Square Enix announced its financial results for the fiscal year that ended in March 2025, on top of its strategy for the next Medium-Term Business Plan that spaned the previous fiscal year and the next two.
According to the provided documents, net sales for the fiscal year were 324,506 million yen (down 8.9％ year-on-year), while operating income was 40,580 million (up 24.6％ year-on-year).
Looking at the Digital Entertainment business, which includes games, net sales were 206,536 million yen (down16.8％ year-on-year), and operating income was ¥33,867 million (up 33.0％ year-on-year).
Specifically, HD games (non-live service games for consoles and PC) recorded 75.1 billion yen in sales, significantly down by 24.1 billion yen compared to the previous fiscal year. Operating profit was a meager 3.3 billion yen, but it’s still better than the previous fiscal year, in which HD games actually lost money (8.1 billion yen, with a difference of +11.4 billion yen).
The improvement in profitability is mainly due to lower to lower development cost amortization, advertising expenses, and content valuation losses, on top of the performance of Dragon Quest III HD-2D Remake, which was better than expected.
MMO games enjoyed the effect of the launch of Final Fantasy XIV’s expansion pack “Dawntrail.” Net sales were 55.5 billion yen, 8.2 billion yen more than in the previous fiscal year.
Operating income was 21.9 billion yen, 2.6 billion yen more compared to the previous fiscal year.
Games for smartphones and browser games saw a sharp decrease in performance, with net sales at 75.8 billion yen, 25.7 billion yen lower than in the previous fiscal year.
Operating income was 8.5 billion yen, 5.7 billion yen lower than in the previous fiscal year.
Speaking of the Medium-Term Business Plan, the motto is “Square Enix Reboots and Awakens,” described as a “3-year reboot for long-term growth.” Square Enix examined the progress made during the past fiscal year and explained the plans going forward.
The four pillars of the strategy are:
- Enhance productivity by optimizing the development footprint in the Digital Entertainment (DE) segment
- Diversify earnings opportunities by strengthening customer contact points
- Roll out initiatives to create additional foundational stability
- Allocate capital giving consideration to the balance between growth investment and shareholder returns
These four pillars are further elaborated as follows.
- Rebuilding the domestic studios portfolio and establishing organizational structure to support them
- Optimizing development costs and controlling investment scale
- Promote multi-platform strategies for HD titles
- Accelerate multifaceted development to maximize IP value
- Improvement of management infrastructure for domestic operations
- Initiation of structural reforms for overseas operations
and optimization of selling, general and administrative expenses - Continuous exploration of growth investment opportunities and strengthening of shareholder returnsthrough increased dividends
- Improvement of stock liquidity and expansion of investor base through stock split
Square Enix mentions that in the fiscal year that ended in March 2025 the company fundamentally revamped our development organization structure for domestic studios.
Based on the concept of integrated studio operations, the company reviewed the entire process of development progress management for it games.
It also switched to a system in which management and studios manage the development progress of all large-scale investment titles, promoting optimization of the development portfolio and schedule, as well as talent mobility and development cost optimization among in-house development personnel.
Below you can see a handy infographic explaining the new approach.
The company reviewed all the games in development at its domestic studios. Some games have been canceled, while other games that required more polish received additional funds. This strategy aims to be selective and focus development resources on the games that warrant it.
The company intends to continue to control the scale of its investment in development in a “disciplined manner.”
Below, you can see the development investment in the past two years compared to previous years.
Regarding to games for smartphones, the company has also reviewed the development pipeline and applied a selective and focused approach. For games currently in operation, Square Enix has applied measures to improve profitability, like expanding platforms, diversifying payment methods, and optimizing operating costs.
Placing all games under the management of the same studio, the company has “consolidated, accumulated, and shared in-house know-how.”
Looking forward, Square Enix intends to establish a mid- to long-term pipeline that will create a shift from quantity to quality. While it still plans to release major games in the next two years included in the plan (including multiple games on multiple platforms), the aim beyond March 2027 is to have a pipeline capable of releasing major games steadily, mainly in key IPs.
To diversify earning opportunities by strengthening customer contact points, Square Enix has implemented a multiplatform strategy, strongly promoting the expansion of both HD games and smartphone games to PC.
The company has also achieved growth in sales of older games through various initiatives, including bundles and promoting the shift to digital purchases.
Interestingly, Square Enix is currently developing a completely new transmedia IP in collaboration with the Japanese TV channel TBS. This includes a new game.
We then hear of initiatives aimed at creating additional foundational stability, starting with those implemented in the past fiscal year.
Organization in Japan
- Started renewal of management accounting system
- Implemented various initiatives to improve productivity by utilizing AI
Overseas Organization
- Started renewal of management accounting system
- Lowered SGA ratio YoY with optimization of labor cost, advertising cost and others
- Introduction of new HR initiatives
- Functional improvement of publishing organization and development studios
◦ Strengthen collaboration between organization in Japan and overseas studios
◦ Changes in partnership structure between overseas studios and publishing organization
◦ Review of development project managed by overseas studios
Next, we hear of the initiative that are planned for the current fiscal year.
Organization in Japan
- Partial introduction of new HR initiatives (determination of bonus funds directly linked to company performance)
- Establishment of Human Resources Development Committee to formulate and implement strategic human resources development measures
- Further promotion of initiatives to improve productivity by utilizing AI
Overseas Organization
- Optimization of HD game development studio and publishing function
- Streamlining development structure by strengthening intra-group collaboration
In conclusion, Square Enix has set the following goals.
- A consolidated operating Margin of 15% in the fiscal year that ends in March 2027.
- Allocating up to 100 billion yen in strategic investments over the three-year period ending in March 2027.
- Return on Equity of at least 10%
Lastly, we get the outlook for the current fiscal year ending in March 2026. Square Enix expects sales to drop even lower to 280.0 billion yen (44.5 billion yen lower than the past fiscal year), while operating income is expected to be 41 billion yen, which would be essentially flat year-on-year (500 million yen higher, to be specific).
If you’d like to compare these results with historical data, you can read our report about the first nine months of the fiscal year, based on data released in February.
Other gaming companies have also already announced their financial results this quarter, including Koei Tecmo, Microsoft, Electronic Arts, Nintendo, Bandai Namco, Konami, Marvelous Entertainment, Sega, Capcom, and Sony. You can expect more reports on this topic over the coming few days.