SONY GROUP CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.73T
• Operating Income: ¥768.93B
• Net Income: ¥609.65B
• EPS: ¥99.83

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Sony Group reported FY2026 Q2 consolidated results under IFRS showing resilient top-line growth and notable margin expansion. Revenue reached 57,295.22 (100M JPY), up 3.5% YoY, while operating income rose 20.4% YoY to 7,689.29 (100M JPY), indicating positive operating leverage. Net income was 5,988.77 (100M JPY), equating to a net margin of 10.4% and basic EPS of 99.83 JPY. Using disclosed revenue and cost of sales, we derive a gross profit of 36,848.71 (100M JPY) and a gross margin of 64.3%, although gross profit itself was not separately reported in XBRL. SG&A expenses were 5,374.37 (100M JPY), 9.4% of revenue, suggesting good cost discipline given the scale of operations. EBITDA was 13,044.90 (100M JPY), for a 22.8% margin, supported by D&A of 5,355.61 (100M JPY). DuPont analysis shows ROE of 7.5% driven by a 10.4% net margin, low asset turnover of 0.159, and high financial leverage of 4.52x, reflecting a large asset base relative to equity. The effective tax rate of 11.5% was below typical statutory levels, aiding bottom-line growth. Operating cash flow was solid at 6,162.89 (100M JPY), roughly in line with net income (OCF/NI = 1.03x), but free cash flow was negative at -286.41 (100M JPY) due to sizable investing outflows. The balance sheet remains equity-light with an equity ratio of 21.3% and total liabilities of 267,830.22 (100M JPY), including 18,439.59 (100M JPY) in short-term loans. Cash and equivalents stood at 29,809.56 (100M JPY), providing liquidity headroom despite limited disclosure on current liabilities. Shareholder returns were meaningful with share repurchases of 2,021.07 (100M JPY) and dividends paid of 549.31 (100M JPY), though aggregate returns exceeded period FCF. The reported payout ratio (61.6%) should be treated cautiously given timing, basis differences, and partial-period earnings. Comprehensive income of 7,303.87 (100M JPY) exceeded net income, implying positive OCI items (e.g., FX or valuation effects). Overall, Sony delivered improved profitability and cash generation quality, while reinvestment needs and leverage remain key watchpoints. Data gaps (e.g., gross profit, R&D, interest expense, current liabilities) constrain depth of analysis; conclusions are based on available figures and derived metrics where appropriate.

Profitability Analysis

ROE_decomposition: Reported ROE is 7.5%, explained by net profit margin 10.4% x asset turnover 0.159 x financial leverage 4.52x (DuPont). The low turnover reflects a large asset base, while leverage amplifies equity returns. margin_quality: Derived gross margin is 64.3% (36,848.71/57,295.22), SG&A ratio 9.4%, and operating margin 13.4% (7,689.29/57,295.22). EBITDA margin stands at 22.8%. The step-up in operating income (+20.4% YoY) versus revenue (+3.5% YoY) indicates favorable mix and cost control. The 11.5% effective tax rate provided an incremental lift to net margin versus operating margin. operating_leverage: Revenue growth of 3.5% coupled with a 20.4% rise in operating income implies positive operating leverage in the period. D&A of 5,355.61 (100M JPY) is substantial (9.3% of revenue), suggesting a capital- and IP-intensive business where scale benefits can support incremental margins.

Growth Assessment

revenue_sustainability: Revenue growth of 3.5% YoY is steady but modest for Sony’s diversified portfolio. Sustainability hinges on hardware cycles, content monetization, and component demand; no segment data was provided to parse the mix. profit_quality: Net margin of 10.4% and OCF/NI of 1.03x indicate earnings largely backed by cash. The below-statutory tax rate (11.5%) boosts net income; normalization of taxes is a risk to run-rate profitability. Equity-method loss (-26.76) was a small drag. outlook: With improving operating margins and robust EBITDA, near-term earnings traction appears supported if revenue momentum holds. However, continued high investment needs (investing CF -6,449.30) and potential FX and product-cycle volatility could moderate growth.

