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Thank you very much for taking time to join us today. We will now begin the Sony Group Corporation Fiscal Year 2026 Second Quarter Earnings Announcement. I am Ishii from Corporate Communications. I'll be acting as moderator. Thank you.

First, Ms. Lin Tao, Executive Officer and CFO, will present the second quarter results and fiscal year 2026 forecast, followed by question-and-answer session. Please note that to ensure our international audience can hear the speaker's own words, the presentation via the English feed will be delivered in a pre-recorded video. The session is expected to last approximately 70 minutes.

Ms. Tao, please.

Hello. I'm Lin Tao, CFO of Sony Group Corporation. Welcome to Q2 earnings announcement. Consolidated sales for the second quarter ended September 30, 2026, increased 10% compared to the same quarter of the previous fiscal year to JPY 3,429.4 billion, and consolidated operating income increased 45% to JPY 622.3 billion. Both were record highs for the second quarter. Net income increased 44% to JPY 449.6 billion. The financial results by segment are shown in the Q2 FY '26 results by segment slide. In the All Other segment, we recorded an additional loss of approximately JPY 30 billion related to Sony Honda Mobility during the quarter. This substantially completed the recognition of losses associated with the downsizing of the company's operations.

We have increased our FY '26 sales forecast 4% compared to our previous forecast to JPY 13 trillion. Our operating income forecast 9% to JPY 1,870 billion and our net income forecast 10% to JPY 1,330 billion. The forecast for operating cash flow is now JPY 1,600 billion. The impact of U.S. tariff refunds and memory market conditions on the full year operating income forecast remains largely unchanged. The forecast by segment is shown in FY '26 results forecast by segment slide.

I will now give an overview of each business. First is G&NS segment. FY '26 Q2 sales increased 9% year-on-year to JPY 1,208.5 billion. Operating income increased 83% to JPY 220.1 billion, a record high for the second quarter. Excluding one-time losses of JPY 49.8 billion recorded in the same quarter of the previous fiscal year, operating income increased 29%. For the full fiscal year, we have increased the sales forecast 6% compared to the previous forecast to JPY 4,830 billion. We have increased the operating income forecast 6% compared to the previous forecast to JPY 700 billion, primarily due to the impact of higher third-party software and network service sales and decreased costs.

The number of monthly active users across the PlayStation platform in September increased 7% compared to the same month of the previous fiscal year to 127 million accounts. That was a record high for September. Total play time for the quarter increased 4% year-on-year. The year-on-year trend for both metrics improved significantly compared to the first quarter of this fiscal year, which we believe demonstrates that the baseline of engagement is steadily improving.

With regard to PS5 hardware, we have been able to offset the rise in memory prices through adjustments to promotions and pricing as well as additional cost reduction, and we expect hardware profitability for the current fiscal year to remain on par with the previous fiscal year. Regarding memory procurement for next fiscal year, based on discussions held so far with various suppliers, we have aligned on the quantity of memory needed for our projected hardware unit sales.

Regarding first-party titles, cumulative sales of Marvel's Wolverine released in September exceeded 2.4 million units, contributing to the improved results of the entire segment for the quarter. We leveraged our expertise building the Marvel's Spider-Man franchise to create a differentiated action game experience for Marvel's Wolverine. Users have praised the new title for its highly immersive action, high-quality production and richly layered storytelling. We have decided to postpone the release of God of War: Laufey to the first quarter of next fiscal year. We will continue to develop the game to ensure that it provides a premium experience that meets the expectation of the title's diverse fan base.

Although new PS5 unit sales are gradually declining as expected in this stage of the console life cycle, the PS platform continues to expand and grow in a stable manner. Looking ahead to next fiscal year, we aim to continue to enhance user engagement and further strengthen monetization through the release of strong titles and the expansion of our service. We also intend to make solid progress in preparing for the next-generation platform.

Next is the Music segment. FY '26 Q2 sales increased 10% year-on-year to JPY 598.4 billion. Operating income increased 6% to JPY 122.8 billion, setting a record high profit for the second quarter. This was primarily due to an increase in music streaming revenue despite the absence of the hit theatrical release of Demon Slayer: Kimetsu no Yaiba, which was recorded in the same quarter of the previous fiscal year. For the full fiscal year, we have increased our sales forecast 5% compared to the previous forecast to JPY 2,300 billion and our operating income forecast 6% from the previous forecast to JPY 445 billion.

Streaming revenue for the quarter on a U.S. dollar basis increased 7% year-on-year in Recorded Music and 6% in Music Publishing. The single Choosin' Texas by Ella Langley is a huge hit, exceeding 1.8 billion cumulative streams globally and breaking multiple records on the music charts. The song has spent a total of 26 weeks at #1 on the U.S. Billboard singles chart, breaking the record previously held by a Mariah Carey song released approximately 30 years ago. It also reached a record total of 19 weeks at #1 on the Digital Songs chart.

There has been a clear increase in the consumption of catalog songs driven by the growth of streaming. Through September of this year, catalog songs, songs that were released more than 18 months ago, accounted for more than half of the streams on Spotify Global Top 200. Due to the big success of Michael Jackson's biopic, his catalog generated more than 3 billion streams on Spotify's Global Top 200 in the 9 months since January of this year, increasing from approximately 100 million in calendar year 2025.

Gen Z listeners accounted for approximately half of the increase in streams, illustrating how the power of visual storytelling has revitalized our catalog and attracted new listeners. We believe such evergreen catalogs are assets that will continue to generate value over the long term, even in the age of AI.

Next is the Picture segment. FY '26 Q2 sales increased 48% year-on-year to JPY 513.7 billion, and operating income was approximately 7x higher at JPY 92.6 billion. This was record high operating income for the second quarter. For the full fiscal year, we increased our sales forecast 6% compared to our previous forecast to JPY 1,760 billion and our operating income forecast 33% to JPY 200 billion, primarily due to an increase in revenue from theatrical releases.

Spider-Man: Brand New Day, released in July, was a record-breaking hit with worldwide cumulative box office revenue exceeding USD 2.5 billion. It is the highest grossing film of all time in North America and the third highest grossing film of all time globally. Following the film's release, unit sales of related game titles approximately doubled and all the SMG released features in the film have generated more than 1 billion cumulative streams. This demonstrates how the real-world experience of watching the movie in the theater serves as a catalyst for enhancing IP value across the Sony Group in multiple ways.

