Why doesn't Sony Group (6758)'s valuation continue to grow even with the highest profits? Profit cycle model and scenario for the second half of 2026

[Summary]

In the fiscal year ending March 2026, Sony Group's sales and profits increased on a continuing operations basis, with sales of 12,479.6 billion yen and operating income of 1,447.5 billion yen. Furthermore, the company is forecasting operating income of 1.6 trillion yen for the fiscal year ending March 2027, and has announced a maximum share buyback limit of 500 billion yen.

Still, the reason why its stock price is difficult to move in one direction is because Sony is no longer just a game console maker, a semiconductor maker, or a content company. The market is still determining which profit model to use to value Sony.

In this article, we view Sony as a "complex platform company that circulates games, music, movies, anime, and image sensors," and outline the KPIs and risks that investors should look at in the second half of 2026.

First, the conclusion

Sony's investment arguments cannot be explained by PS5 unit sales alone.

What is important is not a temporary increase or decrease in hardware sales, but a structure in which the following three factors generate profits in a cyclical manner.

IP for games, music, movies, anime, etc.
Recurring revenue from PlayStation Network, streaming, etc.
Image sensors that support smartphones, cameras, in-cars, and AI devices

What the market is confused about is whether to view Sony as a ``game stock,'' a ``semiconductor stock,'' or an ``IP/entertainment stock.''

Conversely, if this complexity is understood, there is room for companies to be valued higher than simple hardware companies. On the other hand, risks remain including memory prices, sensor market conditions, dependence on hit movies and games, equity method losses, and recovery of large investments.

What's happening?

On May 8, 2026, the Sony Group announced its financial results for the fiscal year ending March 2026.

On a continuing operations basis, sales were 12,479.6 billion yen and operating income was 1,447.5 billion yen. Operating income increased by 13.4% year on year, and the operating profit margin improved to 11.6%. (Sony Group Financial Results for the Year Ending March 2026)

However, it should be noted that due to the partial spin-off of the financial business, the financial business is shown as a discontinued operation.

On a consolidated basis, the final profit and loss will be shown in the red due to the accounting treatment associated with the spin-off. On the other hand, this does not directly worsen the operating income or cash flow of continuing operations. Sony itself has explained that the accounting treatment does not affect total capital, cash flow, or profit or loss from continuing operations.

Key numbers

Item	Results for the fiscal year ending March 2026	Company forecast for the fiscal year ending March 2027
Sales	12,479.6 billion yen	12,300 billion yen
Operating income	1,447.5 billion yen	1,600 billion yen
Net income from continuing operations	1,030.8 billion yen	1,160 billion yen
Operating profit margin	11.6%	-

In addition, on May 8, 2026, Sony announced a share buyback facility of up to 230 million shares, with a total acquisition limit of 500 billion yen. The acquisition period is from May 11, 2026 to May 10, 2027. (Disclosure regarding share repurchase allowance)

Stock price distortion

After the earnings report, stock prices rebounded, but valuations are still not moving in a straight line.

According to time-series data from Yahoo! Finance, Sony Group's closing price on May 18, 2026 was 3,596 yen, PER on the same day was 18.31 times, and PBR was 2.62 times. The year-to-date high was 4,124 yen on January 6, 2026, and it has not clearly recovered from the high price range even after the financial results. (Yahoo! Finance 6758 Time Series)

There are three perspectives behind this twist.

Market view	Contents
Hardware concerns	Will declining PS5 hardware sales and rising memory prices put pressure on profitability
Expectations for structural change	Network services, software, music, and sensors may support profits
Conglomerate discount	Businesses are diversified and it is difficult to know which multiple to evaluate

In other words, rather than saying that Sony is being sold, it should be seen as a situation where the market has not yet been able to measure the quality of Sony's profits.

Competitive comparison

To understand Sony, it is easier to see its outline compared to Nintendo or Apple.

Nintendo is a company with strong IP such as Mario, Zelda, and Pokemon. While they have strong character assets and are less likely to get caught up in hardware performance competition, their business performance cycles are easily influenced by the timing of updates to their own hardware.

Apple is an ecosystem company that encompasses the iPhone, OS, apps, and services. While the strength of its customer base and service revenue is evaluated, it is subject to the maturation of the smartphone market and regulatory risks.

