Square Enix’s stocks plummet following announcement of 70% profit drop
As the market opened in Japan on May 14 at 9:00 AM JST, Square Enix’s stock value decreased rapidly, reaching limit down within 30 minutes. As of this writing, the company’s stocks have fallen by over 15%.
This comes in response to Square Enix’s latest financial report, according to which the company saw net profit decline by 70% to 14.9 billion yen (about $95.4 million) in the past fiscal year (April 2023 – March 2024). While Square Enix’s net sales rose by 4% during this period, operating profit fell by 27%. This drop was mainly caused by the company’s digital entertainment (i.e. video game) sector, where profit sank by 38%. The report highlighted high development and advertising costs, as well as underperformance of major releases as contributing factors to these figures. According to Bloomberg, Final Fantasy 16, Final Fantasy 7 Rebirth and Foamstars fell short of Square Enix’s expectations.
In addition, Square Enix booked 38.8 billion yen (about $248 million) in extraordinary losses related to revisions to its game development pipeline, i.e. the cancellations of ongoing projects. Expected losses had been communicated in April, which was followed by a steady surge in Square Enix’s stock price as shareholders remained expectant. However, share prices suddenly dropped following yesterday’s announcement of the company’s results for the financial year. To tackle ongoing challenges, Square Enix has announced a revision of its policy, which includes shifting to a multiplatform strategy and focusing on the quality of titles over quantity.
This means for Square Enix that this will lead to healthy expectations and to finally be honest about what they need to do to make money as a company. A focus on PC as the base and the rest of the consoles secondary from a development standpoint like Capcom. But also stand out from the rest with the use of A.I for translations and development of games. Plus the quality over quantity will be helpful.