streamed.

Speaker #1: So today, we will present the FY 2025 Q2 financial results, as well as the full year format forecast from Lin Tao, the CFO and Corporate Executive Officer.

Speaker #1: We will have questions and answers after that. The total time will be 70 minutes. Lin Tao's financial results will be presented in English based on the pre-recorded video, which will be streamed.

Speaker #2: Hello, everyone. Today, we explain the content shown here. Sales of continuing operations for the quarter increased 5% compared to the same quarter of the previous fiscal year, to ¥3 trillion 107.9 billion.

Lin Tao: Hello everyone. Today I will explain the content shown here. Sales of continuing operations for the quarter increased 5% compared to the same quarter of the previous fiscal year to JPY 3,107.9 billion, and operating income increased 10% to JPY 429 billion. Both were record highs for the Q2. Net income increased 7% to JPY 311.4 billion. The financial results by segment are shown here. As for our full-year result forecast, we upwardly revised sales from our previous forecast 3% to JPY 12 trillion, operating income 8% to JPY 1,430 billion, and net income 8% to JPY 1,050 billion. We expect that the impact of additional US

Speaker #2: And operating income increased 10% to ¥429 billion. Both were record highs for the second quarter. Net income increased 7% to ¥311.4 billion.

Speaker #2: The financial results by segment are shown here. As for our full-year result forecast, we upwardly revised sales from our previous forecast by 3% to ¥12 trillion, operating income by 8% to ¥1 trillion 430 billion, and net income by 8% to ¥1 trillion 50 billion.

Speaker #2: We expect that the impact of additional U.S. tariffs on the operating income of our continuing operations will decrease by ¥20 billion from our previous forecast to ¥50 billion.

Lin Tao: tariffs on the operating income of our continuing operations to decrease JPY 20 billion from our previous forecast to JPY 50 billion. We have reflected that impact in the forecast for each segment from this quarter. We upwardly revised our forecast for operating cash flow 18% to JPY 1,500 billion. The forecast for each segment are shown here. Now I will turn to an overview of each business. First is the G&NS segment. FY 2025 Q2 sales increased 4% year-over-year, primarily due to the growth of network service revenue and the software sales. Despite the impact of the increasing sales, operating income decreased 13% year-over-year. This was primarily due to the recording of approximately JPY 49.8 billion in non-recurring losses resulting from an impairment of intangible and other assets, and the correction in the amount of previously capitalized development costs.

Speaker #2: And we have reflected that impact in the forecast for each segment from this quarter. We upwardly revised our forecast for operating cash flow by 18% to ¥1.5 trillion.

Speaker #2: The forecast for each segment is shown here. Now, I will turn to an overview of each business. First is the GNSS segment. FY25 Q2 sales increased 4% year on year, primarily due to the growth of network service revenue and software sales.

Speaker #2: Despite the impact of the increasing sales, operating income decreased 13% year on year. This was primarily due to the recording of approximately ¥49.8 billion in non-recurring losses resulting from an impairment of intangible and other assets and the correction in the amount of previously capitalized development costs.

Speaker #2: Excluding these non-recurring items, operating income would have increased 23%. We upwardly revised our sales forecast by 3%, from the previous forecast, to ¥4 trillion 470 billion.

Lin Tao: Excluding these non-recurring items, operating income would have increased 23%. We upwardly revised our sales forecast 3% from the previous forecast to JPY 4,470 billion. This is primarily due to the impact of foreign exchange rates. Despite the negative impact of the non-recurring items and the inclusion of a JPY 30 billion tariff impact that we are recording from this quarter, our JPY 500 billion operating income forecast is unchanged from the previous forecast. This is primarily due to the positive impact of foreign exchange rates. Our PlayStation platform continues to demonstrate its strengths as the best place to play and best place to publish. User engagement trended well with the number of monthly active users across all of the PS in September increasing 3% compared to the last September, 219 million accounts, and total playtime for the quarter also increased 1% year-over-year.

Speaker #2: This is primarily due to the impact of foreign exchange rates. Despite the negative impact of the non-recurring items and the inclusion of a ¥30 billion tariff impact that we are recording from this quarter, our ¥500 billion operating income forecast is unchanged from the previous forecast.

Lin Tao: Game software and network service sales are steadily growing. We expect this trend to continue in the second half due to a continued shift to higher tiers in our network service business and the contribution of first-party titles. As for PS5 hardware, we plan to expand the install base during the year-end sales season while continuing to balance that expansion with the profitability of the entire segment. Although performance varies by title, our live service game overall accounted for more than 40% of our first-party software revenue, similar to the previous quarter, and are a recurring source of revenue. Regarding Destiny 2, partially due to the changes in the competitive environment, the level of sales and user engagement have not reached the expectation we had at the time of the acquisition of Bungie.

Lin Tao: While we will continue to make improvements, we downwardly revised the business projection for the time being and recorded an impairment loss against a portion of the assets at Bungie. On the other hand, Helldivers 2, which was also released for Xbox in August 2025, is doing extremely well, not only attracting new users on Xbox but also seeing increased engagement from existing users on PS5 and PC. This resulted in a significant increase in sales of the title year-on-year. MLB The Show 25, released in March 2025, also continued to perform well during the quarter. In the single-player AAA title space, following the release of Death Stranding 2: On the Beach in June 2025, we released Ghost of Yōtei in October 2025. Ghost of Yōtei surpassed 3.3 million units sold globally as of 2 November 2025, becoming a major hit like its predecessor.

Lin Tao: Building on this recent progress, we aim to strengthen our studio business and expand our IP franchises through continuous learning and improvement. Next is the music segment. FY 2025 Q2 sales increased 21% year-over-year and operating income increased 28%, reaching record highs for the Q2. This was primarily due to a higher visual media and platform revenue driven primarily by the success of the theatrical release of Demon Slayer: Kimetsu no Yaiba – Infinity Castle. It was also due to an increase in streaming revenue. On a U.S. dollar basis, streaming revenue for the quarter increased 12% year-over-year in recorded music and 25% in music publishing. We have upwardly revised our full-year forecast for sales 6% to JPY 1,980 billion compared to the previous forecast and operating income 7% to JPY 385 billion.

This was primarily due to a higher visual media and platform revenue driven primarily by the success of the theatrical release of "Demon Slayer: Demon’s Infinity Castle."

It was also due to an increase in streaming revenue.

On a U.S. dollar basis, streaming revenue for the quarter increased 12% year-on-year in recorded music and 25% in music publishing.

Lin Tao: During the quarter, SMEJ made great strides, recording its highest-ever quarterly sales and operating income and contributing significantly to the growth of this segment. Demon Slayer, produced by Aniplex, became a global hit due to our collaboration with Toho for distribution in Japan as well as the strengthening and expanding of distribution overseas by Crunchyroll and Sony Pictures. As of 13 October, 77.53 million people worldwide, including in Japan, have seen the movie and the total box office revenue has exceeded JPY 94.8 billion. Kokuho has enjoyed a long run in theaters in Japan and has captivated a large audience, being selected as Japan's entry to the 98th Academy Awards in the Best International Feature Film category. The successes of Demon Slayer and Kokuho are examples of how we can increase the value of IP by discovering appealing IP and combining them with the production capability of talented creators.

We have upwardly revised our full-year forecast for sales by 6% to ¥1,980 billion compared to the previous forecast, and operating income by 7% to ¥385 billion.

During the quarter, SMEJ made great strides, recording its highest-ever quarterly sales and operating income, and contributing significantly to the growth of this segment.

Demon Slayer, produced by Aniplex, became a global hit due to our collaboration with Toho for distribution in Japan, as well as the strengthening and expanding of distribution overseas by Crunchyroll and Sony Pictures.

As of October 13th, 77.53 million people worldwide, including in Japan, have seen the movie, and the total box office revenue has exceeded $94.8 billion.

Koko has enjoyed a long run in theaters in Japan and has captivated a large audience, being selected as Japan's entry to the 98th Academy Awards in the Best International Feature Film category.

Lin Tao: We look forward to attracting not only fans but also many creators and actors. In recorded music, Iris Out and Jane Doe by Kenshi Yonezu, an artist affiliated with SMEJ, have been breaking records on music charts both in Japan and overseas, thanks to synergy with the theatrical release of the anime Chainsaw Man – The Movie: Reze Arc, the movie Resident Evil. Outside of Japan, SMG is also achieving very strong results. The global success of artists and songwriters such as Tyler, the Creator, and Bad Bunny has led to a double-digit increase year-on-year of sales and operating income for the quarter. In addition, SMG is further enhancing its relationship with DSPs. It entered into licensing agreements with Spotify during the quarter and in collaboration with several other record labels, agreed to support Spotify's efforts to ensure that AI is used in a manner that will benefit artists and songwriters.

The successes of Demon Slayer and Cook are examples of how we can increase the value of IP by discovering appealing IP and combining them with the production capability of talented creators.

We look forward to attracting not only fans.

But also many creators and actors.

In recorded music, I reach out and gentle by Kenshi Yonezu, an artist affiliated with SMEJ. He has been breaking records on music charts, both in Japan and overseas.

Thanks to synergy with the theatrical release of the anime Chainsaw Man, the movie research.

Outside of Japan, SMG is also achieving very strong results.

The global success of artists and songwriters such as Tyler, the Creator, and Bad Bunny has led to a double-digit increase year on year in sales and operating income for the quarter.

In addition, SMG is further enhancing its relationship with DSPs.

Lin Tao: Next is the picture segment. FY 2025 Q2 sales decreased 3% year-on-year and operating income decreased 25%. This was primarily due to the impact of a decrease in sales from theatrical releases, which benefited from hits like, It Ends with Us in the same quarter of the previous fiscal year. Partially offsetting the decrease in operating income was the impact of higher sales at Crunchyroll. There is no change to our full-year forecast for sales and operating income. Crunchyroll continues to work to enhance the 360-degree IP experience of anime fans through the theatrical distribution of Demon Slayer, the launch of Crunchyroll Manga service, and other efforts. Crunchyroll Manga, which currently digitally distributes hundreds of popular Japanese manga titles, has been positively received by fans and publishers since its launch in October. We expect it will contribute to an increase in fan engagement and grow in subscribers.

It entered into licensing agreements with Spotify during the quarter and, in collaboration with several other record labels, agreed to support Spotify's efforts to ensure that AI is used in a manner that will benefit artists and songwriters.

Next is the picture of the segment.

FY22 sales decreased 3% year on year, and operating income decreased 25%.

This was primarily due to the impact of a decrease in sales from theatrical release, which benefited from hits like "It Ends With Us" in the same quarter of the previous fiscal year.

Partially offsetting the decrease in operating income was the impact of higher sales at Crunchyroll.

There is no change to our full-year forecast for sales and operating income.

Crunchyroll continues to work to enhance the 360-degree IP experience of anime fans through the theatrical distribution of "Demon Slayer," the launch of Crunchyroll Manga service, and other efforts.

Crunchyroll, a manga service that currently digitally distributes hundreds of popular Japanese manga titles.

Has been positively received by fans and publishers since its launch in October.

We expect it will contribute to an increase in fan engagement and growth in subscribers.

Lin Tao: In television productions, new seasons of popular existing series were released this quarter such as Dark, Gen V, and Twisted Metal. In motion pictures, production has begun on the major titles Spider-Man: Brand New Day and The Next Jumanji, which are scheduled to be released next fiscal year. Fans are eagerly awaiting the two titles, with five years having passed since the previous Spider-Man film Spider-Man: No Way Home and seven years have passed since the previous Jumanji film Jumanji: The Next Level. Next is the ET&S segment. FY 2025 Q2 sales decreased 7% year-on-year, primarily due to a decrease in unit sales of TVs. Operating income decreased 13% year-on-year, primarily due to the impact of the decrease in sales, partially offsetted by reductions in operating expenses.

Series were released this quarter, such as Doc Jenv and Twisted Metal.

In Motion, Pictures Productions has begun on the major titles, "Spider-Man: Brand New Day" and the next "Jumanji." We Trust is scheduled to be released next fiscal year.

Since our eagerly awaiting, the two titles have been released, with 5 years having passed since the previous Spider-Man film, "Spider-Man: No Way Home," and 7 years having passed since the previous Jumanji film, "Jumanji: The Next Level."

Next, the ETNS segment's FY22 sales decreased 7% year on year, primarily due to a decrease in unit sales of TVs.

Lin Tao: We have slightly increased our full-year forecast for sales from the previous forecast to JPY 2,300 billion, and we have decreased our operating income forecast 11% to JPY 160 billion, reflecting a JPY 20 billion impact from tariffs from this quarter. In the imaging markets, demand has slowed in two regions: China, where government subsidies that last through the Q1 ended 30 June significantly declined, and the US, primarily due to the impact of additional tariffs. However, this decrease in demand is essentially in line with our previous forecast, and global demand remains solid, primarily because of Asia. The severe operating environment for TVs and smartphones continues, but we are adapting by proactively reducing operating expenses and have been able to minimize the impact on profitability.

Operating income decreased 13% year-on-year, primarily due to the impact of the decrease in sales, partially offset by reductions in operating expenses.

We have slightly increased our 4-year forecast for sales from the previous forecasts to ¥2,300 billion. And we have decreased our operating income forecast by 11% to ¥160 billion.

Reflecting a $20 billion impact from terrorists from this quarter.

In the Imaging markets.

Demand has slowed in two regions.

China, where government subsidies that lasted through the first quarter ended June 30, significantly declined.

And the U.S. primarily due to the impact of additional tariffs.

However, this decrease in demand is essentially in line with our previous forecasts, and global demand remains solid primarily because of Asia.

The severe operating environment for TVs and smartphones continues.

Lin Tao: At the segment level, there are no major changes to the demand outlook for the year-end sales season and second half of the fiscal year. We plan to continue to control costs and inventory and operate our business cautiously. In our sports business, which is a growth area, we completed the acquisition of STATSports in October. STATSports excels in active tracking technology, which collects and analyzes real-time data on athletes' physical condition and performance during games. By combining this data with the optical tracking technology of Hawk-Eye and KinaTrax, we aim to provide industry-leading sports data solutions to teams and athletes around the world. We also hope to accelerate the growth of our sports business overall. Last is the I&SS segment. Sales for the quarterly increased 15% year-on-year and operating income increased 50%, both reaching record quarterly highs for the segment.

But we are adapting by proactively reducing operating expenses and have been able to minimize the impact on profitability.

At the segment level, there are no major changes to the demand outlook for the year, end sales, season, and the second half of the fiscal year.

We plan to continue to control costs and inventory and operate our business cautiously.

In our sports business, which is a growth area, we completed the acquisition of Staff Sports in October.

Start Sports excels in active tracking technology, which collects and analyzes real-time data on athletes, physical condition, and performance during games.

By combining this data with the optical tracking technology of Hawkeye and Kina Tracks, we aim to provide industry-leading sports data solutions to teams and athletes around the world.

We also hope to accelerate the growth of our sports business overall.

Last is the inss segment.

Lin Tao: This was primarily due to higher unit prices resulting from larger-sized sensors for mobile devices and increased sales volume of sensors for consumer cameras. We upwardly revised our full-year forecast for sales 2% to JPY 1,990 billion and operating income 11% to JPY 310 billion, primarily due to the impact of foreign exchange rates. Based on the trends in the final product market and the demand forecasts from our customers to date, we have decided not to include any impact from tariffs in this forecast for this segment. The smartphone market continued to show signs of gradual recovery on the global basis. Sales of mobile sensors during the quarter increased significantly year-over-year due to higher unit prices resulting from larger sensors being used in new products by our major customer and a higher shipment volume than our previous forecast.

Sales for the quarter increased 15% year-on-year, and operating income increased 50%, both reaching record quarterly highs for the segment.

This was primarily due to higher unit prices resulting from larger-sized sensors for mobile devices and increased sales volume of sensors for consumer cameras.

We upwardly revised our four-year forecast for sales, 2% to ¥1,990 billion, and operating income 11% to ¥310 billion, primarily due to the impact of foreign exchange rates.

Based on the trends in the final product market and the demand forecasts from our customers to date, we have decided not to include any impact from tariffs in this forecast for this segment.

The smartphone market continued to show signs of gradual recovery on a global basis.

Lin Tao: Growth of the market for cameras that use new video shooting styles such as handhelds contributed to the growth in sales. Our customers might have brought forward the purchase of components during the first half of the fiscal year due to the additional tariffs and other factors. We have kept our fiscal year sales forecast unchanged from the previous forecast when the impact of foreign exchange rate is excluded. We expect sales for the fiscal year to increase an already significant 11% from the previous fiscal year. During Q3 ending 31 December 2025, we plan to carefully assess the possibility of another upward revision. The higher sales of image sensors and our fixed cost management through an accelerated review of low-profit business and a shift of resources and costs to priority areas are contributing significantly to profit growth this fiscal year.

Sales of mobile sensors during the quarter increased significantly year-on-year due to higher unit prices, resulting from larger sensors being used in new products by our major customer and a higher shipment volume than our previous forecast.

In addition, the growth of the market for cameras that use new video shooting styles, such as handhelds, contributed to the growth in sales.

Our customers might have brought forward the purchase of components during the first half of the fiscal year due to the additional tariffs and other factors.

From the previous forecasts, when the impact of foreign exchange rates is excluded,

We expect sales for the fiscal year to increase and are already significantly up 11% from the previous fiscal year.

During the third quarter, ending December 31, 2025, we plan to carefully assess the possibility of another upward revision.

Lin Tao: During this mid-range plan period, we intend to continue to focus on improving the efficiency of business operations and product development. In the next mid-range plan period, we aim to build on those efforts by continuing to work to improve the profitability of the business by considering measures that balance business expansion with improved efficiency of capital expenditure. To summarize, excluding non-recurring items, the G&NS, music, and I&SS segments all achieved record-high operating income during the quarter, and we believe that our business momentum is strong. Looking ahead to the second half of the fiscal year, given the uncertain business environment, we intend to continue to operate our business cautiously while striving to steadily achieve results.

The higher sales of image sensors and our fixed cost management through an accelerated review of low-profit businesses, along with a shift of resources and costs to priority areas, are contributing significantly to profit growth this fiscal year.

During this mid-range plan period, we intend to continue to focus on improving the efficiency of business operations and product development.

In the next mid-range plan period, we aim to build on those efforts by continuing to work to improve the profitability of the business by considering measures that balance business expansion with improved efficiency of capital expenditure.

To summarize, excluding non-recurring items, the GNS Music and IMSS segments achieved record high operating income during the quarter, and we believe that our business momentum is strong.

Looking ahead to the second half of the fiscal year.

Lin Tao: The upwardly revised operating income forecast for this fiscal year presented today projects an average annual growth rate of operating income of 18% compared to the final year of our fourth mid-range plan, an accumulative operating income margin for the fifth mid-range plan to date of 11.3%. This demonstrates that we're making steady progress toward achieving the targets of our fifth mid-range plan. As for shareholder return, we established today a share repurchase facility of a maximum of JPY 100 billion to be executed by May 2026. We successfully completed the partial spin-off of the financial services business on 1 October. We would like to reiterate our sincere gratitude to our shareholders and investors. This concludes my remarks. Thank you.

Given the uncertain business environment, we intend to continue to operate our business cautiously while striving to steadily achieve results.

The upwardly revised operating income forecast for this fiscal year, presented today, projects an average.

The annual growth rate of operating income is 18% compared to the final year of our Force mid-range plan.

An accumulative operating income margin for the 5th month, Mr. Plan, to date of 11.3%.

This demonstrates that we're making steady progress toward achieving the targets of our fifth mid-range plan.

As for shareholder return, we established today a share repurchase facility of a maximum of ¥100 billion to be executed by May 2026.

And we successfully completed the partial spin-off of the financial services business on October 1st.

We would like to reiterate our sincere gratitude to our shareholders and investors.

This concludes my remarks.

Thank you.

Operator: That was a presentation from Lin Tao. From 4:25 PM, we will accept questions from the media. From 4:50 PM, we will accept questions from investors and analysts. The time allocated for questions and answers is 20 minutes each. Those of you who have registered your questions beforehand, please click the link which says "Participate in Webinar." As for the instructions on how to ask questions, please refer to the information that was sent to you beforehand. We will break for a while. We are about to start the Q&A session for the media. You're kindly requested to wait for a few more minutes. Thank you for waiting. Let's start the Q&A session.

So that was a presentation from Lintel.

From 4:25.

We will accept questions from the media.

And from 4:50, we will accept questions from investors and analysts.

For time, allocated for questions and answers is 20 minutes each.

Those of you who have registered your questions beforehand.

Uh, please click the link that says "Participate in Webinar."

As for the instructions on how to ask questions, please refer to the information that was sent to you beforehand.

And we will break for a while.

We are about to start the Q&A session for the media.

You are kindly requested to wait for a few more minutes.

Thank you for waiting. Let's start the Q&A session.

Operator: To answer your questions, we have on the podium Lin Tao, CFO, Corporate Executive Officer. Hirotoshi Korenaga, Senior Vice President in charge of Accounting. Naoya Horii, Senior Vice President in charge of Corporate Planning and Control, Disc Manufacturing Business, and Storage Media Business. Now we would take questions from ladies and gentlemen of the media. Please be reminded that each one may ask up to 2 questions. To ask questions, please click the "Raise Hand" button on the Webex screen. The 1st one is from NHK, Mr. Taruno, please. Can you hear me? Yes, we can hear you. Thank you. I have 2 questions. You have just explained the results this time in and out of Japan. What about the market conditions as you see it, including the consumer behaviors and activities? That's my 1st question.

To answer your questions, we have on the podium Lintel, CFO, Corporate Executive Officer.

Vice President in charge of accounting.

Vice President in charge of Corporate Planning and Control, Disc Manufacturing Business, and Storage Media Business.

Now, we would take questions from ladies and gentlemen of the media.

Please be reminded that each one may ask up to two raise hand buttons on the WebEx screen.

Akira Taruno: Can you hear me?

The first one is from NHK. Mr. Tan, or Miss Tano, please.

[Translator]: Yes, we can hear you.

Akira Taruno: Thank you. I have 2 questions. You have just explained the results this time in and out of Japan. What about the market conditions as you see it, including the consumer behaviors and activities? That's my 1st question. The second is that Demon Slayers or Kokuho have become such a big hit. It's a music and pictures-related content business. How are you going to grow these content-related businesses, and what kind of initiatives are you going to continue?

Can you hear me? Yes, we can hear you. Thank you.

I have 2 questions.

Uh, you have just explained the results this time in and out of Japan. What about the market conditions, as you see it?

Including the consumer behaviors and activities.

Operator: The second is that Demon Slayers or Kokuho have become such a big hit. It's a music and pictures-related content business. How are you going to grow these content-related businesses, and what kind of initiatives are you going to continue? Thank you for your questions. First, about the market conditions and the business sentiment in and out of Japan. For Japan and the US, it seems that there's some stability quite recently. However, we are doing business globally, and the US economy is something that we focus on. In the latter half, towards the latter half of the year, it seems that there's signs of slowing down in the US economy in terms of inflation. The inflation rate is going up, and the job applicant ratio is coming down. Statistics, because of the closure of the government services, we don't have much data.

That's my first question. And the second is that, uh, demons layers or cocoa ho.

Have become such a big hit.

[Translator]: Thank you for your questions. First, about the market conditions and the business sentiment in and out of Japan. For Japan and the US, it seems that there's some stability quite recently. However, we are doing business globally, and the US economy is something that we focus on. In the latter half, towards the latter half of the year, it seems that there's signs of slowing down in the US economy in terms of inflation. The inflation rate is going up, and the job applicant ratio is coming down. Statistics, because of the closure of the government services, we don't have much data.

That's music and, uh, uh, pictures, uh, related content business. How are you going to grow these content-related businesses? And what kind of initiatives are you going to continue?

Thank you for your questions.

Uh, first about the market conditions.

And the business sentiment in and out of Japan for Japan and the U.S.

It seems that there's some stability, uh, quite recently. However, we are doing business globally, and you will see the economy is something that we focus on.

In the letter, I have towards the latter half of the year. It seems that there are signs of slowing down in the US economy in terms of inflation. The inflation rate is going up, and the job applicant region is coming down in statistics.

Operator: It seems to me there's a lack of transparency or certainty. Towards the latter half of this year, we are being cautious and trying to be conservative in our business operation. About your second question, Demon Slayer and Kokuho, thanks to your patronage in Japan and outside Japan, they have become such a big hit, and then they contributed a big positive impact on our business. Going forward, as content IP, we will continue to adapt the titles to the films and motion pictures, and then partnering with the distributors both in and Japan, we would like to grow this business. Not only Demon Slayer, but especially in Hollywood, the box office revenue, very high box office revenue, was achieved. I think culturally, this gives us a big power.

[Translator]: It seems to me there's a lack of transparency or certainty. Towards the latter half of this year, we are being cautious and trying to be conservative in our business operation. About your second question, Demon Slayer and Kokuho, thanks to your patronage in Japan and outside Japan, they have become such a big hit, and then they contributed a big positive impact on our business. Going forward, as content IP, we will continue to adapt the titles to the films and motion pictures, and then partnering with the distributors both in and Japan, we would like to grow this business. Not only Demon Slayer, but especially in Hollywood, the box office revenue, very high box office revenue, was achieved. I think culturally, this gives us a big power. Japanese content, make it successful in Hollywood going forward, is good not only for Sony but for content publishers of Japan as a whole. Going forward, in addition to the deployment of IPs, 360-degree utilizations and LPs, merchandising, we will make an effort to expand this. Thank you very much.

Because of the, uh, uh, closure of the government services, we don't have much data, but it seems to me there's a lack of, uh, uh, transparency, uh, and certainty towards the latter half of this year. We are being cautious and trying to be conservative in our business operation. About your second question.

Demon Slayer and Koko.

Thanks to your patronage in Japan and outside Japan, they have become such a big hit and then...

that they contributed a big positive impact on our business going forward.

Content. As content IP, we will continue to uh uh uh uh adopt uh, the titles to the, uh, films and the motion pictures.

and then,

Partnering with the distributors, both in Japan, we would like to grow this business.

Well, not only Demon Slayers, but um,

especially in Hollywood.

Operator: Japanese content, make it successful in Hollywood going forward, is good not only for Sony but for content publishers of Japan as a whole. Going forward, in addition to the deployment of IPs, 360-degree utilizations and LPs, merchandising, we will make an effort to expand this. Thank you very much. We would take the next question. Yoshida-san from Nikkei. This is Yoshida from Nikkei. I hope you can hear me. Yes, we can hear you. I do have two questions. The first one is as follows: the live service in game business and the development status of Marathon, and whether you wish to launch it this year. Have you made any changes to the plan? That's the first question. Also looking at the actual performance of add-on service from July and in September, and you recorded the underperformance for the first time in 13 quarters.

The box office revenue, very high box office revenue was achieved, and I think culturally this gives us a big power.

So, Japanese content.

Make it, uh, successful in Hollywood. Going forward, is good not only for Sony, but for, uh, content publishers of Japan.

As a whole.

Going forward, in addition to the deployment of IPS 360° utilization and LPS merchandising.

Operator: We would take the next question. Yoshida-san from Nikkei.

We will make an effort to expand this. Thank you very much.

We will take the next question.

Yoshida San: This is Yoshida from Nikkei. I hope you can hear me.

You see the son from Nik?

[Translator]: Yes, we can hear you.

Yoshida San: I do have two questions. The first one is as follows: the live service in game business and the development status of Marathon, and whether you wish to launch it this year. Have you made any changes to the plan? That's the first question. Also looking at the actual performance of add-on service from July and in September, and you recorded the underperformance for the first time in 13 quarters. This might have been attributable to the delay in the live service or new title releases. That's the first question. Second question, you said that the Demon Slayer has a really culturally significant impact. What is the reason, in your view, that these titles are exceeding your expectation in terms of performance?

This is Yoshida from Nik. Uh, I hope you can hear me. Yes, we can hear you. I do have two questions. The first one.

Is as follows the live service in-game business.

And the development status of a marathon and whether you wish to launch it this year. Have you made any changes to the plan? That's the first question, and then...

Operator: This might have been attributable to the delay in the live service or new title releases. That's the first question. Second question, you said that the Demon Slayer has a really culturally significant impact. What is the reason, in your view, that these titles are exceeding your expectation in terms of performance? Thank you very much for your question. The first question, with regards to the developments that are a Marathon, is we are still working on it. From 22 October and then 28 October for a week, there was a technical test that involves 80,000 people. As a result, the gameplay and then retention, those are the key KPIs that we tested on. We are in the process of analyzing the performance against those KPIs. As needed, we will make corrections.

And then also looking at the actual performance of add-on service from July and in September and you you you recorded the underperformance for the first time in 13 quarters. And then this might have been attributable to the delay in the live service or new title of releases. That's the first question and second question.

Um, so you said that, uh, the day the Demon Slayer has a really culturally significant impact.

[Translator]: Thank you very much for your question. The first question, with regards to the developments that are a Marathon, is we are still working on it. From 22 October and then 28 October for a week, there was a technical test that involves 80,000 people. As a result, the gameplay and then retention, those are the key KPIs that we tested on. We are in the process of analyzing the performance against those KPIs. As needed, we will make corrections.

And why is the reason, in your view, that you know these titles are exceeding your expectations in terms of performance? Thank you very much for your question. The first question, with regards to the development, instead of a marathon.

From October 22nd to 28th, for a week, there was a technical test that involved 80,000 people, and as a result,

Operator: We are fully dedicated to launching the title as scheduled. Yes, we assume that we will launch this within this year. That is included in the forecast. With regards to add-on, compared to last fiscal year, there has been a reduction, as you mentioned. With regard to add-on, whether it's add-on or full game, it really depends on the most popular titles, most played by the gamers and users. We don't believe that this represents a reduction or slowdown. As we gear up for the year-end sales season, and we have launched new titles, and I hope that the performance will be even strengthened. Second question, Demon Slayer upside and the reason for it. First, as a content business, or thinking about the nature of the content business, it's really difficult to accurately predict the performance.

[Translator]: We are fully dedicated to launching the title as scheduled. Yes, we assume that we will launch this within this year. That is included in the forecast. With regards to add-on, compared to last fiscal year, there has been a reduction, as you mentioned. With regard to add-on, whether it's add-on or full game, it really depends on the most popular titles, most played by the gamers and users. We don't believe that this represents a reduction or slowdown. As we gear up for the year-end sales season, and we have launched new titles, and I hope that the performance will be even strengthened. Second question, Demon Slayer upside and the reason for it. First, as a content business, or thinking about the nature of the content business, it's really difficult to accurately predict the performance.

The game play. And then retention. Those are the key kpis that we tested on and then we are in the process of analyzing the performance against those kpis. And as needed, we will make Corrections. And then we are fully dedicated to, uh, launching uh, the title, uh, a schedule. And then, yes, we will. We assume that we will launch this uh within this year.

And that is included in the forecast.

And with regards to add-on,

Compared to last fiscal year, there has been a reduction, as you mentioned.

But, um, with regard to add-ons and then whether it's an add-on or a full game,

And you really depend on the most popular titles, most played by the gamers and users.

So we don't believe that this represents a reduction of slowdown. As we gear up for the year and sales season, we have launched new titles, and I hope that the performance will be even strengthened.

And then second question.

So, the Demon Slayer uh, upside, and the reason for it,

First.

As a content business or thinking about the nature of the contents business.

Operator: The previous title was really successful during the pandemic. At the time of the launch, we had a lot of confidence. However, this title exceeded the expectation. This could be attributable to the great performance in the overseas market in Hollywood. We generated top-grossing revenue, and that was unprecedented. From that perspective, we were able to deliver performance that was unexpected. Thank you.

[Translator]: The previous title was really successful during the pandemic. At the time of the launch, we had a lot of confidence. However, this title exceeded the expectation. This could be attributable to the great performance in the overseas market in Hollywood. We generated top-grossing revenue, and that was unprecedented. From that perspective, we were able to deliver performance that was unexpected. Thank you.

It's really difficult to accurately predict the performance.

And then the previous title was really successful during the pandemic.

And at the time of the launch, we had a lot of confidence. However,

In this title, we exceeded the expectations. This could be attributable to the great performance in the overseas market in Hollywood.

Lin Tao: Let's go to the next question. From Toyo Keizai, Umegaki-san. Umegaki from Toyo Keizai, thank you. I have two questions. The first question is about the music segment. JPY 25 million, I think, was the upward revision that you made in operating income. I wonder how much of the contribution was from the Demon Slayer. I understood that it was already reflected in the forecast. In the visual media platform, it was like a JPY 200 billion revenue. What kind of contribution did this upside impact make? The next is on pictures. The JPY 250 billion was the operating income. I believe that in the first half, you had a little bit of a difficulty. The TV production, I understand, is kind of going down. You mentioned about the sequels. I'm wondering how the sequels will be contributing. Those are the two questions.

Operator: Let's go to the next question. From Toyo Keizai, Umegaki-san.

And we generated top uh grossing uh revenue and that was unprecedented. So from that perspective we were able to deliver um uh performance. That was uh unexpected. Thank you. Let's go to the next question.

Hayato Umegaki: Umegaki from Toyo Keizai, thank you. I have two questions. The first question is about the music segment. JPY 25 million, I think, was the upward revision that you made in operating income. I wonder how much of the contribution was from the Demon Slayer. I understood that it was already reflected in the forecast. In the visual media platform, it was like a JPY 200 billion revenue. What kind of contribution did this upside impact make? The next is on pictures. The JPY 250 billion was the operating income. I believe that in the first half, you had a little bit of a difficulty. The TV production, I understand, is kind of going down. You mentioned about the sequels. I'm wondering how the sequels will be contributing. Those are the two questions.

From Toyo Kai.

um,

Thank you.

I have 2 questions. The first question is about music segment.

Um,

$25 million, I think was, uh, the upward revision that you made in operating income. I wonder how much of the contribution was from Demon Slayer.

I understood that it was already reflected in the forecast.

In the visual media platform, it was like a ¥200 billion revenue.

So, uh, what kind of contribution did this upside, uh, impact make? Now the next is on pictures?

Lin Tao: Thank you very much for the questions. In music, in the music segment, the upward revision was the JPY 25 billion upward revision that we meant. The contributions were from Demon Slayer and Kokuho and the streaming music. Kokuho and Demon Slayer together, they contributed about 50% of the upside impact. As for the Pictures segment, the full-year forecast for the first half, the nature of the Pictures segment tends to have this launch in the latter half rather than in the first half. Please understand that this is a seasonal impact. TV production and movie production, structurally, we are seeing the depressed business of the industry. How can we control the cost and produce projects or items that will be very successful? As for the Pictures segment, Crunchyroll is one of the driving forces for growth.

[Translator]: Thank you very much for the questions. In music, in the music segment, the upward revision was the JPY 25 billion upward revision that we meant. The contributions were from Demon Slayer and Kokuho and the streaming music. Kokuho and Demon Slayer together, they contributed about 50% of the upside impact. As for the Pictures segment, the full-year forecast for the first half, the nature of the Pictures segment tends to have this launch in the latter half rather than in the first half. Please understand that this is a seasonal impact. TV production and movie production, structurally, we are seeing the depressed business of the industry. How can we control the cost and produce projects or items that will be very successful? As for the Pictures segment, Crunchyroll is one of the driving forces for growth. The subscribers, as well as the sales, have both increased since the previous year. In the pictures segment, Crunchyroll will be focusing on that in order to grow the business. Thank you.

Uh, the 250 uh billion, uh was the operating uh income. I believe that in the first half, you had a little bit of a difficulty, the TV production. I understand is kind of going down. Uh, you mentioned about uh, the sequels but I'm wondering what the sequels. Uh how the sequels uh will be contributing. Those are the 2 questions.

Thank you very much for the questions in music.

In the music segment, the upward revision.

Was the 25th.

The contributions were from Demon Slayer and Cuckoo, and a streaming music.

Cookoo and Demon Slayer.

Together.

Are there a contributed uh about 50% of the upside um impact?

and as for the pictures,

The full-year forecast for the first half.

The picture segment, the nature of the picture segment,

Um, it tends to have this launch in the latter half rather than in the first half. So, uh, please understand that this is a seasonal impact. So TV production and movie production are structurally.

The depressed business of the industry. So how can we control the costs? And

Produce.

Lin Tao: The subscribers, as well as the sales, have both increased since the previous year. In the pictures segment, Crunchyroll will be focusing on that in order to grow the business. Thank you. Let us proceed to the next question. From Yomiuri Newspaper, Nakayama-san, please. Thank you. My name is Nakayama of Yomiuri Newspaper. Thank you for the opportunity. I have 2 questions, if I may. One, a very detailed question. As you have just said, in the music, the operating incomes, half of the upside comes from Demon Slayer and Kokuho. If you could give me a breakdown between Demon Slayer and Kokuho, I would appreciate it. Second, about the impact of tariffs, JPY 50 billion. Last time, you talked about the utilization of the strategic inventory. What would be the background of this JPY 20 billion worth of decline?