SPE has a strong lineup of upcoming releases. There is Jumanji: Open World this December and the animated film, Spider-Man: Beyond the Spider-Verse, next fiscal year. The success of theatrical release not only contributes to performance in a single fiscal year, but also generates significant revenue opportunities in the future through post theatrical distribution windows. We will continue to strive to deliver compelling films by combining our global beloved IP and creative strength with our global marketing and distribution capabilities.

Regarding the anime business, which is centered on Crunchyroll, we are combining the strengths of our Sony Group companies to expand our content offering and broaden our reach to fans to achieve sustainable revenue growth. To expand our content offering, we launched Crunchyroll Storyworks. Through this initiative, Crunchyroll, Aniplex and SPE aim to collaborate with Japanese creators to strengthen the adaptation of stories from around the world into anime and produce live-action adaptations of Japanese anime.

To expand our reach to fans, we plan to introduce a dedicated Crunchyroll hub on the PS5 home screen next spring. This new feature aims to capture the cross-demand between games and anime, which share a large overlap in their fan bases, by providing a cross-discovery feature that allows users to seamlessly discover related content. We will continue to focus on expanding our reach by creating in-person fan experiences in collaboration with Japanese publishers and production partners. Through these initiatives, we aim to further raise global awareness of anime, expand our fan base and addressable market and solidify the mid- to long-term revenue growth of the Sony Group's anime-related business.

Next is the ET&S segment. FY '26 Q2 sales decreased slightly year-on-year to JPY 567.8 billion. Operating income increased 5% to JPY 64.1 billion, primarily due to the impact of U.S. tariff refunds despite the impact of the lower sales. The full year forecast remains unchanged from the previous forecast. Although conditions remained challenging in the Imaging business this quarter, primarily due to a slowdown in the Chinese market, we minimized the impact of increased memory cost and lower unit sales on earnings by expanding market share led by new products and by accelerating the shift toward high value-added products.

Regarding the joint venture with TCL, discussions between the 2 companies to finalize the details of the joint venture's organizational structure and operations are progressing smoothly ahead of full-scale operation in April of next year. True RGB BRAVIA, which was launched in June and has been selling well around the world, features a suite of high value-added technologies that are expected to contribute significantly to improving the profitability of our display business this fiscal year. Combined with TCL's business scale and cost competitiveness, we expect these technologies to become a major competitive advantage for the joint venture from next fiscal year.

Last is the I&SS segment. FY '26 Q2 sales decreased 6% year-on-year to JPY 577.6 billion, and operating income increased 12% to JPY 154.6 billion. This was a record high for quarterly operating income. Our sales forecast is essentially unchanged compared with the previous forecast at JPY 2,120 billion. We have increased our operating income forecast 7% compared to the previous forecast to JPY 450 billion.

In the smartphone market this quarter, growth declined approximately 20% year-on-year, mainly due to the impact of conditions in the memory market. Although the market for mid-range and lower phones declined significantly, we believe the decline in the high-end market was limited. Shipment volumes of our mobile sensors have trended generally in line with the market. We expect the proportion of shipments in the first and second halves of this fiscal year to differ from the prior fiscal years due to supply chain inventory levels and changes in customer product cycles.

We will continue to adjust our sales forecast for the current fiscal year while monitoring factors such as supply constraints for components used in end-user products such as memory and the impact on demand of rising prices for high-end products. Thanks to the dedicated efforts of our on-site staff and the support of our partner companies, operations at Kumamoto Technology Center, which was damaged by the July 28 Kumamoto earthquake, have already recovered to pre-earthquake levels. However, we have reflected a loss of approximately JPY 16 billion this fiscal year in our results forecast primarily due to damage to work in progress inventory, equipment repairs and lost opportunities during the production downtime.

On August 11, Sony and TSMC signed definitive agreement to establish a joint venture. Through a collaboration with TSMC in the joint venture, we expect both companies to enhance the performance and cost competitiveness of image sensors and drive the creation of new value in the era of physical AI. We also expect to lay the foundation for further improvement in the capital efficiency of this segment over the long term. While some of the profits we recorded in the first half of FY '26 came from such things as tariff refunds and demand being brought forward, we achieved consolidated operating income of over JPY 1 trillion for the first time in history for either half of the fiscal year.

We believe this strong performance was achieved through the symbiotic combination of the stable growth in our distribution platforms, including PlayStation Network and Crunchyroll and hit content driven by our strong IP and creative talent such as Spider-Man, Wolverine and Ella Langley. In our next mid-range plan, which begins next fiscal year, we plan to maintain this momentum and aim for further growth across the ecosystem of the entire Sony Group.

This concludes my presentation. Thank you.

So that was announcement from Ms. Lin Tao. From 16:50, we will have the Q&A session for media. And from 17:15, we would have the investors and analyst Q&A session. Q&A session will be 20 minutes each. [Operator Instructions] Please wait a few moments.

We'll be starting the media Q&A session shortly, so please wait a few moments. First, I will introduce you today's presenters. We have Corporate Executive Officer and Chief Financial Officer, Ms. Lin Tao; Senior Vice President, in charge of Accounting, Mr. Hirotoshi Korenaga; Senior Vice President in charge of Corporate Planning and Control, Mr. Naoya Horii.

First, we take questions from the media. [Operator Instructions] Who have a question, please go ahead. First question from Nikkei, Mr. Yoshida, please.

Yes. I am Yoshida from Nikkei. And for the game, I'd like to ask 2 questions. First question is in 2026 full year forecast, the operating income you had revised so that the game software, I think there's an impact from that. But aside from your own software, but the Grand Theft Auto VI, is it because that it is more favorable performance? That is the first question.

And the second question is about the next-generation of platform. How is the development going? And I don't think there was an explanation about that. But from this year, so that you are going to have the investment in earnest for the next-generation platform. So please tell us how it is progressing? Is it progressing according to [ your ] schedule? And also for this year, so G&NS, the development, is it going to surpass the FY 2025? Is that correct? So those 2 questions, please.

All right. Thank you for the question. And the first question is that for the operation -- operating income, operating profit, so that we had revised upwards. And the reason is that third-party software itself had surpassed our expectations. And that as I have been saying, in MAU of September, so we had 127 million accounts, and then the play time has been quite favorable. So engagement itself is quite good, going on very nicely. So third-party sales is due to those high engagement of the game players.

