The market has reacted negatively to Square Enix’s latest financial report. The Japanese company recorded a significant decline in both revenue and profit.
Kingdom Hearts HD 2.8 Final Chapter Prologue
Financial highlights
- According to its H1 financial results, Square Enix reached ¥157.6 billion ($1 billion) in net revenue for the six-month period ended September 30, 2024. This is down 8.4% year-over-year.
- Operating profit was ¥21.17 billion ($137.8 million), up 22% compared to the same period last year. However, ordinary profit fell 30.6% to ¥18.14 billion ($118 million).
- Net sales of its Digital Entertainment segment accounted for 63% of the total, or ¥98.1 billion ($638 million) — down 19.6% year-over-year. Its operating income grew 8.5% to ¥16.8 billion ($109 million).
- Mobile and browser game revenue fell 29.7% to ¥38.2 billion ($248 million), while its operating profit decreased ¥50.5% to ¥4.8 billion ($31.2 million).
- The decline was driven by weakness in existing titles and lack of royalty revenue recognized during the same period last year.
- Revenue from the HD Games subsegment, which includes PC and console titles, plunged 37% to ¥27.5 billion ($179 million). It also posted an operating loss of ¥1.2 billion ($7.8 million), an improvement from last year’s ¥2.4 billion ($15.6 million).
- As Square Enix pointed out, new releases, including the launch of the Kingdom Hearts series on Steam, generated less revenue than last year’s titles such as Final Fantasy XVI and Final Fantasy Pixel Remaster. Losses narrowed “mainly due to lower development cost amortization and advertising expenses.”
- MMO was the only subsegment that experienced growth during the period. Its revenue grew 35.5% to ¥32.4 billion ($211 million), while operating profit increased 40.8% to ¥13.1 billion ($85 million). Final The Dawntrail expansion for Final Fantasy XIV was the main driver.
- Overall, Square Enix sold 10.69 million copies of games during H1 FY25 — down 12% from the same period last year.
How did the financial results affect Square Enix shares?
As reported by Nikkei, Square Enix plunged 12.37% on Monday. At the time of writing, the stock was trading at ¥5,542 ($36) per share, down 10.9% from the previous close of ¥6,220 ($40.46).
This is the second major decline for the Japanese publisher. In May, Square Enix shares fell 16% — the biggest decline in 13 years (via Bloomberg).
At the time, the company announced a reboot strategy, planning to restructure its operations over the next three years. As part of this strategy, Square Enix will “aggressively pursue a multiplatform strategy” by releasing its new games on all major platforms. It will also pursue initiatives “designed to win over PC users” and maximize digital sales.