A project for, um, items that will be very successful as for the pictures. Um, segment. Crunchyroll, uh, is one of the driving forces, uh, for um, growth.

The subscribers.

Operator: Let us proceed to the next question. From Yomiuri Newspaper, Nakayama-san, please.

As well as uh, the as a sales have both increased since the previous from the previous year. So, uh, in the pictures, a segment, crunchy roll, uh, will be, uh, focusing on that in order to grow the business. Thank you.

Let us proceed to the next question.

[Company Representative] (Yomiuri Newspaper): Thank you. My name is Nakayama of Yomiuri Newspaper. Thank you for the opportunity. I have 2 questions, if I may. One, a very detailed question. As you have just said, in the music, the operating incomes, half of the upside comes from Demon Slayer and Kokuho. If you could give me a breakdown between Demon Slayer and Kokuho, I would appreciate it. Second, about the impact of tariffs, JPY 50 billion. Last time, you talked about the utilization of the strategic inventory. What would be the background of this JPY 20 billion worth of decline? About the breakdown, for each individual title, may I refrain from making comments on the breakdown of each title? About the tariffs impact, Horii will answer.

From Yumi. Renee newspaper.

Thank you. My name is Nakaya. I'm your newspaper. Thank you for the opportunity. I have 2 questions. If I may 1.

A very detailed question.

As you have just said, in the music segment, half of the operating income upside comes from Demon Slayer.

And cook a whole, if you could give me a breakdown between Demon Slayer and cocoa, I would appreciate it. Second, about the impact of tariffs.

50 billion yen.

Lin Tao: About the breakdown, for each individual title, may I refrain from making comments on the breakdown of each title? About the tariffs impact, Horii will answer. Thank you for your question. As you rightly pointed out, the impact of the tariff used to be JPY 70 billion. Now it's JPY 50 billion. It's a JPY 20 billion worth of decline. In the I&SS segment, the impact of the tariff in the previous time, we incorporated that to a certain extent in the I&SS segment. If you look at the final product market and the orders received from the customers, we look at these factors. This time, in this particular segment, we don't see any further need of incorporating the impact of the tariff in this. We excluded that. The JPY 20 billion decline comes mainly from the I&SS segment. Thank you.

And, uh, last time you talked about the utilization of the, uh, uh, strategic inventory. What would be the background of this, uh, uh, ¥20 billion worth of decline?

Now, about the breakdown.

For each individual, uh, title while I.

May I refrain from making comments on the... uh, uh... the... uh, uh...

[Translator]: Thank you for your question. As you rightly pointed out, the impact of the tariff used to be JPY 70 billion. Now it's JPY 50 billion. It's a JPY 20 billion worth of decline. In the I&SS segment, the impact of the tariff in the previous time, we incorporated that to a certain extent in the I&SS segment. If you look at the final product market and the orders received from the customers, we look at these factors. This time, in this particular segment, we don't see any further need of incorporating the impact of the tariff in this. We excluded that. The JPY 20 billion decline comes mainly from the I&SS segment. Thank you.

Breakdown of each title and about the tariffs' impact H will answer. Thank you for your question.

As you rightly pointed out that the impact of the Tariff, well, you used to be 72 billion and now, it's 50 billion in such a 20 billion year worth of decline, in the Ayah, and SSS segment.

The impact of the tariff in the previous time.

It, uh, we incorporated that to a certain extent in the I and SS segment. But if you look at the final products market and, uh, the orders received from the customers, we look at these, uh, factors and then this time.

In this particular segment, we don't see any further need to incorporate the impact of the tariff in this. So we excluded that the 2000 decline.

Comes mainly from the INSS segment. Thank you.

Operator: We are running short on time. The next person will be the last questionnaire. Narisawa-san from Asahi Shimbun. Narisawa-san, can you hear us? Can you hear me? Yes, we can hear you. Sorry about that. This is Narisawa from Asahi Shimbun. I have a question about the games segment. PlayStation 5 is celebrating its 6th anniversary since 2020. Also this year, the performance is quite good. You are looking to expand the install base. Can you talk a little bit about the future strategy? Thank you very much. This year, we are in year 6 since the launch. PS5 has been growing in its install base. Our view is that, compared to conventional console life cycles, looking at the PS4 life cycle, it seems to be getting longer and longer.

Operator: We are running short on time. The next person will be the last questionnaire. Narisawa-san from Asahi Shimbun. Narisawa-san, can you hear us?

We are running short on time. Uh, so, uh, the next person will be the last question.

from a newspaper.

Hayato Narisawa: Can you hear me?

Can you hear us?

[Translator]: Yes, we can hear you.

Hayato Narisawa: Sorry about that. This is Narisawa from Asahi Shimbun. I have a question about the games segment. PlayStation 5 is celebrating its 6th anniversary since 2020. Also this year, the performance is quite good. You are looking to expand the install base. Can you talk a little bit about the future strategy? Thank you very much.

Can you hear me? Yes, we can hear you. Sorry about that. And this is Narisawa from Mainichi.

And I have a question about games segment.

And PlayStation 5 um celebrating a 6th anniversary since 2020. And then also this year, the and the performance is quite good and then you are looking to expand the install base. And as for can you talk a little bit about the future strategy?

[Translator]: This year, we are in year 6 since the launch. PS5 has been growing in its install base. Our view is that, compared to conventional console life cycles, looking at the PS4 life cycle, it seems to be getting longer and longer. Especially the PS4, which was launched in 2013, and it's been over a decade since then. There are many active users enjoying the console, and they are enjoying the other consoles. From that perspective, we believe that the PS5 is only in the middle of the journey. We are really planning to expand it even further. As for the year-end sales season, and thinking about the customer lifetime value, and then also thinking about the profitability we want to promote so that we will expand the install base. As for the future launches and successors, and then we are not in a position to make any comments about that. That's all we have.

Thank you very much.

This year.

And we are in year 6 since the launch, and then PS5 has been.

Uh, growing in its installed base, and our view is that.

Operator: Especially the PS4, which was launched in 2013, and it's been over a decade since then. There are many active users enjoying the console, and they are enjoying the other consoles. From that perspective, we believe that the PS5 is only in the middle of the journey. We are really planning to expand it even further. As for the year-end sales season, and thinking about the customer lifetime value, and then also thinking about the profitability we want to promote so that we will expand the install base. As for the future launches and successors, and then we are not in a position to make any comments about that. That's all we have. This concludes the Q&A session for the media. The Q&A session for the investors and analysts will commence at 4:40 PM.

And compared to conventional console life cycles, looking at the PS4 life cycle, it seems to be getting longer and longer.

And especially the PS4, which was launched in 2013. It has been over a decade since then, but there are many active users enjoying the console.

In the middle of the journey, and then we, uh, really planning to expand it even further. As for the year-end sales season,

And thinking about the customer lifetime value, and then also thinking about the profitability, we want to promote so that we will expand the installed base.

Operator: This concludes the Q&A session for the media. The Q&A session for the investors and analysts will commence at 4:40 PM. We will soon begin the Q&A session for investors and analysts. Please remain on standby. Thank you for waiting. We will now take questions from investors and analysts. I am Kondo from the IR Group, and I will serve you as moderator. Thank you. The same three speakers from the media session will be responding to your questions. We will now begin the Q&A session. If you have questions, please limit yourself to two questions per person. If you have a question, please click on the raise a hand button on your web screen. SMBC Nikko Katsura-san, please go ahead.

And as for the, uh, future launches and successors, we are not in a position to make any comments about that. Then that's all we have.

So, this concludes the Q&A session for the media.

And the Q&A session for the investors and analysts will commence at 4:40 PM.

Operator: We will soon begin the Q&A session for investors and analysts. Please remain on standby. Thank you for waiting. We will now take questions from investors and analysts. I am Kondo from the IR Group, and I will serve you as moderator. Thank you. The same three speakers from the media session will be responding to your questions. We will now begin the Q&A session. If you have questions, please limit yourself to two questions per person. If you have a question, please click on the raise a hand button on your web screen. SMBC Nikko Katsura-san, please go ahead. Thank you very much. This is Katsura from SMBC Nikko. I would like to ask about G&NS and then I&SS. The first question is about G&NS. Apart from the JPY 14.9 billion impairment, the operating income for Q2 is 15.3%.

We will soon begin the Q&A session for investors and analysts. Please remain on standby.

Thank you for waiting. We will now take questions from investors and analysts.

I am Condo from the IR group, and I will serve as your moderator. Thank you.

The same three speakers from the media session will be responding to your questions.

And we will now begin the Q&A session if you have a question uh and then uh please limit yourself to 2 questions per person. And if you have a question, please click on the raise a hand button on your WebEx screen.

Ryosuke Katsura: Thank you very much. This is Katsura from SMBC Nikko. I would like to ask about G&NS and then I&SS. The first question is about G&NS. Apart from the JPY 14.9 billion impairment, the operating income for Q2 is 15.3%. Q1 is 15.8%. You are able to achieve this high level of profit without major titles. This could be a threshold. Can you talk a little bit about how do you see it? Are there any factors contributing to this great performance? That's the first question. Also, the land price is increasing. That might have the negative impact on the PS5, the hardware profitability. What's your plan for the remainder of the years and next fiscal year? With regards to I&SS, you said that you are going to strike a good balance between business expansion and the profitability improvement. In North America, smartphones seem to be doing really well. Three months ago, there was a lot of news. With regards to changes in the geopolitical situation, what sort of plans are you planning to take for the midterm? Do you have any updates? Those are the two questions. Thank you.