And for those titles that we are going to be releasing, I cannot go into the details of what we are going to do, but we have very high expectations towards that.

And for the second question, so this is a next-generation R&D. We are progressing as scheduled. So for the next-generation investment, so the second half would be a large impact of the investment amount. And the development itself is on schedule. And maybe there are some changes due to the accounting rules so that maybe that can be made in next year, not this year. Thank you.

We would now move on to the next question. Toyo Keizai, Yamashita-san, please.

So this is Yamashita from Toyo Keizai. I have 2 questions. The first question about looking at the year-to-date for the second half, you have upwardly revised the operating income. So the year-to-date, how much was the upside compared to your original estimation?

And the second question is about your gaming business. About securing, so you mentioned that you are deciding how to secure the memories for the next year. GTA 6 launch might be one of the reasons the users will purchase the new PlayStation. So hardware sales, will it be the same as normal years? So what is your expectations on hardware sales next year?

Your first question is about the operating income year-to-date operating income, how much was it higher than originally forecasted? Horii-san will explain later. And I will answer the second question. So will -- GTA is encouraging users to repurchase the hardware? And what is the outlook for the next year? This year, after -- even after the price adjustment of hardware, sell-in and [ sell-in ] had good momentum.

On the other hand, the hardware life cycle gradually, we are expecting less sales of new hardware. So for new hardware sales, in terms of units, this will go down gradually. So about the -- but we want to manage the profitability of hardware without incurring big losses.

In addition to that, we already have about 100 million units of PS5 installed. And also, there are PS4 users amounting to 127 million accounts and how we can have these players play and increase their engagement. This will be our focus. About the first half, we would like Horii-san to answer.

So looking at the performance expectations per quarter, we do not disclose. So my answer will be qualitative. In the second quarter, the upside of Spider-Man was the biggest factor. In addition to that, there was strong gaming engagement. So these were the 2 main reasons for increased revenue and profitability. So the extent is about 4 digits. Thank you.

The next question, please. Freelance, Nishida-san, please.

This is Nishida. I have 2 questions. First, well, we see increase in cyberattacks. And what impact is it having on Sony? Well, as for the SIE network for the family account, there seems to be some impact, but other business is included. For example, what are you investing in to come up with measures, what monitoring are you carrying out? So what sort of impact is it having on your business?

The second question about the image sensors for smartphones and the market conditions. Can you elaborate? Currently, I think that there is a weakening in the market, but the Chinese market impact included, especially your high-end market where you are strong? How do you predict the market to develop, please?

The first question, I will respond. The second will be by Horii about the cyberattack impact. First of all, we are aware that there have been a series of incidents, and we, as management, take this seriously. And we apologize to the customers and stakeholders to whom we have inconvenienced. We would like to take this opportunity to express our apologies.

Now as for the specifics, well, there are different incidents, and I cannot give the details, but cyberattacks are becoming more complex and sophisticated. And even more in the past, we recognize that we need to put in measures. And going forward, well, because we can use AI on the defense side as well. So including that, we want to increase its priority and take out corporate-wide activities.

About the smartphone shipment, Horii will respond.

Yes. Thank you for the question. Well, smartphone product market situation, well, there are different survey companies, which are providing us with data. But basically, the low end and midrange dip versus the high end. I think the impact is less in the high end. I think there is a difference in situation between these 2 segments.

Well, mainly in China, the high-end market is, well, amongst the brands, there are quite a different situation. And the manufacturers, which have a large share, are becoming stronger and those others are losing their share. That is what we're seeing right now. That is our understanding. Now as for the future, we have to exercise prudence. We have to observe more carefully the market before making a judgment. That is all.

All right. So we go to the next question. From Sankei Newspaper, Takagi-san please.

Yes. This is Takagi from Sankei Newspaper. Yes, I have one question about the cyberattack, related to the cyberattack. So you said that you're not going to the details, individual matters, but the SIE, so what happened at SIE, I don't think that there's any formal announce yet. But SNS, we hear on the social media that the customers have very much concerned about what happened. So the PlayStation service, regarding the PlayStation service, what kind of the cyberattack impact do you have? Can you explain about that?

Yes. Thank you for the question. So about the PlayStation, kind of impact of the cyberattack. So we are now making the investigation and that, yes, we had already taken measures to counter this attack. And for the customers who had been impacted, we had already took appropriate measures. So please understand that we have taken appropriate measures. Thank you.

Let's move on to the next question. [Operator Instructions] There seems to be no more questions. So we would like to close the Q&A session for the media. The Q&A session for investors and analysts will begin at 5:10 p.m.

Thank you for waiting. We will now take questions from investors and analysts. I am Shinchi from the IR department, and I will be serving as your moderator. And the same three panelists from the media session will answer your questions. So please let us now begin the Q&A session. [Operator Instructions].

Munakata-san from Goldman Sachs.

I am Munakata from Goldman Sachs. I have 2 questions. Number one is about gaming. And the second question is about the overall situation. About the gaming business, you mentioned that the engagement has been rising. The MAU play time is already very high. So thinking about next year onwards, do you think there will be further upside to the engagement next year onward? What type of users do you think will be more active? This month, there will be a launch of a big title. So there will be big momentum in the holiday season. But how do you think the market will keep on growing in the -- continuously? That is my first question.

Second question, the entertainment business, you have upwardly revised that is gaming, Music and Pictures. So your capability to generate revenue and profit is increasing. And I think your communication with investors is getting more active because the next mid-range plan will be starting from next year. So which businesses do you think will have still room for growth? And what will be the driver? Maybe it's not one single business, but ecosystem as a whole. But please give us hints on where the upsides reside.

Thank you for the question. About your first question, gaming, how we see increase of MAU and engagement next year onward. For us, MAU, playtime and ARPU. The monetization part, the ARPU, especially, will become very important KPIs. MAU and playtime is depending on how interesting the game titles are. And the game, which is about to be launched, I think, will be a big catalyst on increasing these KPIs.

GTA VI there will be contribution this fiscal year. But even looking at series games titles in the past, these games have driven the growth for multiple years. So I think this new title will be contributing even after next year, but this is not the only driver. There are thousands of game titles on the PlayStation platform already, 1 or 2. And also, there may be surprise hits, which we do not yet anticipate. So that is what is interesting about the gaming business. So I think these highly -- high variation of interesting games will be driving engagement.

And about your second question about the overall picture and where the upsides are, there are many upsides. First of all, finally, in my opinion, we have been investing on entertainment for many years. And finally, we are seeing mega hits every year, and we will be able to deploy the IP in a very multilateral, multifaceted manner. So we are now going into that stage. And looking at the platform, not only PlayStation Network, Crunchyroll is growing and also cross-discovery of PlayStation and Crunchyroll, I think the platform will be activated further. In addition to that, the semiconductor joint venture with TSMC. Up till now, Sony was advancing linearly, but this JV will bring a new way for us to advance and grow. So I have high expectation on that, too. Thank you.

Thank you. Thank you, Munakata-san.

Next question, BofA Securities, Hirakawa-san, please.

My name is Hirakawa from BofA Securities. Well, it's a short-run question, but about gaming. And the memory prices are rising. And you said that you have secured the necessary volume. But next fiscal year, if you were to introduce a new console, I think that the game profitability will decline as a result of having to make investment. And so for the next fiscal year's memory price and forecast, well, is it to the level that you can absorb it for pricing policies? And in case of new console, for example, at the gross margin level, will there be a break? So can you explain about your forecast for next fiscal year?

The second, from next fiscal year, image sensor strategic customer share will not be 100%. And so you are communicating with the strategic customers. What sort of scenario can you anticipate? On our part, I think that your strong position will remain in place, but can you explain about the impact?

About your question regarding our gaming business and the profitability from next fiscal year onward. As you say, the memory prices will be one of the challenges the management will face. Well, on our part, well, I'm looking at the gaming business on the whole. One of the most important index is at the healthy game platform. Well, we have 127 million accounts and how actively they engage and how we can monetize in a sound way will be key to supporting our profitability.

In addition to that, from next fiscal year onward, there will be the investment for the new platform. And for future growth, we have to attach great importance to our new platform. We have to make the necessary investments for that. But we have to support this soundness of our platform and try to think how rationally we can invest in our platform, and we can announce that at appropriate timing in the future.

About your second question, about our major customers and image sensor customers. About our customers' procurement strategy. Well, we are not in a position to comment. But on our part, we do have to assume certain scenarios. I cannot give you the details, but in general, the customers will source from different sources. I think this is normal business practice that we must assume. In line with that, of course, our company have to think about our production capacity in line with the scenarios that we are assuming.

Well, for us, what does this mean? Well, basically, well, technical competitiveness, cost competitiveness need to be maintained. Well, I think there will be fierce competition. And so what we can control is our technical superiority and cost superiority. And with that in mind, from next fiscal year and after, we will make the plans.

Does Mr. Horii have something to add? Thank you.

Well, speed will be key, I think. And we have to try to adapt to the changing environment and run our business next fiscal year and onward. The TSMC collaboration that we've announced this time, well, amidst this fierce competition, in order for us to win, we have to work with them and work on both our technical and cost front and win in the market ultimately. That is all. Thank you.

Thank you, Hirakawa-san.

All right. So next question. So from JPMorgan Securities, Ayada-san, please.

I'm Ayada from JPMorgan Securities. I have 2 questions. For the gaming, the second quarter actual and the full year estimate. And for the second quarter, as you have been explaining to us that second quarter active user had increased and the play time has increased very strong. So that I'd like to ask the background factors, how do you analyze why it was so strong? And first quarter to second quarter, is the case that it goes down, but it hasn't been the case this time. So maybe there was a special factor for that. That is the first point.

And the second question is about for the same gaming industry about the profit going up, but the cost improvement, you have said, but the cost improvement what kind of a cost improvement? Is it due to the development or is it for the sales promotion or other cost factors? And if possible, please tell us about the hardware. So it was 9 million at the beginning of the quarter, but then is there any change to that?

All right. Thank you very much for the question. And first of all, the second quarter engagement, the background factors to that. And the gaming engagement in most cases, depend on the way people play the games. So it's not everything due to the seasonality factors. And in that sense, if you have the large-scale titles, well, for those of you to play, the big titles has been launched the new season and then the engagement would go up. So that's usually the case that goes up with the big titles release. And in any sense, it's very positive that people play longer hours and engage. So we have big titles that will be launched very shortly so that we hope that those momentum of having high engagement in the platform is a very good performance for us.

And the second one about the cost improvement. So the forecast, well, compared to the last time forecast, we can see cost improvement. That's your question, right? So that is because for the next-generation title development, timing is different. So the next-generation investment itself, we are on schedule, but some of them, the accrual basis is different so that it's going to be on next year's. So because of the lag in the timing of the quarters. And then about the hardware sales, how many units we expect. So we had 9 million at the beginning of the quarter as a guidance. And then I refrain from saying the actual numbers, but what we had said at the initial period, we are having more units than what we have prepared at the initial stage.

[Operator Instructions]

Next question. SMBC Nikko Securities, Katsura-san, please.

I am Katsura from SMBC Nikko Securities. I have 2 questions. Number one is about I&SS. And the second question is overall. About I&SS, due to the change in the new product launch, you said the seasonality will change from the past. And looking at the appendix, the capacity and wafer input, the actual wafer input went down. I think that was impacted by the Kumamoto earthquake. So that -- I want to confirm that. And also, how do you perceive seasonality? Will this be leveled more or -- and also how you hold inventory? Before, you had high inventory in Q2 and Q4, while Q4, Q1 had lower performance. So please let me confirm that.

And how to -- how you spend the money. Looking at the cash flow from operating activities, JPY 1.6 trillion. So you have upwardly revised by JPY 100 billion. And the business -- looking at the business environment of entertainment as a whole, so how you will be investing and how you see the environment and how you see the target -- potential targets of investments. So please elaborate on your strategic investment.

Thank you for the question. About your first question, was about the production and how we hold inventory for semiconductors. Horii-san will be answering that question later. And second question was about capital allocation and strategic investment, which I will first respond to. You are right when you say our operating cash flow has been upwardly revised. In the midterm, the current midterm, the -- our operating cash flow generation capacity has increased steadily. Currently, we -- while we invest in the growth investment, while keeping the financial health, we still have room to increase shareholder returns.

