Major Square Enix Investor Slams Current Performance, Urges Other Shareholders to Share 'Frank Views' As It Calls for a 'Fundamental Reassessment' of Its Business

3D Investment Partners, which holds roughly a 14% stake in Square Enix, published a 100‑page document calling for a “fundamental reassessment” of the company after identifying stalled revenue and profits and a marked deterioration in earning power — citing declines in operating income, return on equity, excessive fragmentation of the development portfolio, high development costs and weak product/promotional strategies. 3DIP says it has been in dialogue with management since July 2024 but received only a brief reply from President Kiryu in October 2025, and is now soliciting other shareholders’ views to press for concrete countermeasures and a revised medium‑term plan to unlock IP value. The intervention follows recent cost-cutting moves at Square Enix — including mass layoffs, sales of western studios and IP to Embracer, and a stated push to automate QA with generative AI — and signals growing shareholder activism that could force strategic, portfolio and governance changes if management does not produce clearer operational improvements.

Analysis

3D Investment Partners, a roughly 14% shareholder in Square Enix, published a 100-page critique arguing the company has suffered “sluggish” revenue and profit performance and a “significant deterioration in earning power,” citing declines in operating income, return on equity and other key metrics under the current management over the past three years. The activist specifically calls out excessive fragmentation of the development portfolio, weak product design and promotional strategy, inflated development costs and declining tie ratios, and demands a fundamental reassessment of the medium-term plan to better monetize Square Enix’s IP.

3DIP says it has been in dialogue with management since July 2024 but received only a brief reply from President Kiryu in October 2025, and has now gone public to solicit other shareholders’ views; the presentation highlights comparisons with peers (Capcom, Sega, Konami, Bandai Namco, Nintendo) and cherry‑picked critical Metacritic responses, while former exec Jacob Navok echoed the core points that sales underperformed and development costs were too high (citing FF16). The intervention follows recent measures including mass layoffs of 100+ staff, sale of Western studios and IP to Embracer, and a stated plan for 70% of QA to be handled by generative AI by end‑2027 as part of an “aggressive” AI strategy.

The near‑term implication is heightened governance risk and potential for board‑level proposals, accelerated restructuring or further asset rationalization if management does not present credible, quantifiable countermeasures; the sentiment signal is strongly negative (score -0.65) with moderate market impact (0.45), so expect stock volatility and investor scrutiny until operating income, ROE and development‑cost metrics show clear improvement.

Key Decisions for Investors

• Monitor 3D Investment Partners’ next steps and any shareholder resolutions or board responses closely, as escalation could drive near‑term volatility and re‑rating
• Require concrete, measurable guidance on operating income, ROE and development‑cost reductions before adding to positions; consider trimming exposure if management fails to present a credible medium‑term plan
• Assess downside from further studio/IP disposals and cost cuts already underway and model a lower revenue growth scenario until tie‑ratio and product/promotion metrics stabilize
• If management delivers clear execution milestones (quantified cost savings, timeline for AI QA deployment and improved sales guidance), consider re‑entry or incremental exposure, otherwise hedge or remain underweight