In SMBC Nikko, uh, please go ahead.

Thank you very much.

And this is Kasa from SMBC Nikko.

Is um, about gns.

Operator: Q1 is 15.8%. You are able to achieve this high level of profit without major titles. This could be a threshold. Can you talk a little bit about how do you see it? Are there any factors contributing to this great performance? That's the first question. Also, the land price is increasing. That might have the negative impact on the PS5, the hardware profitability. What's your plan for the remainder of the years and next fiscal year? With regards to I&SS, you said that you are going to strike a good balance between business expansion and the profitability improvement. In North America, smartphones seem to be doing really well. Three months ago, there was a lot of news.

Um, apart from the ¥14.9 billion impairment, the operating income for the second quarter is 15.3%, and in Q1 it was 15.8%. You were able to achieve this high level of profit without major titles, and this could be a threshold.

And can you talk a little bit about how you see it? And are there any factors contributing to this great performance? That's the first question. And then also,

and,

And the land fashion price, uh, is increasing, and then that might have the negative um, uh, impact on the uh, the PS5, the hardware profitability. So what's your plan for the uh next? This remainder of the year, and then next fiscal year and then with regards to the inss and you said that you are going to strike a good balance between business expansion and the profitability Improvement and in North America,

Uh, smartphones, uh, seem to be doing really well.

Operator: With regards to changes in the geopolitical situation, what sort of plans are you planning to take for the midterm? Do you have any updates? Those are the two questions. Thank you. The first, I would like to take the questions on game. The profitability in Q2, the major contributing factor is the forex, network service, and SNNA. There was a reduction in M&A expenses. From that perspective, we were able to realize a relatively high rate of profitability. Whether this is sustainable or not, that is the question. Basically, the network service, which commands a higher profit, software, and especially a first-party software, if they perform really well, we should be able to maintain a high level of profitability.

But, uh, three months ago, there were a lot of news.

[Translator]: The first, I would like to take the questions on game. The profitability in Q2, the major contributing factor is the forex, network service, and SNNA. There was a reduction in M&A expenses. From that perspective, we were able to realize a relatively high rate of profitability. Whether this is sustainable or not, that is the question. Basically, the network service, which commands a higher profit, software, and especially a first-party software, if they perform really well, we should be able to maintain a high level of profitability.

And with regards to changes in geopolitical situation what sort of a a plans that you're planning to take for the midterm and then do you have any updates? So those are the 2 questions. Thank you. But first

Let's take the questions on the game.

and the profitability in Q2,

And the major contributing factor is the Forex and network service and then and a and there was a reduction in m&a uh expenses. And so from that perspective, we were able to realize a high relatively High, uh, rate of profitability. Whether this is a sustainable or not, that is the question.

And basically, the network service, which commands the higher profit, and then software.

Operator: With regards to memory prices, with the potential impact on the hardware profitability for this fiscal year, we have already secured all the parts that we need. Because the market continues to fluctuate, we keep a close eye on the situation on the market. Of course, the supplies, parts, and their prices, when they go up, of course, that will have an impact on the profit of the hardware. For the FI as the next fiscal year onward, we have already achieved the 80 million install base for PS5. Assuming this will grow next year, instead of additional hardware profitability, we want to really continue to monetize the install base that we have already secured. I think that would be the priority. The second question will be addressed by Horii-san.

And especially with first-party software, if they perform really well, we should be able to maintain a high level of profitability.

[Translator]: With regards to memory prices, with the potential impact on the hardware profitability for this fiscal year, we have already secured all the parts that we need. Because the market continues to fluctuate, we keep a close eye on the situation on the market. Of course, the supplies, parts, and their prices, when they go up, of course, that will have an impact on the profit of the hardware. For the FI as the next fiscal year onward, we have already achieved the 80 million install base for PS5. Assuming this will grow next year, instead of additional hardware profitability, we want to really continue to monetize the install base that we have already secured. I think that would be the priority. The second question will be addressed by Horii-san.

And with regards to the memory prices and then um with the in potential impact on the hardware profitability and then for this third, uh, first square and we have already secured all the parts uh that we need but because the uh the market uh, is continued to fluctuate. So we keep a close eye on the situation on the market and of course, the supply, the name parts, and then their prices. Uh, go when they go up and of course that will have an impact on the

A profit of the hardware for the NFI as an next physical year and onward.

And we have already achieved the 18 million install base for PS5, and assuming this will grow next year.

In.

Instead of additional hardware profitability and we want to really continue to monetize the installed base that we have already uh, secure. And I think that would be the priority. And the second question uh will be addressed by Horizon.

Operator: Thank you very much for your question. First, the first half of the question, the business expansion for the next year, enhancement of the investment efficiency. We have been able to manage these quite well this year. Especially on the expenses side, we have been able to restrain the expenses so that we can generate the sales growth versus previous year. Yes, we want to maintain this, further improve into the next year. As for our response to the geopolitical risks continuously, with regards to production in the US, we want to ensure the quality so that we can produce in a stable way. Trying to do that in-house, that would be really difficult to achieve.

Naoya Horii (Sony Gr: Thank you very much for your question. First, the first half of the question, the business expansion for the next year, enhancement of the investment efficiency. We have been able to manage these quite well this year. Especially on the expenses side, we have been able to restrain the expenses so that we can generate the sales growth versus previous year. Yes, we want to maintain this, further improve into the next year. As for our response to the geopolitical risks continuously, with regards to production in the US, we want to ensure the quality so that we can produce in a stable way. Trying to do that in-house, that would be really difficult to achieve.

Thank you very much for your question.

First, the first half of the question, so the the business expansion for the next year and then also enhancement of the investment efficiency and we have been able to manage these quite well, this year. And then especially on the expenses side. We had been able to restrain the expenses so that we can generate the uh, sales growth versus previous year. And yes, we want to maintain uh, this and then further improve uh, into the next year.

And as for the geog, our response to the geopolitical risks.

Continuously.

Operator: However, working closely with the different partners or making a joint investment, and what else we can do to really address this issue of the US production, there is no clear answer, but we will continue to explore all the options. Thank you. Next, from Nomura Securities, Okazaki-san. This time, the impairment loss, Bungie's intangible assets was reflected in that. In the balance sheet, how much assets do you still have? What is the risk of the impairment loss? The second question has to do with the PlayStation 5. In Q1 and Q2, I think you sold more than in the previous year. Toward the end of the year, you said you're going to expand. Well, are you aiming to have an upward revision, or is the sales going to be more than previous year?

Naoya Horii (Sony Gr: However, working closely with the different partners or making a joint investment, and what else we can do to really address this issue of the US production, there is no clear answer, but we will continue to explore all the options. Thank you.

And with regards to production in the U.S., we want to ensure the quality so that we can, uh, produce in a stable way, uh, and trying to do that, uh, in-house. That would be really difficult to achieve. However,

And working closely with the different partners or making a joint investment.

and,

Operator: Next, from Nomura Securities, Okazaki-san.

And what else can we do, uh, to really address this issue of U.S. production? There's no clear answer, but we will continue to explore all the options. Thank you.

Next.

Yu Okazaki: This time, the impairment loss, Bungie's intangible assets was reflected in that. In the balance sheet, how much assets do you still have? What is the risk of the impairment loss? The second question has to do with the PlayStation 5. In Q1 and Q2, I think you sold more than in the previous year. Toward the end of the year, you said you're going to expand. Well, are you aiming to have an upward revision, or is the sales going to be more than previous year?

so, this time,

Tangible assets were reflected in that, in the balance sheet.

Um, how much assets do you still have? And what is the risk of the impairment loss?

the second question, has to do with the PlayStation 5,

Operator: First, on the impairment loss, Bungie, this is an impairment loss of Bungie, the intangible assets as well as the tangible assets. They are the target for the impairment loss. Goodwill, that is supported by the whole game segment. There will not be any impairment loss for the goodwill. For this time, Destiny 2, which is a game performance, did not reach the expectation when we acquired Bungie. The balance, the assets, well, more specific, it's very difficult to give you specifics. Yes, we still have some intangible assets. The question of whether there's still any risk remaining or not, Marathon, which is going to be launched, and Destiny 2, the performance, if the performance is not going to reach what we expect, of course, there is a risk of impairment loss.

[Translator]: First, on the impairment loss, Bungie, this is an impairment loss of Bungie, the intangible assets as well as the tangible assets. They are the target for the impairment loss. Goodwill, that is supported by the whole game segment. There will not be any impairment loss for the goodwill. For this time, Destiny 2, which is a game performance, did not reach the expectation when we acquired Bungie. The balance, the assets, well, more specific, it's very difficult to give you specifics. Yes, we still have some intangible assets. The question of whether there's still any risk remaining or not, Marathon, which is going to be launched, and Destiny 2, the performance, if the performance is not going to reach what we expect, of course, there is a risk of impairment loss.

