SONY

Business Context and Reporting Period

This Form 6-K filing covers Sony Group Corporation's consolidated financial results for the first quarter of fiscal year 2026 (ended June 30, 2026), announced on July 31, 2026. The reporting period follows a partial spin-off of Sony Financial Group Inc. (SFGI) effective October 1, 2025, classifying the Financial Services business as a discontinued operation. Consequently, comparative figures for Q1 FY25 reflect continuing operations only.

Key Financial Metrics

Segment Performance Highlights:

• Game & Network Services (G&NS): Sales flat (+0.6 bln yen) due to FX headwinds offsetting organic declines in hardware and non-first-party software; Operating Income rose 37% to 202.0 bln yen driven by FX and U.S. tariff refunds.
• Music: Sales increased 21% to 562.0 bln yen; Operating Income rose 14% to 105.9 bln yen, driven by streaming and live events.
• Imaging & Sensing Solutions (I&SS): Sales surged 26% to 512.7 bln yen; Operating Income jumped 125% to 122.2 bln yen due to improved product mix and mobile sensor demand.
• Pictures: Sales declined 4% to 315.1 bln yen; Operating Income increased 33% to 24.8 bln yen due to lower marketing costs.

Material Changes vs. Prior Period

The 40% increase in operating income was primarily driven by strong performance in the I&SS and G&NS segments. Foreign exchange rates were a significant positive contributor, adding approximately 216.2 bln yen to sales growth, though sales on a constant currency basis decreased by approximately 1%. Financial income decreased by 15.7 bln yen due to lower unrealized gains on Spotify shares, partially offset by reduced foreign exchange losses. The effective tax rate increased from 26% to 27% due to the absence of tax refunds recorded in the prior year.

Guidance, Outlook, and Risks

Full-Year FY2026 Forecast (Revised July 2026):

• Sales: Revised upward to 12,500 bln yen (from 12,300 bln yen).
• Operating Income: Revised upward to 1,720 bln yen (from 1,600 bln yen), with a margin of 13.8%.
• Net Income: Revised upward to 1,210 bln yen (from 1,160 bln yen).
• Dividend: Planned total dividend of 35 yen per share.

Key Drivers for Revision: Upward revisions are attributed to stronger-than-expected sales and operating income in the G&NS segment, aided by U.S. tariff refunds and favorable FX rates. However, the forecast includes higher interest expenses and tax expenses.

Material Risks and Contingencies:

• 2026 Kumamoto Earthquake: Occurred on July 28, 2026. Sony's Kumamoto Technology Center suspended production immediately. While other sites in Nagasaki, Oita, and Kagoshima resumed operations, the financial impact is currently difficult to estimate and is not incorporated into the full-year forecast.
• Memory Market: Continued surge in memory prices remains a challenge for the Entertainment, Technology & Services segment and may impact high-end smartphone shipments in the second half of the fiscal year.
• Geopolitical and Tariff Risks: Ongoing volatility in U.S. tariff policy and geopolitical conflicts (Ukraine/Russia, Middle East) pose risks to supply chains and profitability.

Investor Verification Checklist

• Verify the extent of production downtime and financial impact from the July 28, 2026 Kumamoto earthquake on semiconductor facilities.
• Monitor the sustainability of the 125% operating income growth in the I&SS segment amidst potential memory price volatility.
• Assess the reliance on U.S. tariff refunds and favorable foreign exchange rates for the G&NS segment's margin expansion.
• Review the execution of the Recognition Music Group consolidation and its impact on the Music segment's full-year targets.
• Track the PlayStation 5 hardware profitability plan against memory market conditions in the second half of FY26.