In an overall challenging global economy, Sony Group recently released financial results for the first quarter of fiscal 2026. The company reported a solid 8% or ¥216.2 billion of revenue growth for a total revenue in the quarter of ¥2.83 trillion. Even more impressive, the company reported that net income grew 32%. While operations did improve, the lion’s share of these overall gains was due to a favorable foreign exchange rates and the return of tariffs after the Supreme Court struck down the Trump administration’s “reciprocal tariffs” program as illegal.
Still, Sony Group had a lot of positives to talk about.
Read more on Sony Group’s fiscal 2026/Q1 results…
Sony celebrated a strong first quarter as its management team successfully navigated challenging global macroeconomic issues, such as global softening in demand, spiking inflation, collateral damage from the Iran war – including the closing of the Strait of Hormuz – and more. But along with these headwinds, the company also benefited from a couple of strong tailwinds, including the return of a substantial amount of tariffs from the U.S. and the weakening of the yen, which boosted the results of its chips, music, and games business.
Increased Guidance for Annual Operating Profit
The news in the quarter was so good that the company decided to upgrade its guidance for the full fiscal year to ¥1.7 trillion (US$10.8 billion) in operating profit. That was a ¥100 billion upgrade over the previous forecast of ¥1.6 trillion in operating profit for the year. Just like Wall Street in the U.S., investors in Japan like when a company says we’re going to be even more profitable than we originally predicted.
However, the company warned that it is still determining the damage from the recent earthquake that hit Kumamoto Prefecture, where Sony has facilities.
CFO Says Positive Tailwinds Should Continue
Lin Tao, Sony’s Chief Financial Officer (the first woman to ever hold the position), told analysts on the earnings call that most of the ¥120 billion increase in the projected annual operating profit would continue to result from the “positive impact from the U.S. tariff refunds and foreign exchange gains,” according to a report by the Nikkei. Of the total benefit from the return of tariffs, about 70% of that was received in the first quarter.
Shares in Sony stock jumped 4% when the Q1 earnings were announced. However, by the end of the day, they settled back down to 0.6% lower than the previous day’s close.
Where Revenues Grew the Most
As I noted above, revenues grew a solid 8.2% or ¥216.2 billion in Q1 of fiscal 2026 to ¥2.83 trillion. This was a good increase over revenues of ¥2.62 trillion in the same quarter a year earlier. However, on a constant currency basis (taking out the effect of currency exchange rates), revenues actually decreased by 1%. So that foreign exchange (FX) tailwind really helped.
The biggest contributors to revenue growth were the Imaging & Sensing Solutions (+26%) and Sony Music (+21%). Not helping was Sony Pictures, with a revenue decrease of 4%. Helping some, but not much, was Game & Network Services, with revenue up +0.06%.
Minor Gain for Entertainment, Technology & Services
The category that most of us in custom integration know Sony for is their Entertainment, Technology & Services division. While they showed a revenue gain of +1.8%, keep in mind that this was helped by a strong FX tailwind. This was the division that set up a “joint venture” with China’s TCL, transferred Sony’s AV business, and gave TCL majority ownership and control of the division. This was part of Sony’s plan to exit the hardware business to focus on networking and service businesses.
Sony’s senior vice president overseeing corporate planning and control, Naoya Horii, told analysts on the earnings call that Sony would book an added cost of ¥10 billion this fiscal year as part of its recently announced joint venture with TSMC (Taiwan Semiconductor Manufacturing Company) to build a new manufacturing site in Kumamoto that will manufacture next-generation image sensors for AI. I wrote about the venture here…
Cross-Pollinating Division Success
In discussing Sony’s entertainment success, CFO Tao called analysts’ attention to the success Sony had with the film “Michael,” which is a documentary on the life of the pop icon Michael Jackson. But as Tao noted, streaming counts for Jackson’s music – which is co-owned by Sony Group – quadrupled compared with the period prior to the movie’s release.
“There was a big spike among Gen Z…his music has grasped the new generation of fans and will continue to be listened to for years to come,” Tao said. Sony makes a lot of effort to create this kind of cross-pollination of success between divisions.
Concerns Include Earthquakes and Currency Fluctuations
Perhaps the biggest factor driving uncertainty with Sony right now was the recent earthquake that hit the Kumamoto area, where the company has several semiconductor facilities. Local media reported that production at the Kumamoto Technology Center of Sony Semiconductor Manufacturing in Kikuo, near the quake’s epicenter, was immediately suspended after the quake. However, Tao told analysts that operations are set to resume in stages… All should return to their pre-quake levels by the middle of August, or right about now.
Finally, the last area of concern for Sony investors is the current currency volatility in Japan. While Q1 benefited from a favorable foreign exchange rate, that could easily turn around in this later period and become a heavy drag on results.
And that might change everything.
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