About the strategic investment, we have already made the decision on JPY 1.5 trillion of strategic investment. And we continue to -- we will continue to strategically invest mainly in the entertainment business.

So Horii-san will now answer the first question on semiconductor.

So this is impacted by the timing of the launch of the new products by the customers. So as you say, the third quarter had highest volume because there was this end of the year sale. But this fiscal year, some of the new products were not launched back in September. So for the second half, there was some impact to the volume in the second half. But we are talking about the cycle here. But once this cycle transition is complete, it's just a matter of timing. So I don't think there will be much impact on the full year volume. But this fiscal year is a transition period. So that really changed the balance between the first and second half.

And your second -- there was -- you also had a question about the volume of the wafer input. The input of the wafers have actually gone down. And as you say, this was impacted by the Kumamoto earthquake. That's all. Thank you.

Time is limited. So the next will be the last question. SBI Securities, [indiscernible], please.

First question. There seems to be an audio problem. The Americans are suffering from high interest rates, likewise in Europe.

Thank you for the question. But as a holiday season, we are seeing inflation worldwide. And how do we see the business given this environment? I think, was the question. Well, yes, inflation is on the rise worldwide. And especially for the hardware, we are seeing high prices and prices rising. This is something that we are paying attention to. And because of high prices, how the demand will change is something that we have to look out for because we are selling the end product. It is an important indicator. But other than hardware, when it comes to content and service, it is less impacted by inflation and such a business environment.

Our entertainment business, it accounts for 70% of our net sales and profit. And this impact -- well, the inflation impact is less. But we have to continue to see how inflation will affect the consumption behavior. That is all. Thank you.

It's time for us to end our Sony Group earnings announcement. Once again, thank you for your attendance.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

We thank you very much for joining us today. We will now begin the Sony Group Corporation's First Quarter Earnings Announcement. I am Ishii of Corporate Communications. I will be ending this session. Today, fiscal 2026 first quarter consolidated results and consolidated forecast will be presented by Executive Officer and CFO, Lin Tao, followed by questions and answers. The English prerecorded presentation by Ms. Tao will be streamed through the English channel. We are planning for a total of 70 minutes. Ms. Tao, please.

Hello, everyone. Welcome to Sony Group earnings announcement. Before explaining our financial results, I would like to discuss the impact of the 2026 Kumamoto earthquake that occurred on July 28. First, I would like to express my heartfelt sympathy to those affected by the earthquake and to those whose daily lives have been disrupted. We have several semiconductor facilities located in Kumamoto prefecture and neighboring prefectures. And while all these facilities were affected by the earthquake, there were no casualties other than a few people who sustained minor injuries.

The Kumamoto Technology Center of Sony Semiconductor Manufacturing Corporation, in Kikuyo Town, Kumamoto Prefecture, which is relatively close to the epicenter, experienced shaking at a seismic intensity of 5-plus and suspended production immediately after the earthquake. Restoration efforts to resume production are currently underway. Our production sites in Nagasaki, Oita and Kagoshima had no significant damage to buildings or equipment and production has resumed. We will continue our efforts to fully restore production, and we'll update you on the progress and impact on our business at the appropriate time.

As it is currently difficult to reasonably estimate the financial impact of this earthquake, the impact has not been incorporated into the full year results forecast we will show today. Now I will turn to the earnings presentation. Consolidated sales for the first quarter ended June 30, 2026, increased 8% compared to the same quarter of the previous fiscal year to JPY 2,837.8 billion, and consolidated operating income increased 40% to JPY 476.5 billion, both record highs for the first quarter. Net income increased 32% to JPY 342.2 billion.

The financial results by segment are shown in the Q1 FY '26 results by segment slide. We have increased our FY '26 sales forecast 2% compared to our previous forecast to JPY 12.50 trillion. Our operating income forecast 8% to JPY 1,720 billion and our net income forecast 4% to JPY 1,210 billion. We expect operating cash flow to be JPY 1,500 billion, unchanged from the previous forecast. Regarding U.S. tariff refunds, we expect approximately JPY 80 billion of the tariffs, which the Sony Group as a whole paid to be refunded during the current fiscal year.

And we have allocated most of that amount to an upward revision of our consolidated operating income forecast. The FY '26 result forecast by segment is shown in the FY '26 results forecast by segment slide. In all other segments, Sony Financial Group, which was previously accounted for under the equity method, no longer meets the accounting standard of an equity affiliate since SFGI's shareholders' meeting last month. Consequently, we have concluded the recording of equity method income or loss in FY '26 Q1, and it is not included in our results forecast from the second quarter ending September 30, 2026.

This is strictly a change in accounting treatment and does not imply any change in the position of SFGI within the Sony Group nor a change in our collaborative or capital relationship with SFGI. Now I will turn to an overview of each business. First is the G&NS segment. FY '26 Q1 sales were essentially flat year-on-year at JPY 937.1 billion. Operating income increased 37% year-on-year to JPY 202 billion, primarily due to the impact of U.S. tariff refunds, partially offset by an increase in costs, including investment for the next-generation platform and restructuring costs.

We increased our sales forecast 3% from the previous forecast to JPY 4,540 billion, primarily due to the impact of foreign exchange rates. We increased our operating income forecast 10% from the previous forecast to JPY 660 billion, primarily due to the impact of the U.S. tariff refunds and foreign exchange rates as well as additional cost improvements. The number of monthly active users across PlayStation platform in June increased 2% compared to last June to 125 million accounts, a record high for June.

Although total play time during the quarter decreased 4% year-on-year, we think that user engagement continued to be solid because the same period of the previous fiscal year benefited from season updates to major titles and new hit titles. We expect further improvements in engagement metrics going forward because many major titles are scheduled to be released toward the end of calendar year. Regarding the impact of memory market conditions on PS5 hardware, we have secured the quantity of memory necessary to meet our projected sales volume for the current fiscal year, and there is no change to our plan for hardware profitability to remain similar to the previous fiscal year.

We continue to aim for further growth of the installed base while closely monitoring PS5 hardware demand trends and the potential for securing additional memory. In the Studio business, live service titles such as latest installments in the MLB The Show Series and Helldivers 2 now in its third year since release, continued to contribute steadily to revenue. With the release of Season 2 in June, Marathon has maintained a high user retention rate while also acquiring new users. As for titles on sale this fiscal year, Stellar Blade released in April, received high acclaim with another Metacritic score of 88 and is steadily expanding its user base.

