Square Enix Q1 FY2026 Earnings Show Lower Sales but Higher Profits in Key Segment

Octopath Traveler 0

Square Enix has reported its financial results for Q1 FY3/2026, covering the period from April to June 2025, showing mixed results.

While overall sales took a notable hit due to the absence of major new releases, profits in certain areas actually improved thanks to lower costs and a more streamlined approach to development and marketing.

The company’s Digital Entertainment segment, which includes HD console and PC titles, MMOs, and mobile/browser games, saw net sales drop by about ¥11 billion compared to the same quarter last year.

A major factor was the lack of high-profile launches — last year’s lineup had heavy hitters like multiple Kingdom Hearts titles debuting on Steam, which created a big spike in sales at the time. This year, Square simply didn’t have an equivalent blockbuster in that slot.

Yet, interestingly, profit in the HD games category surged by around 1,900% year-over-year — jumping from just ¥0.05 billion to ¥1 billion (~$6.76 million). As per the company’s explanation, this was largely due to lower “development cost amortization” and reduced advertising expenses.

This shift ties directly into Square Enix’s ongoing restructuring strategy, announced in 2024 by CEO Takashi Kiryu. The plan — officially titled Square Enix Reboots and Awakens — aims to overhaul the company’s development process, focus on quality over quantity, and push for more multi-platform releases after years of PlayStation exclusivity. According to the leadership, future major titles like Dragon Quest XII and Kingdom Hearts IV will likely see broader day-one launches across platforms to reach more players and improve profitability.

Still, 2025 remains a relatively quiet year for big releases. The next few months will bring Final Fantasy Tactics: The Ivalice Chronicles (Sept 30), Dragon Quest 1 & 2 HD-2D Remake (Oct 30), Octopath Traveler 0 (Dec 4), and Final Fantasy 7 Remake Intergrade for Switch 2 and Xbox this winter. While only one of these is an all-new title, the lineup is still strong for JRPG fans and could help bolster end-of-year results.

Mobile and browser games followed a similar pattern — lower sales but slightly higher profits — while MMOs like Final Fantasy XIV and Dragon Quest X Online saw declines without any major expansions to drive activity.

Company-wide, net sales for the quarter totaled ¥59.32 billion ($401.3 million), down 15% year-over-year, with operating income at ¥9 billion ($60.9 million), a 16% drop.