In Q1 and Q2, um, I think you sold more than in the previous year, but toward the end of the year, you said you're going to expand. Well, are you, um, aiming to um, have an upward um, revision, or is the sales going to be more than the previous year? First on the impairment loss: Bungee. This is an impairment loss of Bungee, the intangible um, assets as well as the tangible um, assets. So, they are the target for the impairment loss and Goodwill. Um, that is reflected, that is supported by the whole, uh, game um, segment. So, there will not be any impairment loss for the Goodwill. So, for this time, uh, Destiny 2, which is a game.

Uh, performance.

did not, uh,

Uh, we reached the expectation that we had when we acquired Banji. So, the balance, uh, the assets, well, uh, more specifically, it's very difficult to give you specifics.

But, uh, yes, we still have some intangible assets and the question of whether there is still any risk, uh, remaining or not.

Marathon, which is going to be launched, and Destiny 2.

The uh, the performance.

Operator: We don't believe that this will impact the whole game segment, at least at this point in time. Your second question was about the install base in Q1 and Q2. It was more than in the previous year. 50 million units is the goal we have for the year. The number of units we believe we have forecasted for this year, we believe we can reach that. Thank you. Thank you. JP Morgan, from JP Morgan, Ayata-san, please. Thank you very much. My name is Ayata from JP Morgan. I have a question about games and I&SS. One question each. For games, as has been discussed earlier, network service sales in dollar terms increased by 35% in Q2. What would be the breakdown, if possible? I would like to know. 2 years ago, there was a price increase. Maybe there's an effect from that.

[Translator]: We don't believe that this will impact the whole game segment, at least at this point in time. Your second question was about the install base in Q1 and Q2. It was more than in the previous year. 50 million units is the goal we have for the year. The number of units we believe we have forecasted for this year, we believe we can reach that. Thank you.

If the performance uh uh is uh not going to reach what we expect. Of course, there is a, a risk of impairment loss, but we don't believe that this will impact uh the whole game um, segment at least at this point in time. The second question that was about the install base

Uh, in Q1 and Q2, uh, it was more than in the previous, uh, year.

So, 105, uh, 50 million units is the uh.

Goal: We have for the year.

Operator: Thank you. JP Morgan, from JP Morgan, Ayata-san, please.

And that the number of units, we believe, we have forecasted for this year. We believe we can reach that. Thank you.

Thank you.

Junya Ayada: Thank you very much. My name is Ayata from JP Morgan. I have a question about games and I&SS. One question each. For games, as has been discussed earlier, network service sales in dollar terms increased by 35% in Q2. What would be the breakdown, if possible? I would like to know. 2 years ago, there was a price increase. Maybe there's an effect from that. The shift toward the higher-priced products or the number of paying subscribers increase. Well, I think these are the possible items. What would be the breakdown in terms of priority? I&SS, in the first half, it seems that there is some customers brought forward the purchase of the components. In Q3, the input of wafers from 155 to 160, there seems to be a shift. Against this backdrop, toward the US and the Chinese market, what would be your take on the market conditions? I am sure there's an upside. Please explain the risks and upside both. Thank you.

JP Morgan from JP Morgan, ayatan, please.

Thank you very much.

My name is Ayata from JP Morgan. I have a question about the games and inss: 1 question each for game.

As has been discussed earlier, network service sales in dollar terms.

Operator: The shift toward the higher-priced products or the number of paying subscribers increase. Well, I think these are the possible items. What would be the breakdown in terms of priority? I&SS, in the first half, it seems that there is some customers brought forward the purchase of the components. In Q3, the input of wafers from 155 to 160, there seems to be a shift. Against this backdrop, toward the US and the Chinese market, what would be your take on the market conditions? I am sure there's an upside. Please explain the risks and upside both. Thank you. For the network service and the factors contributing to the increase in sales, as you rightly said, price comes at the top of the list, the price increase. Impact still lingers.

Increased by 35% in the second quarter. And what, what would be the breakdown? If possible, I would like to know, by 2 years ago there was on the price increase. Maybe there's an effect from that and then.

The shift toward the higher, uh, price, uh, products or the number of, uh, uh, uh, paying uh, uh, subscribers, uh, increase. Well, I think these are the possible, uh, items. So, what will be the breakdown in terms of priority? And I ins

In the first half, it seems that, uh, there are some customers who brought forward, uh, the purchase of the components. But in the third quarter,

The input of wafers.

from 155 to 1,060 there seems to be a shift, so

Junya Ayada: For the network service and the factors contributing to the increase in sales, as you rightly said, price comes at the top of the list, the price increase. Impact still lingers. Then the number of subscribers or users increased compared to the previous year and the product mix. Tier 2 and Tier 3, higher tier users, we have more and more people going to the higher tiers. I think those are the contributing factors for the increased sales. Well, there's a factor contributing to the increase in the operating income. That is to say, acquisition of the contents, efficient way of acquisition, looking at the data, that contributed to the operating income improvement. I&SS, please.

Against this backdrop, what is your take on the market conditions in the U.S. and the Chinese market? I am sure there is an upside, so please explain the risks and upside as well. Thank you for the network service and the factors contributing to the increase in sales, as you rightly said.

Price comes at the top of the list: the price increase.

Operator: Then the number of subscribers or users increased compared to the previous year and the product mix. Tier 2 and Tier 3, higher tier users, we have more and more people going to the higher tiers. I think those are the contributing factors for the increased sales. Well, there's a factor contributing to the increase in the operating income. That is to say, acquisition of the contents, efficient way of acquisition, looking at the data, that contributed to the operating income improvement. I&SS, please. Thank you for your question. As you rightly pointed out, in the first half, the shipment, the sensors' shipment exceeded what we expected. For the full year forecast, we place it unchanged.

Uh, the impact still, uh, lingers, and then the number of subscribers, so users increased compared to the previous year. And the product makes tier 2 and tier 3, higher tier users.

Uh, we have more and more people going into the higher tiers. I think those are the contributing factors for the increase, uh, sales. Well, there's a factor contributing to the increase in the operating income. That is to say.

Position of the contents, efficient way of acquisition.

[Translator]: Thank you for your question. As you rightly pointed out, in the first half, the shipment, the sensors' shipment exceeded what we expected. For the full year forecast, we place it unchanged. The supply chain of the set, because of the US tariffs or the shift in the production base, because of these, there seems to be a certain level of opaqueness, lack of clarity. What we shipped, some of them go directly to the final markets. Some of them still linger in the supply chain. We have to look at this. The Q3, we will continue full capacity wafer import. Opportunistically, if things go well, we can see the increase in sales. From next fiscal year onwards, well, of course, we can think of accumulating the strategic inventory as well. About the amount, volume of the input, we look at these factors. About customers, well, I cannot mention each and individual customer's situation. Generally, as has been reported in the media, depending on the customers, there are ups and downs.

Looking at the data that contributed to the operating income improvements and insights, please.

Thank you for your question.

As you pointed out,

In the first half of the shipment.

The sensors shipment.

exceeded what we expected, and for the full year forecast,

Operator: The supply chain of the set, because of the US tariffs or the shift in the production base, because of these, there seems to be a certain level of opaqueness, lack of clarity. What we shipped, some of them go directly to the final markets. Some of them still linger in the supply chain. We have to look at this. The Q3, we will continue full capacity wafer import. Opportunistically, if things go well, we can see the increase in sales. From next fiscal year onwards, well, of course, we can think of accumulating the strategic inventory as well. About the amount, volume of the input, we look at these factors. About customers, well, I cannot mention each and individual customer's situation. Generally, as has been reported in the media, depending on the customers, there are ups and downs.

we uh, place it unchanged.

The supply chain of the set has been affected because of the U.S. tariffs.

The shift in the production base because of these factors seems to indicate a certain level of opaqueness and lack of clarity.

So what we shipped?

but,

That some of them go directly to the final markets, and some of them still, uh, uh, uh, uh, linger in the supply chain. So we have to look at this and the third quarter.

We will continue, uh, full capacity wafer.

Import opportunistically if things go well.

We can see the increase in sales, and then from next fiscal year onwards. Well, of course, we can think of accumulating the strategic inventory as well.

So, about the amount of volume of the input, we look at these factors about customers. Well, I cannot mention each and individual customer's situation, but generally,

As has been reported, uh, in the media.

Operator: The smartphone market is still on the recovery track, gradual recovery track. That's our understanding. At this point in time, in terms of market and customers, North America seems to offer bigger chance and opportunities. Thank you. We will take the next question. Ezawa-san from Citigroup Securities. This is Ezawa from Citigroup Securities. We have 1 question, big question for game. There was a mention of treating R&D capital as an expenses. Can you talk a little bit more about that? Is this related to some sort of impairment? The titles related to this, if there are any specific titles related to this, and if you could talk about them, that would be great. Furthermore, the development asset capitalization. As we run your business, will you foresee this will happen more often?

[Translator]: The smartphone market is still on the recovery track, gradual recovery track. That's our understanding. At this point in time, in terms of market and customers, North America seems to offer bigger chance and opportunities. Thank you.

Depending on the customers, there are ups and downs.

And the smartphone market is still on the recovery track, a gradual recovery track. That's our understanding.

At this point in time, in terms of market and customers in North America.

Operator: We will take the next question. Ezawa-san from Citigroup Securities.

Seems to offer a bigger chance and opportunities. Thank you.

So, we will take the next question.

Kota Ezawa: This is Ezawa from Citigroup Securities. We have 1 question, big question for game. There was a mention of treating R&D capital as an expenses. Can you talk a little bit more about that? Is this related to some sort of impairment? The titles related to this, if there are any specific titles related to this, and if you could talk about them, that would be great. Furthermore, the development asset capitalization. As we run your business, will you foresee this will happen more often?

