Sony shares fell after the company reassessed PlayStation 5 sales and released more financial data…

Sony has lost roughly $10 billion in value as shareholders reassess the company’s investment pledge in light of a revised PS5 sales forecast and a lower-than-expected operating margin in its latest fiscal quarter. This news follows controversial comments from the company. According to the latter, the PS5 has entered the “last stage” of its life cycle. This sparked a wave of discontent among PlayStation users on social media.

Despite the PlayStation 5’s current-gen console outscoring the Xbox by a two-to-one ratio, it looks like the PS5 fell short of Sony’s expectations last quarter.

Sony previously indicated that it expects to ship 25 million PS5 units during the 2023 fiscal year. However, due to console sales in the winter quarter, the tech manufacturer adjusted this number to 21 million units. Sony CFO Hiroki Totoki explained the lower-than-expected sales with a “last stage” comment. Claiming that the console will naturally sell less and less until the PS6 comes out. Totoki also stated that there will be no “significant” new first-party titles for the console until at least March 2025.

Sony shares take $10 billion loss on lower-than-expected sales and weak margins

As reported by CNBC, Sony’s shares began to plummet. This resulted in an estimated loss of $10 billion. Lowering the PS5 sales forecast may have played a role in this downgrade. However, analysts say the operating margin of the company’s gaming division actually plays a more significant role. According to CNBC’s calculations, the company’s operating margin in the December quarter was just under 6%. This is a decrease of more than 3% compared to the same period in 2022. It is only half of the operating margin achieved in the highly profitable January-March quarter of 2022. Analysts describe Sony’s operating margin as “near a decade low.”

At the same time, Sony’s game sales and sales of digital content and expansions are doing well, leading many to wonder what exactly could be behind the surprisingly low margins.

There can be several reasons for this. However, software development costs have also been raised as a possible factor, as those costs appear to be rising. They were not offset by lower expenses related to hardware development compared to 2020 and 2021.

This is an absolute low point in terms of the value of the company’s shares. It may come as a shock to many as the PS5 has been incredibly successful and has a significant lead over the Xbox in terms of market share this generation. As the PS5 gets more exclusives this year and Sony cuts back on things like acquisitions and reverse spend, this stock value is expected to stabilize.

Source: CNBC