Sony: 3Q17 revenue increased 12% year-on-year, operating profit increased 3.8 times

Sony's operating profit grew 3.8 times as much as last year

According to the financial data released by Sony for the third quarter of 2017 (ending December 2017), Sony's revenue in 3Q17 increased by 12% year-on-year to 672.3 billion yen. Operating profit reached 350.8 billion yen, 3.8 times that of the same period last year, and net profit attributable to Sony shareholders reached 295.9 billion yen.

The reason why operating profit is three times that of last year is that there were large one-time expenses last year. After deducting these expenses, the adjusted operating profit increased by 137.4 billion yen compared with the same period last year, a year-on-year increase of 66.5%.

Except for the mobile phone business, Sony's other businesses have achieved good growth

Sony's multi-business operations have all achieved positive operating profits. In terms of year-on-year growth, except for the mobile phone business, all other businesses have achieved growth, partly due to favorable exchange rates.

Sony raised its full-year 2017 operating profit forecast to 720 billion yen from 630 billion yen in October, partly due to a one-time gain of 13.8 billion yen from U.S. tax reform.

In terms of business segments, Sony also raised its operating profit forecasts for its music, semiconductor and financial services businesses.

In the third quarter, Sony's top three revenue-contributing businesses were gaming and network services, home entertainment and audio, and financial services, contributing 26%, 16%, and 13% of revenue, respectively. The top three operating profit-contributing businesses were gaming and network services, semiconductors, and financial services.

Gaming and online services businesses benefited mainly from the booming software sales

Revenue for the quarter increased by 16% year-on-year, mainly due to the hot sales of the PS4 software business and the impact of exchange rates. Software business sales increased by 41% year-on-year, exceeding the 300 billion yen mark for the first time.

Operating profit for the game and network services business increased by 35.3 billion yen year-on-year to 85.4 billion yen, mainly due to increased sales and favorable exchange rate effects.

PS4 hardware sales have decreased slightly compared to last year, falling from 9.7 million units last year to 9 million units this year.

As of last year (2017), the cumulative sales of PS4 reached 73.6 million units, and the number of PS Plus membership subscribers exceeded 31.5 million.

The company expects PS4 sales to reach 19 million units in fiscal 2017.

Gaming and streaming revenue drove 22% growth in music business

Music business revenue increased 22% year-on-year to 39.3 billion yen this quarter. The mobile game "Fate/Grand Order" continued to contribute greatly to revenue, and streaming revenue continued to grow, up 37% year-on-year. Operating profit increased from 28 billion yen in the same period last year to 39.3 billion yen this year.

The growth of the film and television business was mainly due to the strong sales of television and film business.

Sony's film and television business grew 16% year-on-year to 260.3 billion yen, mainly due to the growth in advertising and subscriptions from the acquired Indian TV sports network and the increase in revenue from the acquisition of Funimation; the hot global box office sales of "Jumanji: Welcome to the Jungle" released by Sony Pictures also made a significant contribution to the growth in revenue.

Operating profit of the film and television business increased by 117.3 billion yen to 10.5 billion yen, mainly due to a one-time goodwill impairment of 10.5 billion yen last year.

Sony's home entertainment and audio business revenue and profit further increased due to strong 4K TV sales and exchange rates

In the third quarter, Sony's home entertainment and audio business revenue increased 22% to 429.8 billion yen, and operating profit increased 20.3 billion yen to 46.2 billion yen. The increase in revenue and profit was mainly attributed to the hot sales of high-end models, especially 4K TVs, and the favorable impact of foreign exchange rates.

Imaging products and solutions business revenue mainly benefited from exchange rates and high-end models

In the third quarter, Sony's imaging products and solutions business revenue increased by 8% year-on-year, and operating profit increased by 4.9 billion yen to 26 billion yen. The increase in revenue and profit was mainly due to exchange rates and high-end models of imaging.

Mobile communications business continues to slump

In the third quarter, due to the decline in Sony's smartphone sales, revenue fell 13% year-on-year, and operating profit fell 5.4 billion yen to 15.8 billion yen. For this reason, Sony lowered its full-year smartphone sales forecast by 1.5 million units to 14 million units, and revenue was also lowered by 40 billion yen to 740 billion yen.

The semiconductor business mainly benefited from the sales growth of mobile phone image sensors

In the third quarter, semiconductor business revenue increased by 7% year-on-year, and operating profit increased by 33.4% year-on-year to 60.6 billion yen. The growth in revenue and profit was mainly due to the increase in sales of mobile phone image sensors.

Sony expects demand for mobile phone image sensors to remain stable in the short term, but will continue to grow with the adoption of dual cameras. Sony remains optimistic about image sensors and expects applications from other fields such as automobiles to increase as the industry develops.

Financial business grew well, with revenue up 17%

Financial business revenue increased 17% to 373.3 billion yen, and operating profit increased 27.3 billion yen to 56.3 billion yen. The increase in operating profit was mainly due to the sale of investment properties and the reduction of gains and losses in the hedge fund market.

Free cash flow continued to improve, mainly due to profit growth, with operating and investment cash flow reaching 237.7 billion yen. Cash flow has improved significantly compared to last year, when cash flow was negative 160.6 billion yen.