In addition, going forward, we expect Marvel Token Fighting Souls set for release in August, Marvel's Wolverine set for release in September and God of War Ragnarök set for release in February of next year to continue to drive performance in this segment. Next is the Music segment. FY '26 Q1 sales increased 21% year-on-year to JPY 562 billion, primarily due to the impact of foreign exchange rates as well as increased revenue from live events and higher streaming revenue in Recorded Music. Operating income increased 14% to JPY 105.9 billion, a record high for the first quarter.

We increased our forecast for sales 2% from the previous forecast to JPY 2,190 billion and our forecast for operating income 5% to JPY 420 billion, primarily due to the impact of foreign exchange rates and the consolidation of Recognition Music Group. Streaming revenue for the quarter on a U.S. dollar basis increased 10% year-on-year in Recorded Music and 8% in Music Publishing. Reflecting the global success of the movie, Michael, streams of songs by Michael Jackson, whose music catalog is co-owned by Sony Music Group, increased significantly, reaching approximately 4x the level seen before the film's release.

We think that the significant increase in streams of his songs by Gen Z indicates that Michael Jackson's music is attracting a new generation of young fans and will continue to be enjoyed for many years to come. As catalog listening continued to grow throughout the market, SMG is leveraging its global catalog management expertise to expand its reach into new markets and audience, thereby continuously enhancing the value of its catalog. We believe that we can expect further value appreciation going forward due to new and greater licensing opportunities enabled by AI.

In FY '26 Q1, Ella Langley's new album, Dandy Lion, reached #1 on the U.S. Billboard album chart and its lead single broke the all-time record for the longest run at #1 by a female artist on the Billboard single chart. This indicates that we are continuing to discover new hit artists, and we plan to further enhance our business foundation by also continuing to focus on catalog. Next is the Pictures segment. FY '26 Q1 sales decreased 4% year-on-year to JPY 315.1 billion, primarily due to a decline in the number of series delivered in television production, partially offset by higher revenues from Crunchyroll. Operating income increased 33% to JPY 24.8 billion, primarily driven by a decrease in marketing costs related to theatrical releases.

We increased our sales forecast 2% from the previous forecast to JPY 1,660 billion, primarily due to the impact of foreign exchange rates and our operating income forecast 3% to JPY 150 billion. Spider-Man: Brand New Dame, which opens in theaters around the world starting this weekend, is one of Sony Pictures Entertainment's most iconic and long-loved franchises, and we are confident it will be a hit. In June, SPE announced that it will further enhance its experiential entertainment through a strategic investment in Cosm, which specializes in cutting-edge shared reality technology that bridges the virtual and physical world.

Through this partnership, SPE aims to provide fans around the world with new immersive content experience and expand the value of Sony Group's extensive portfolio of IP. Regarding anime, which is one of the pillars supporting our creative entertainment vision, we are working with creators and partner companies to further grow our business across the Sony Group. Aniplex and Kadokawa through the anime film distribution company, Animek, which they jointly established in March 2026, have begun distributing theatrical anime films since May. Going forward, they plan to distribute works made by Aniplex and works sourced from Kadokawa's novels and games.

Aniplex and Crunchyroll are continuing to collaborate on the development and expansion of anime IP, and they have decided to produce a theatrical film of the global popular hit anime Solo Leveling. Crunchyroll continues to grow its subscribers beyond the more than 21 million it had at the end of March this year, and its results in the quarter improved year-on-year. Next is the ET&S segment. In FY '26, Q1 sales increased 2% year-on-year to JPY 543.9 billion, and operating income was essentially flat at JPY 42.6 billion. There is no change to our FY '26 forecast. The imaging market this quarter remained stable in all regions, except China, where the market continued to experience negative growth compared to the previous year.

Against this backdrop, strong sales of the Alpha 7 Mark 5, which won the grand prize at the Camera Grand Prix 2026 and the Alpha 7R Mark 6 launched in June helped raise average selling prices and expand our market share in the full-frame camera market, enabling the imaging business as a whole to maintain its sales on par with the same quarter of the previous fiscal year. In the displays business, new true RGB BRAVIA models boasting the widest color gamut in the history of our consumer TVs were well received. The continued surge in memory prices remains a key business challenge for this segment this fiscal year. However, the business is doing everything it can to implement cost reduction measures in procurement and design and to adjust its pricing strategies, including foreign exchange management.

We expect to maintain the profit level projected in the previous forecast for the segment as a whole. Last is the I&SS segment. FY '26 Q1 sales increased 26% year-on-year to JPY 512.7 billion, mainly due to higher average selling prices of mobile sensors as well as the impact of foreign exchange rates. Operating income increased approximately 2.3x to JPY 122.2 billion and reached a record high for the first quarter. We have increased our FY '26 sales forecast 2% to JPY 2,110 billion and our operating income forecast 5% to JPY 420 billion from our previous forecast, mainly due to the impact of foreign exchange rates.

While the smartphone market posted negative growth for the second consecutive quarter, high-end manufacturers, primarily our major customer, are expanding their unit sales and market share. In line with this trend, although our mobile sensor unit sales only slightly increased year-on-year, sales grew significant year-on-year due to improved customer and product mix as well as the impact of foreign exchange rates. Looking ahead to the second half of the fiscal year, we anticipate that market conditions for memory will also affect shipment volumes of high-end phones. Therefore, we remain cautious in our full year forecast and expect revenue for mobile sensors as a whole to slightly decrease from the previous fiscal year.

Regarding the strategic partnership with TSMC for the development and manufacture of next-generation image sensor announced in May, detailed discussions are progressing smoothly with a view to signing definitive agreements. To prepare for the establishment of the joint venture with TSMC, we have incorporated approximately JPY 10 billion in additional costs for the current fiscal year into our full year forecast. Through our partnership with TSMC, which possesses world-class semiconductor process technology, we aim to further enhance the technological competitiveness of future image sensors, including high-density and to firmly capture growing demand not only in mobile sensors, but also in areas such as physical AI, thereby further solidifying our #1 position in the image sensor market.

To summarize, the G&NS, Music and I&SS segments posted record profits for the first quarter and the Sony Group as a whole has continued to achieve robust profit growth. Even in an uncertain business environment, the profit-generating capacity of each business segment is steadily increasing, and we intend to continue our efforts to deliver solid results in the final fiscal year of the fifth mid-range plan. Regarding the share repurchase program, the cumulative amount purchased through the end of June was approximately JPY 120 billion out of the facility we established in May. And we intend to continue to work towards strengthening shareholder returns. This concludes my remarks.

This was a presentation by Tao. From 4:25 p.m., we will take questions from the media. And from 4:50 p.m., we will take questions from investors and analysts. We are planning for approximately 20 minutes for Q&A session. [Operator Instructions]

Thank you very much for waiting. Ladies and gentlemen, we would like to start the Q&A session. First, let me introduce those on stage to take your questions. Lin Tao, CFO, Corporate Executive Officer; Hirotoshi Korenaga, Senior Vice President in charge of Accounting; Naoya Horii, Senior Vice President in charge of Corporate Planning and Control. First, we will take questions from the media. [Operator Instructions] The first person to ask a question is Nishizono from NHK.

My name is Nishizono from NHK. I'm sure you're so busy to take care of the aftermath of Kumamoto earthquake. So let me ask the first question about the Kumamoto earthquake. I think the semiconductor facilities in Kumamoto, you announced that from next month onwards, you're going to resume the production. 10 years ago, when there was a Kumamoto earthquake, I think it took about 3 months to go back to the previous level of production. And now by the end of mid-August, you're going to resume -- go back to the previous level. And why could you shorten the time for restoration and BCP countermeasures.

Now, but I understand this is the question about the impact of the earthquake. As has been announced in the press release, starting on the 4th of August, Kumamoto Technology Centers will start resumption of the production gradually. And by mid-August, we are scheduled to go back to the pre-earthquake level. And other than that, Kumamoto, those production sites in Kyushu, Nagasaki, Oita and Kagoshima already, they have resumed the production. Compared to 10 years ago, simply put, the damage, the level of damage is so different this time. Of course, BCP and other matters, we learned lessons from the previous earthquake.

And we accumulated the expertise and knowledge how to quickly restore the operation. But simply put, this time around, the level of damage is so different from 10 years ago. The buildings and the production facilities for improving the antiseismic strength that we have been doing this for the last 10 years. And also not only our in-house efforts, but our collaborations and cooperation with partner companies have helped us because we discussed with them on these matters. And let me add that for this restoration this time, we enjoy the cooperation from the employees and also our business partners. This contributed to the fact that we can resume the production quickly this time around. So I thank them very much.

Next question, please. [ Nikos Yoshida ] from Nikkei Newspaper.

Yes. Two questions. First, following up on the previous question, impact to the semiconductor business. So last time, it took about 3 months. This time, it's expected to be relatively short time to resume to pre-earthquake level operation. But I don't think you have the full scope yet. And I don't think you have stated the monetary impact. Compared to the last time, the monetary impact would be less. Is that your outlook? So give us a qualitative response on that, please. Second, about the game business, PS5.

So you're going to end the disc products. I think that you made a comprehensive decision on that. And there was some movement against that. And some of the consumer organizations have criticized you. Some have sued you. And so how did you come to that decision? And how do you respond to the criticism? And so was this a decision that was necessary for the next-generation game device? Or was it intended for enhancing the margin? So was that a sales decision?

Thank you for the question. So to address the first question about the semiconductor business impact of the earthquake, as I said earlier, -- so we are checking various things, and it's difficult to estimate the overall impact, but we'll be resuming more quickly than before. And also the annual performance of semiconductor, we think that the impact will not have a major impact to the full year results for the semiconductors. So PS5 ending disk production, the second question. So on this point, so we announced that January 2028 onwards, we will no longer be manufacturing game disks. So 1.5 years ahead.

So we made this announcement at this time. 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. And to this decision, we have received various opinions and people have strong views. And we understand that the community has put forth those views to us. Games are loved by many people.

It's a form of entertainment that's loved by people, and it's connected to people's fond memories in many cases. And so we understand those emotions. We want to consider that. And in the future digital ecosystem, how do we engage the gamers is something that we would like to continue to explore. Thank you very much.

The next question, please. [ Nishi ] speaking. Can you hear me?

Yes. I also have 2 questions. First, well, as was asked about the termination of this production. At present, for example, are you seeing users and sales going down? Do you have any forecast? Are you saying that you're not in a position to make such forecast yet? So I want to know what you think the impact will be up until 2028. And about imaging, you have made a proposal to acquire Tamron. And is there anything that you can comment on at this point in time?

Thank you very much for your question. About your first question about PlayStation Disk. Well, in -- up until 2028, well, at this point in time, well, we are not seeing any impact on our business as of now. But going forward, about the content sales, I think large part is already digitized. And therefore, as a result of the discontinuation of a disk, we don't see that there will be any negative impact on our business. However, as I already said, the users, the players have attachments, and we have to think about how to respond to those feedbacks. About the second question about Tamron announcement.

Well, about Tamron, as they have disclosed, we made a proposal to make Tamron into a 100% subsidiary. Now the thinking behind this, first, Tamron for the shareholders of Tamron and also for our imaging business, we think that it is a proposal will lead to the optimum value creation. Our proposal is to enhance Tamron's corporate value. And at the same time, we can combine our strengths and leveraging these strengths, we can lead to this -- to the development of our imaging business. So this was the assumption in making this proposal. That's all. Thank you.

We will proceed to the next person [ Toyo Keizai Yamashita-san ].

[ Yamashita of Toyo Keizai ]. I have 2 questions. First is about the proposal to Tamron. Let's say that this -- if you acquire the precision lens manufacturer like Tamron, it seems that this shows a little bit of difference in the orientations of your past investment. So how do you position this investment? Second question about I&SS. You talked about the setting up of the joint venture with TSMC and also the cost -- additional cost of JPY 10 billion. How are you going to use this JPY 10 billion? And when -- give me the time line, when is it going to be used?

Thank you for your question. First, about the Tamron's acquisition proposal. Sony places so much emphasis on creativity and technology to deliver Kando. That's our purpose. Therefore, on this creativity, in the past, we have acquired various entities. concerning IPs. But for technology, the creativity of the creators have to be supported, and that is one of the pillars of our strategic investment. In that sense, this is a priority area of Sony's strategic investment.