Sony is not in the middle.

Company	Strengths	Main evaluation axes
Nintendo	Character IP and in-house hardware	IP value, hardware cycle, software sales
Apple	Lock-in of devices, OS, and services	Ecosystem, service revenue, replacement demand
Sony	IP, games, music, movies, sensors, networks	Profit cycle of multiple businesses, capital efficiency, growth investment

The difficulty with Sony is that it cannot be evaluated based on just one business. However, this is also a competitive advantage.

Profit cycle model

Sony today is more of a company that circulates content and technology than a consumer electronics manufacturer.

Key point
        ↓
Key point
        ↓
Key point
        ↓
PlayStation Network、Key point
        ↓
stability
        ↓
IP、Key point

The longer this cycle continues, the more likely Sony will be seen as a platform company that connects IP, data, hardware, and semiconductors, rather than a company that sells one-off products.

Of course, this cycle does not occur automatically. If delays in game development, slump in movies, slowing growth in music streaming, and deteriorating market conditions for sensors combine, being a conglomerate will weigh on its reputation.

How to view PlayStation

If you look at PlayStation only as a business that sells game consoles, it is easy to misunderstand the current status of Sony.

In the Game & Network Services business for the fiscal year ending March 2026, a decline in hardware unit sales was a negative factor in sales. On the other hand, network services and non-first-party game software sales grew, and operating income for the entire business increased 12% year on year. (Sony Group Financial Results Explanation Material for the Year Ending March 2026)

The same document also shows that PlayStation monthly active users in March 2026 increased by 1% year-on-year to 125 million accounts, which was the highest ever for the fourth quarter.

Hardware sales are not the only indicator to look at.

*Monthly active users of PlayStation Network *Software sales and download ratio

Recurring charges such as PlayStation Plus
In-game purchases
Profitability of first party titles
Investment burden for next-generation platform

In the game business for the fiscal year ending March 2027, the company is forecasting an increase in operating income due to an increase in first-party titles and a rebound from impairment losses in previous years, while factoring in a decline in PS5 hardware sales. What is important here is not ``we are weak because hardware sales are decreasing,'' but ``Can we absorb the decrease in hardware with software, networks, and IP?''

Strengths of music, movies, and anime

Sony's music business has revenue streams that include streaming, music publishing, live music, merchandise, and video media platforms.

In the fiscal year ending March 2026, the music business had sales of 2,120.1 billion yen and operating income of 447 billion yen. The financial results report explains the increase in streaming revenue from Recorded Music and Music Publishing, the increase in live events and merchandise, and the contribution from anime and video-related businesses.

Movies and anime don't end with their theatrical release alone.

Hit IP generates profits over multiple years when connected to distribution, licensing, sequels, games, merchandise, music, and overseas expansion.

In this respect, Sony is becoming more similar to a Nintendo-type IP company. However, it differs from Nintendo in that it has a game network that distributes IP, video production, music publishing, and even sensor technology.

Image sensors are input devices in the AI era

The Imaging & Sensing Solutions business had sales of 2,151.5 billion yen and operating income of 357.3 billion yen in the fiscal year ending March 2026. Operating income increased 37% year on year, due to increased sales of image sensors for smartphones and an improved product mix.

For the time being, the main battleground for image sensors will be smartphones. It would be dangerous to leave this out and suddenly talk about AI alone.

However, in the medium to long term, sensors may become more important as input devices in the AI era.

Smartphone camera
Digital camera
Vehicle camera
Industrial equipment
Robotics
Edge AI

In order for AI to understand the real world, it needs an entry point to acquire videos and images. One of the components that plays a key role in this process is the image sensor.

On the other hand, in the I&SS business for the fiscal year ending March 2027, the company expects sales of mobile sensors to decline. It is necessary to pay attention to the slowdown in the adoption of large sensors for smartphones and the impact of memory market conditions.

What has changed with financial spin-offs?

Sony implemented a partial spin-off of Sony Financial Group in 2025.

According to the official page, Sony shareholders as of September 30, 2025 now own two listed stocks: Sony stock and SFGI stock. Additionally, more than 80% of SFGI shares, which were 100% owned by Sony, will be distributed as dividends in kind, and SFGI shares will be listed on the Tokyo Stock Exchange Prime Market on September 29, 2025. (Sony Group Partial Spin-off Materials)

This has great meaning.

Previously, Sony was easily seen as a conglomerate with finance, insurance, and banking interests. After the spin-off, it became easier to see that the company was allocating capital to entertainment, technology, and image sensors.

In fact, official documents state that the purpose of the spin-off is to "specialize in a business portfolio centered on creation" and to concentrate capital allocation on the three entertainment businesses and the image sensor business.

However, by removing the financial business, stable income derived from insurance and banking will be separated from Sony itself. While purification has the potential to improve valuations, it also creates a structure that is more directly exposed to economic and market fluctuations in the entertainment and semiconductor industries.

KPIs to see in the second half of 2026

When looking at Sony in the second half of 2026, investors would like to check the following indicators.

Area	Featured KPI	View
Games	G&NS operating profit margin, PSN monthly active users	Can the decrease in hardware be absorbed by the network and software?
Music	Streaming revenue, music publishing, live performance related	Will recurring revenue and IP revenue continue to grow
Movies/Animation	Product lineup, license revenue	Can hit dependence be leveled out with multiple IPs
I&SS	Mobile sensor sales and operating profit margin	Balance between smartphone market conditions and high added value
Financials	Progress of share buybacks, net cash	Balancing shareholder returns and growth investment
Capital efficiency	ROE and operating profit margin after spin-off	Will the evaluation of the core business proceed after the financial separation

The most important of these are games and sensors.

Will games be able to shift to a structure where profits remain even if the number of hardware units sold decreases? Can sensors compensate for their maturation for smartphones with high added value and new applications? These two points will likely influence the evaluation in the second half of 2026.

Bullish scenario

In the bullish scenario, the following conditions overlap:

Absorb the decline in PS5 hardware sales with software, network, and first-party titles
Music streaming and music publishing continue to grow steadily
Licensing revenue from movie and anime IP is accumulating
Maintain profitability of high value-added sensors in I&SS business
Up to 500 billion yen worth of share buybacks will be evaluated as improving capital efficiency
Business purification after financial spin-off eases conglomerate discount

In this case, Sony is likely to be reevaluated as not just a hardware stock, but as a global conglomerate tech company that combines IP, networks, and semiconductors.

Bearish scenario

In a bearish scenario, the risks are:

PS5 hardware profitability will deteriorate due to rising memory prices
Next-generation platform investment will put pressure on gaming business profits
IP revenue is not growing due to lack of hits for movies, games, and anime.
Demand for smartphone sensors will slow down more than expected
The strong yen depresses overseas profits converted into yen.
Equity method losses and new business burdens continue, including those related to Sony Honda Mobility

What is particularly important to note is that Sony's strength, diversification, can be evaluated as ``difficult to understand'' depending on the market environment.

If the slowdown in individual businesses becomes noticeable before the market evaluates the company as a composite platform, the increase in PER will be easily suppressed.

Summary

The essence of the Sony Group is that it is no longer a company that only sells televisions and game consoles.

Today, Sony has transformed into a company that circulates multiple sources of profit by combining games, music, movies, anime, image sensors, and network services.

What is important when making investment decisions in the second half of 2026 is not just the immediate PS5 sales volume.

The important question is:

Can the decrease in hardware be absorbed by software, network, and IP?
Will IP revenues from music, movies, and anime grow stably?
Will image sensors show room for growth beyond smartphone dependence?
Will the market evaluate the improvement in capital efficiency after the financial spin-off?

If the market understands this structural change more deeply, Sony may be valued as a multi-platform company that connects entertainment and technology, rather than just a gaming stock or a semiconductor stock.

On the other hand, such evaluation takes time. That is why the second half of 2026 will be a period in which companies should carefully monitor the quality of profits and changes in KPIs, rather than short-term fluctuations in stock prices.

Source

This article is for educational and informational purposes only, based on public information. It is not a recommendation or solicitation to buy or sell any specific security or financial product. Although care is taken with accuracy, the content and future investment outcomes are not guaranteed. Final investment decisions should be made at your own judgment and responsibility.