LogIn"Their revenue on digital sales, add-on-content, digital downloads are at all-time highs… And yet their margins are at decade-lows. This is just not acceptable."
Image credit: Rokas Tenys/Shutterstock.com
According to CNBC, Sony's market value dropped by $10 billion, decreasing from $120 billion to $110 billion following the quarterly report. The reason for this decline lies in the updated forecast for PlayStation 5 shipments for the fiscal year. Initially projecting 25 million units, Sony now anticipates around 21 million units.
However, despite the changes in shipment forecasts, analysts are "disappointed" with Sony's operating margins. While the company continues to achieve revenue milestones, its significant costs are impacting profits.
"'The shipment forecast cut for PS5 ... is not what is disappointing ... What is disappointing is the low level' of operating margin," stated Atul Goyal, Equity Analyst at Jefferies (via CNBC).
Analysts noted that the profit share was lower compared to previous years, despite PlayStation having ample growth opportunities. The "extremely disappointing" results are partly attributed to high game budgets, which analysts consider a significant factor in the financial performance assessment.
Image credit: Insomniac Games, Spider-Man 2
Serkan Toto, CEO and Founder of Kantan Games, a Tokyo-based company, suggests that costs for hardware production may have decreased, but game budgets have increased due to rising software production costs.
"Their rev (revenue) on digital sales, add-on-content, digital downloads are at all-time highs… And yet their margins are at decade-lows. This is just not acceptable," added Goyal.
Adding to that, we recently reported that Sony's Chief Operating Officer Hiroki Totoki talked to investors and mentioned that the PlayStation division has growth potential but expressed concerns about budgets.
For more information, you can read the report by CNBC and join our 80 Level Talent platform and our Telegram channel and follow us on Instagram, Twitter, and LinkedIn, where we share breakdowns, the latest news, awesome artworks, and more.