Is our son from CT Group Securities?

This is Saba from State Group Securities.

And in, uh, we have one question. Big question for the game.

and,

So there was a mention of the uh treating R&D um Capital um in um as an expenses, can you talk a little bit more about that and is this related to some sort of impairment?

Or, and also the title related to this. If there are any specific titles related to this, uh, and if you could talk about them, that would be great. And then furthermore,

and also the, um,

the cap.

And development asset capitalization.

uh,

Operator: That is the one big question. The next question is also, this has to do with the development asset. If you look at the supplementary presentation, and when you look at the depreciation by segment, it appears that there's no apparent increase. However, the depreciation of the development is not really included, I believe. The capitalization of a development for the game base, what would be the scale of the asset for the gaming development? Thank you for your questions. The capitalization and then correction. This is not attributable to the nature of the business. Korenaga-san, we'll talk more about the details of the revision. Thank you for the question. This value is not an impairment of asset. In the past, there was the network development, which was treated as the intangible asset.

Kota Ezawa: That is the one big question. The next question is also, this has to do with the development asset. If you look at the supplementary presentation, and when you look at the depreciation by segment, it appears that there's no apparent increase. However, the depreciation of the development is not really included, I believe. The capitalization of a development for the game base, what would be the scale of the asset for the gaming development?

And as we run your business, then will you, will you? Will you, will you, um, foresee? This will happen more often?

And that is the one big question. The next question is also, um, this has to do with the, um,

The development asset. And if you look at the supplementary presentation,

[Translator]: Thank you for your questions. The capitalization and then correction. This is not attributable to the nature of the business. Korenaga-san, we'll talk more about the details of the revision. Thank you for the question. This value is not an impairment of asset. In the past, there was the network development, which was treated as the intangible asset.

And when you look at the depreciation by segment, it appears that there's no apparent increase. However, in the appreciation of the development is not really included. I believe and the capitalization of a development for the game based what would be the scale of the uh the asset for the gaming development? Thank you for your questions.

So, the capitalization and then correction.

And this is not attributable to the nature of the business.

this is,

In, we'll talk more about the, uh, the details of the revision. Thank you for the question.

so, this

Value.

Is not an independent asset, and in the past.

Operator: Part of that should not have been capitalized. We found out. That's why for the past years, for this fiscal year, we made the correction in one go. Specifically, the network-related asset and R&D are capitalized. Console and hardware R&D are treated as expenses. This treatment was mistakenly done in the past, which we made a correction retroactively. That's all. Through operational improvements, we will prevent the recurrence. We believe that this will not happen again. The next one is the game capitalization, the depreciation or amortization. The depreciation of a game itself. We do this in accordance with the rules. It's not that all the games are capitalized. We will work closely with the auditing firm.

[Translator]: Part of that should not have been capitalized. We found out. That's why for the past years, for this fiscal year, we made the correction in one go. Specifically, the network-related asset and R&D are capitalized. Console and hardware R&D are treated as expenses. This treatment was mistakenly done in the past, which we made a correction retroactively. That's all. Through operational improvements, we will prevent the recurrence. We believe that this will not happen again. The next one is the game capitalization, the depreciation or amortization. The depreciation of a game itself. We do this in accordance with the rules. It's not that all the games are capitalized. We will work closely with the auditing firm.

And there was the network development, which was treated as the intangible asset, and then part of that.

And then for this fiscal year, we made the correction in one go and specifically.

The network related asset.

And, uh, R&D, uh, are capitalized, but console and hardware, uh, R&D are treated as expenses.

So this treatment, uh, was mistakenly done in the past and which

We, uh, made a correction retroactively.

Uh, that's all.

And through operational improvements, we will prevent the recurrence. So we believe that this will not happen again.

and the next 1 is,

The game capitalization and then the depreciation for monetization. So, uh, the depreciation that we gave itself.

And we do this in accordance with the roles, so it's not that, you know, all the games are capitalized.

Operator: At the stage of the development, basically, we will be able to finalize the value of the asset later in the process. In terms of value, it's not really that high. On an annual basis, we believe the tens of billions of JPY, that level. As for the depreciation expenses, when we launched the contents, we started to depreciate. That is the nature of the business. Thank you. We have very little time left. The next person will be the last person to ask questions. Please only ask one question. From Goldman Sachs Securities, Munakata-san. This is Munakata from Goldman Sachs Securities. Thank you for this opportunity. One question on G&NS. The full year operating profit, I think it was JPY 500 billion. The tariff impact was not included in the forecast.

And we will work closely with the auditing firm.

[Translator]: At the stage of the development, basically, we will be able to finalize the value of the asset later in the process. In terms of value, it's not really that high. On an annual basis, we believe the tens of billions of JPY, that level. As for the depreciation expenses, when we launched the contents, we started to depreciate. That is the nature of the business. Thank you.

So at the stage of the development, we will be able to finalize the value of the asset, uh, better in the process. So in terms of value, it's not really that high on an annual basis.

and we believe the tens of billions in tens of billions of billions of yen that that level

And then, as for the depreciation expenses,

Operator: We have very little time left. The next person will be the last person to ask questions. Please only ask one question. From Goldman Sachs Securities, Munakata-san.

So, when we launched the contents, we started to depreciate, and that is a major part of the business. Thank you.

Minami Munakata: This is Munakata from Goldman Sachs Securities. Thank you for this opportunity. One question on G&NS. The full year operating profit, I think it was JPY 500 billion. The tariff impact was not included in the forecast. When you consider these items, I believe that the profitability has improved. The current platform, I think it's looking at hardware and other services, which the prices are going up. By looking at the competitors' trends, next year, after next year, in order to improve your profitability, what will be the upside? It will be probably the game contents and these items. Are you planning to revise the prices of the game contents, for example?

So, uh, we have very little time left, so the next person will be the last person to ask questions. Please only ask one question from Goldman Sachs Security.

This is Munekata from Goldman Sachs Securities. Thank you for this opportunity. Um, one question on G and NS.

So the full year operating profit, I think it was $500 billion, but uh, it...

Operator: When you consider these items, I believe that the profitability has improved. The current platform, I think it's looking at hardware and other services, which the prices are going up. By looking at the competitors' trends, next year, after next year, in order to improve your profitability, what will be the upside? It will be probably the game contents and these items. Are you planning to revise the prices of the game contents, for example? Thank you very much for the question. The game business for next year, well, first, we have to focus on the year-end season and try to expand the installed-based units so that we can have 90 million units by the time we start next year. The upside and downside. The upside for next year, the first-party contents, Insomniac Games is developing that. Marvel's Wolverine will be launched.

The tariff impact was not included in the forecast.

And, uh, when you consider these, uh, items.

I believe that the profitability has improved.

And the, uh, current platform, I think it's looking at, uh, hardware and other services, uh, which the prices are going up. So, uh, by looking at the competitors on trends.

Um, next year, after next year, in order to improve your profitability, what will be the upside? Uh, it will be probably the game content.

[Translator]: Thank you very much for the question. The game business for next year, well, first, we have to focus on the year-end season and try to expand the installed-based units so that we can have 90 million units by the time we start next year. The upside and downside. The upside for next year, the first-party contents, Insomniac Games is developing that. Marvel's Wolverine will be launched.

And these, uh, items, uh, are you planning to revise the prices of the game contents? For example, thank you very much for the question.

The game uh business. Uh, for next year. Well, first uh we have to focus on the uh year end uh season and try to expand the in total B installed based units.

So that, uh, we can have 90 million units, uh, by the time we start next year,

The upside and downside.

The upside, uh, for next year. The first-party content.

Operator: Tent Pole contents, that's there. Marathon, it's a live service. If we can be launched this year, next year, I think we will enjoy revenue, profitability. On the other hand, the market situation. Somebody else asked this question. The components and the supply chain are not very transparent. We have to be careful about that, looking at the profitability, how to balance that. Going forward, when we plan next year's strategy, we need to take that into account. As for prices, I don't have anything that I can comment. Thank you very much. Since it's time, we'd like to conclude Sony Group Corporation's consolidated financial results presentation. Thank you very much.

[Translator]: Tent Pole contents, that's there. Marathon, it's a live service. If we can be launched this year, next year, I think we will enjoy revenue, profitability. On the other hand, the market situation. Somebody else asked this question. The components and the supply chain are not very transparent. We have to be careful about that, looking at the profitability, how to balance that. Going forward, when we plan next year's strategy, we need to take that into account. As for prices, I don't have anything that I can comment. Thank you very much.

The Insomniac studio is developing the Wolverine, which will be launched.

So, 10 Pole.

Uh, that's there a marathon.

Uh, the live. It's a live service. So if we can be launched this year or next year, I think we will enjoy revenue profitability. On the other hand,

The market situation. Uh, somebody else asked this question: the components and the supply chain are not very transparent, so we have to be careful about that. Looking at the profitability, how do we balance that?

So, going forward, um, when we, uh, plan next year's.

Operator: Since it's time, we'd like to conclude Sony Group Corporation's consolidated financial results presentation. Thank you very much.

Um, strategy, we need to take that into account as for prices. I don't have anything that I can comment on. Thank you very much.

Uh, since it's time.

Results. Presentation. Thank you very much.

Q2 2025 Sony Group Corp Earnings Call

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