Square Enix FY2024 profit decline despite Final Fantasy releases

Square Enix just dropped their FY2024 results, and it’s a bit of a rollercoaster ride. Sales are up a tiny bit (3.8%), but profits took a nosedive across the board. Things got rough on the money-making side. Operating income and ordinary income fell by a whopping 26.6% and 24.1%, respectively. Profits for shareholders dropped 69.7%. This translates to a much smaller slice of the pie for everyone (earnings per share down 70.3%).

Cancelled Games and Development Troubles

A big chunk of the blame lies with canceled game projects. Square Enix scrapped a handful of projects in its Digital Entertainment segment (its core business), leading to a ¥22 billion loss. Reportedly, it’s because it’s changing its approach to big-budget games, focusing on releasing them on multiple platforms and improving its internal development muscle. That sounds good in theory, but those canceled projects say otherwise, at least for now.

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Adding to the profit woes were higher development costs and advertising expenses. Plus, some existing games, both online multiplayer titles and mobile/browser games, didn’t perform as well as hoped. Sales and profits went down for those segments.

Final Fantasy to the rescue

There are some silver linings, though. New releases like “FINAL FANTASY XVI” and “FINAL FANTASY PIXEL REMASTER” boosted sales in the Digital Entertainment segment. Their arcade business is also doing well, with sales and profits on the rise. Publishing and merchandising are winning, too, thanks to the popularity of “The Apothecary Diaries” anime and strong sales of new character merch.

Square Enix predicts sales to dip by 13% next year, but they also expect profitability to improve. They’re planning to pay out a bigger dividend to shareholders, too. Sounds promising, but only time will tell.

“The Company recognizes the enhancement of corporate value and distribution of profits to shareholders as
key management undertakings. The Company determines the level of dividends according to its basic 30%
payout ratio policy, as well as by taking the balance between growth investment and shareholder returns into
consideration.”

Square Enix’s FY2024 results show a company facing some tough decisions. Cancelling games and underperforming titles raise questions about their development strategy. But there’s hope! They seem committed to adapting to what gamers want and diversifying their income streams. New releases and growth in other segments are positive signs.

The bottom line? Whether Square Enix can pull off their new development strategy and deliver winning games across platforms will be crucial. The future of their profitability and leadership in the gaming industry depends on it. Investors and fans alike will be watching closely.