Sony Group Corp. $SONY has issued a disappointing forecast for the upcoming fiscal year, largely due to the increasing burden of tariffs in the United States. Despite optimistic expectations for growth in operating profit, the new data suggests that reality may be less favorable than analysts had anticipated.
On Wednesday, Sony stated it expects tax revenues in the US to amount to 100 billion yen (approximately $700 million) over the fiscal year ending in March 2026. The company forecasts an operating profit of 1.28 trillion yen. However, even excluding the impact of tariffs, this outlook falls short of analysts’ consensus estimate of 1.5 trillion yen and shows little change compared to the previous year's figures.
The issue of US tariffs, which have been imposed on various categories of products, significantly dampens optimistic expectations. This creates additional financial burdens for companies such as Sony, which are already facing challenges in key markets.
Key Points of the Forecast
Operating profit expectation of 1.28 trillion yen;
Tax revenues in the US at 100 billion yen;
Minimal changes compared to previous periods;
Reevaluation of financial reporting to reflect the cessation of business operations in the financial department.
The less-than-optimistic financial forecast coincided with Sony's announcement of a share buyback program worth up to 250 billion yen. Additionally, the company has signaled plans for the partial spin-off of its financial division, which could help reduce costs and improve capital structure.
Sony plans to release its updated financial report on September 29, making this a pivotal event for shareholders and analysts. Starting from this quarter, the financial division will be treated as a discontinued operation in its reporting, aligning with its strategy of business optimization.
Despite the negative forecasts, Sony's stock rose by 3.7% in Tokyo trading on Wednesday. This increase may be connected to a broader trend in Japan, where companies, having accumulated cash reserves over the years, are increasingly conducting share buybacks. This reflects mounting pressure on firms to enhance capital efficiency and shareholder returns.
Japanese firms are under pressure to improve their market capitalization. Share buybacks have emerged as a popular strategy for boosting shareholder value. This also highlights an overall trend in the business environment, where shareholders demand greater returns.
However, the challenges associated with tariffs and internal financial changes place Sony in a position that requires a reassessment of its strategies and approaches. While the current forecasts do not inspire optimism, learning from these ongoing issues may lay the groundwork for future successes.
Looks like tariffs are throwing a wrench in Sony's growth plans—what a tough break!
It's frustrating to see how tariffs are impacting companies like Sony just as they aim for growth.