Financial Health

liquidity: Cash and equivalents were 29,809.56 (100M JPY). Current assets totaled 74,549.88 (100M JPY), but current liabilities were not disclosed, preventing current/quick ratio calculation. Working capital shown equals current assets, implying current liabilities data was unavailable. solvency: Total assets were 361,279.49 (100M JPY) and equity 79,940.61 (100M JPY), yielding an equity ratio of 21.3% and financial leverage of 4.52x. Debt-to-equity is 3.35x on a total-liabilities basis. Short-term loans were 18,439.59 (100M JPY); long-term debt was unreported, limiting net leverage assessment. capital_structure: Significant liabilities and active buybacks (2,021.07) indicate an equity-efficient structure supported by liquidity. Without full debt disclosure, interest coverage and net debt are not estimable.

Cash Flow Quality

earnings_quality: OCF/NI at 1.03x indicates earnings are cash-convertible. The gap between EBITDA (13,044.90) and OCF (6,162.89) underscores working capital and cash taxes/other items typical for the period. FCF_analysis: Free cash flow was -286.41 (100M JPY), driven by investing outflows of -6,449.30 (100M JPY). This likely includes capex plus strategic investments; capex itself was not separately disclosed. working_capital: Inventories were 13,107.70 (100M JPY), about 22.9% of period revenue, and accounts payable 21,001.44 (100M JPY). Receivables/payables detail beyond AP was unreported, limiting analysis of cash conversion cycle.

Dividend Sustainability

payout_ratio_assessment: The provided payout ratio is 61.6%, but dividends paid in cash flow (-549.31) relative to net income (5,988.77) imply a cash payout of ~9% for the period; the discrepancy likely reflects basis/timing differences (e.g., annualized DPS vs. half-year earnings). FCF_coverage: FCF coverage is -0.08x, indicating dividends were not covered by FCF in the period due to negative FCF. However, ample cash (29,809.56) provides buffer, and buybacks (2,021.07) were a larger use of cash than dividends. policy_outlook: Given strong cash generation historically and current liquidity, maintaining shareholder returns appears feasible, but sustainability will depend on normalization of investing outflows and continued OCF strength. Lack of DPS detail constrains precision.

Risk Assessment

Business Risks:

• Product cycle volatility in gaming, electronics, and image sensors impacting volumes and pricing
• Content and IP performance variability affecting margins and cash flow
• Foreign exchange fluctuations (USD/EUR/EM) influencing revenue and costs
• Supply chain constraints or component cost inflation
• Competitive pressure in entertainment, gaming, and semiconductor markets
• Potential impairments of intangibles/goodwill (not disclosed) if projects underperform

Financial Risks:

• High balance-sheet leverage (assets/equity 4.52x; liabilities/equity 3.35x)
• Negative FCF in the period amid sizable investing outflows
• Refinancing/interest rate risk given short-term loans of 18,439.59 (100M JPY)
• Uncertain net debt and interest coverage due to unreported long-term debt and interest expense
• Tax rate normalization risk from a low effective tax rate (11.5%)

Key Concerns:

• Sustaining margin gains with modest top-line growth (+3.5% YoY)
• Visibility on capex versus financial investments in investing CF (-6,449.30)
• Inventory and working capital management without full receivables/current liabilities disclosure
• Alignment between payout metrics and cash flow coverage, especially alongside buybacks

Investment Implications

Key Takeaways:

• Margin expansion drove operating income +20.4% YoY on +3.5% revenue growth
• ROE of 7.5% is leverage-assisted amid low asset turnover (0.159)
• Cash conversion is sound (OCF/NI 1.03x), but FCF was slightly negative due to heavy investing
• Balance sheet equity ratio 21.3% with meaningful short-term borrowings and large cash
• Shareholder returns are substantial (buybacks and dividends) and exceeded period FCF

Metrics to Watch:

• Segment-level margins and revenue mix (unreported here)
• Capex versus strategic investment breakdown within investing CF
• OCF/NI sustainment and working capital turns (inventory, receivables, payables)
• FX impacts on revenue and margins
• Tax rate trajectory and any one-offs affecting net margin
• Net leverage and interest coverage once debt and interest details are available

Relative Positioning: Within Japan’s large-cap technology and entertainment cohort, Sony’s profitability profile shows strong EBITDA margin and improving operating leverage, with moderate ROE supported by leverage and a diversified earnings base; however, capital intensity and sizable investment needs temper FCF in the period.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis