DRAM price increase puts pressure, Sony's profit still surged by 22%, raises full-year guidance

Despite facing pressure from soaring memory chip costs, Sony Group achieved strong profit growth thanks to favorable exchange rates and a diversified business portfolio, raising its full-year performance expectations. However, its core gaming hardware business is facing supply chain cost challenges. The Japanese tech and entertainment giant announced on Thursday that its operating profit for the December quarter surged 22% year-on-year to 515 billion yen, exceeding market expectations of 468.9 billion yen. Revenue was 3.71 trillion yen (approximately USD 23.68 billion), slightly above the expected 3.69 trillion yen, marking a 1% year-on-year increase. This represents a strong rebound for Sony following a decline in profits in the previous quarter. Sony subsequently raised its full-year operating profit forecast to 1.54 trillion yen, an increase of 110 billion yen from previous estimates, representing an 8% upward adjustment. The company also raised its annual revenue forecast by 300 billion yen to 12.3 trillion yen, a 3% increase, but maintained its estimate of a 50 billion yen loss due to U.S. tariff impacts. After the earnings report was released, Sony's stock initially rose over 5%, but then reversed to a decline of 0.87%. The gaming business, which is the company's largest source of revenue, showed weak performance, while market research firm TrendForce predicted on Monday that traditional DRAM chip contract prices would soar by 90% to 95% this quarter compared to the previous three months, raising cost concerns for PlayStation console manufacturing. Gaming Business Under Pressure, Hardware Sales Slow Sony's gaming and network services division reported sales of 1.613 trillion yen this quarter, a decrease of 68.7 billion yen year-on-year. This division includes the popular PlayStation home console brand, which is Sony's largest revenue driver. Although this business has benefited from the transition to digital game purchases and growth in PlayStation Plus subscription services in recent quarters, hardware shipment growth has remained sluggish. Sony's hardware business is expected to face headwinds from rising component costs this year. DRAM Price Surge Poses Cost Risks PlayStation consoles rely on dynamic random-access memory (DRAM) chips, which are currently in short supply due to surging demand from artificial intelligence and data center operators. According to a report released by market research firm TrendForce on Monday, traditional DRAM chip contract prices are expected to rise by 90% to 95% this quarter compared to the previous three months. Last month, a top CEO in the semiconductor industry told CNBC that the memory chip shortage is expected to last until 2027. Strong performance in the music and imaging segments partially offset the pressures on the gaming business. Sony's music division reported a 12.6% year-on-year revenue increase for the December quarter, driven by growth in live events, merchandise sales, and streaming services. Meanwhile, the imaging and sensing solutions business saw revenue growth of over 20%. This division focuses on the development and manufacturing of semiconductor-based imaging and sensing technologies