Sony's Q1 FY2026 Earnings Show Digital Push Paying Off Despite PS5 Sales Decline

Credit: Sony

Sony has posted its first-quarter earnings for FY2026, and the numbers tell a familiar story. Physical media is fading fast, PS5 hardware sales are down, but the company's overall profitability keeps climbing anyway.

For the three months ended June 30, 2026, Sony's Games & Network Services segment reported flat sales but a solid jump in operating income. The boost mostly came down to US tariff refunds, not some massive surge in game sales.

Breaking Down the Numbers

Here's what the quarter looked like at a glance:

• Overall sales income: 2.83 trillion yen ($17.6 billion), up 8% year on year

• Overall operating income: 476.4 billion yen ($2.9 billion), up 40% year on year

• G&NS sales income: 937.1 billion yen ($5.8 billion), up just 0.6% year on year

• G&NS operating income: 202 billion yen ($1.2 billion), up 37% year on year

Why Did G&NS Sales Stay Flat?

The main culprits were declining first-party game sales and softer hardware numbers. First-party game sales dropped from 6.9 million units to 6 million. Saros launched this quarter, and while Sony hasn’t revealed any figures, it says the user base is “steadily expanding.” The report also points to Marathon's Season 2 launch in June, noting the game has kept "strong user retention" while still "acquiring new users."

Non-first-party game sales actually ticked up slightly, moving from 65.9 million to 66.1 million units.

Total game sales landed at 526.6 billion yen ($3.2 billion). Of that, digital games and add-on content made up a whopping 485.2 billion yen ($3 billion), while physical games brought in just 20.5 billion yen ($128 million). That’s roughly a 92:8 ratio.

Network services fared better, climbing 21% year on year to 172.6 billion yen ($1 billion). Monthly active users hit 125 million in June, a 2% increase and a record high for the month. Total playtime dipped 4%, but Sony chalked that up to strong engagement the previous year thanks to major title updates and new releases.

Hardware sales, meanwhile, weren't as kind. They totaled 222 billion yen ($1.3 billion), down 10.4% year on year, with PS5 unit sales falling from 2.5 million to 1.6 million.

Sony Isn't Budging on Ending Physical Discs

This is probably the part fans have been waiting for. Sony finally addressed the backlash over its plan to stop manufacturing physical PlayStation game discs starting January 2028, and the message was clear: the decision stands.

CFO Lin Tao fielded questions from analysts during the earnings call and didn't shy away from the topic. She explained that digitalization across the entire entertainment industry was the biggest factor behind the move, not just something unique to PlayStation.

In her own words (via Genki):

"There are various reasons we made this decision, the biggest being that the digitalization of content overall has been progressing, that's the big factor. It's not just for PlayStation, but for all kinds of content, digitalization is progressing. And so when we think about the future, and we put in a lot of thought and time, and we cautiously considered this, and we came to this conclusion, and we're going to cautiously move this forward."

Tao also acknowledged the wave of criticism from the community, admitting that "people have strong views" on the matter. She didn't hint at any change of heart though. Instead, she said Sony wants to keep exploring "how do we engage the gamers" within a future digital ecosystem.

That response likely won't satisfy fans behind the ongoing "Don't Kill The Disc" petition and upcoming Blackout, but it does confirm Sony has made peace with the direction it's heading.

What About the Memory Shortage?

With Nvidia GPU prices climbing and the wider component crisis putting pressure on hardware makers everywhere, Sony addressed concerns about PS5 supply too. According to the earnings statement, the company has secured enough memory to cover its projected sales volume for the current fiscal year, with hardware profitability expected to stay in line with FY25.

Looking Ahead

Sony has actually raised its full-year forecast for G&NS, now expecting sales of 4.5 trillion yen ($28.1 billion) and operating income of 660 billion yen ($4.1 billion). Both numbers are up from May's projections.

Upcoming first-party games:

• MARVEL Tōkon: Fighting Souls - August 6, 2026 (PS5, PC)

• Marvel’s Wolverine - September 15, 2026 (PS5)

• God of War: Laufey - February 16, 2027 (PS5)