So we have maintained our consistency in our investment thesis. For the details of the proposal, I am not in the position to make a comment at this moment in time. And the next question about the TSMC joint ventures with the TSMC and its preparation cost, and Horii will answer this.

Thank you for your question. This time around, JPY 10 billion was allocated or posted for the full year forecast. In starting up the production in the new site, this is going to be a cost to be incurred, and that's why we posted this. So this is the cost required for the production preparation in a general sense of the word. Well, we have not reached the definitive agreement stage. But our discussion has been advancing smoothly. And from the second half of this year, we would like to see the specific preparation work to begin. If we successfully conclude the agreement for the next fiscal year onwards, we would like to make investment with the current level or even more in order to make the preparation definite.

Time is running out. So the next person will be the last person to ask question. From [Asahi Shimbun, Miura-san ], please.

[ Miura San from Asahi Shimbun ]. I want to also ask about the earthquake, one clarification. So you said that the extent of the damage was smaller than the earthquake of 10 years ago. So in terms of the seismic intensity, Kikuyo Town's intensity compared to a decade ago was slightly less and damage was less. And also, I think that you have increased seismic resistance of the production facilities. I think that's my understanding. Is that correct? Are the reasons that damage was less?

Yes, you're correct.

It's time to end the media Q&A. We will start the investor analyst Q&A from 4:50 -- excuse me, 4:50. We'll be starting the investor analyst Q&A shortly. Please wait a while until we begin. Thank you for waiting. We'd now like to start the investor analyst Q&A session.

I'm N.P. Singh from IR. Those on stage are the three, the same as the media session. We'll start the Q&A. Those have questions. [Operator Instructions] From [ SMBC Nikko Securities, Katsura-san ].

I'm [ Katsura from SMBC Nikko ] Securities. I'd like to ask 2 questions. One is overall and the next is regarding cost. The first question, Well, I may have missed this in the presentation, but you have made upward revisions of which each of the -- amongst the ET&S segments, you did make reference to the U.S. tariff refund on a total basis in the first quarter annual, how much of the refund has been factored in? Can you share those numbers with us? And the second is about memory cost. In regards to memory cost, ET&S and G&NS impacted annually, maybe -- well, especially ET&S, I think you said was JPY 30 billion. So about these numbers, have there been any changes in how you factored this in? Can you explain that to us, please?

Yes. Thank you for the questions. The first question is about the U.S. tariff refund and its impact on our forecast. Well, overall, the whole group, we are estimating JPY 80 billion refund. Most of it has been included in our upward revision of our forecast. About the second question about the memory cost. G&NS game and ET&S, both are responding to the memory cost increase.

About game, already, we have secured the numbers necessary for this year. And this has already been reflected in our forecast. ET&S, most of the memory that will be needed has been secured. And the timing at which we can secure all the memory necessarily will be the second quarter. I think we have a good outlook already. And therefore, the numbers have been included in our forecast this time. That's all.

The next question from Goldman Sachs Securities [ Munakata-san ].

[ Munakat ] from Goldman Sachs. I would like to ask 2 questions on games. First, user engagement and market trend and your market share. MAU in June hit the record high and the total play time in June showed a little decline. But what would be the overall trend and movement in this market in your view? And do you have any conviction that you can keep this market share in the games? Now about the completion or the ending of the disk sales, I'm sure I understand the background.

I understand that there will be an effect on the retailers. How do you position your relationship with the retailers? And as the disks disappear, some of the users may feel that it's coming closer to the gaming PC. And how do you differentiate that from the gaming PC?

Thank you for your question. First, about the engagement of the games and the gaming market. For MAU, it's been steadily increasing and the play time -- well, it showed a slight decrease. But last year, last fiscal year compared to the same time previous year, there was a decrease in the content, and that's the reason in our view. Well, so we don't have major concern on the overall game business. Game as an entertainment we can provide services so that a certain number of users always enjoy our products. And towards the second half of this fiscal year, major contents are set to be released and not only the first-party IP, but the third-party IPs, major titles are coming up in the secondary half, and there will be a boom or boost.

Now about the market share, how do you define the market share? Hardware in the first quarter, sell-in and sell-through have been quite robust. Most likely, we feel certain that the market share has not declined. Your second question about the end of the disk sales and its impact on the retailers. For the last 30 years, we have been selling PlayStation and the retail partners have been always important to us. And with the completion of the dis production, we communicated this at an early stage so that we have enough time to be able to listen to various partners' voices. And in the North America, this has already happened.

But without disks in the package, there's a code included. That's how we -- how they sell in North America. And about the retailers, there are regional characteristics. And for each regional partner, we try to have thorough dialogue so that we can end up in a win-win situation. Now the differentiation from PC, we don't feel that the disk is the factor to differentiate from the PC. For PC, there's certain ways to play with the PC as a user, it's a long tail. Our strength is that the curated content is one of our strength and the game environment stable -- being stable, that's another strength.

And high end -- compared to the high-end gaming PC, our products is more affordable. So we don't feel that the disk itself is a strong factor for differentiation. So going forward, we can coexist peacefully with PC games.

Next, Mizuho Securities, Nakane [ san ]please.

Yes. One question about music. So the consolidation of the Music Group, I think they have a wonderful catalog. It would be wonderful if that's achieved. But so you have this collaboration with JIC and size of the balance sheet and how much investment in catalog. So in the supplementary material, not so much mentioned. So talk about this. How much risk are you taking? How much risk are you avoiding in this scheme? And also in today's announcement, you gave us some information, but if you can provide some more detail, please.

Thank you for the question. Recognition Music Group acquisition scheme is what you're asking about, I think. And so concerning this acquisition, raising cash and interest-bearing debt and the GIC part of the GIC fund. So in terms of how we buy, I think we have put together a creative solution. So the music catalog is going to be a very important strategy for us going forward, especially high-quality content is not always readily available. So when we need high-quality catalog, we want to be prepared and be able to buy. And so various financing methodologies, we are preparing to allow us to make those moves.

Time is limited. The next person will be the last. JPMorgan Stanley, Ayada-san, please.

I would like to ask 2 questions. The first, confirming the numbers about the tariff refund. First quarter actual is how much? And also the segment breakdown. And the annual JPY 80 billion, again, if you can give the breakdown by segment, I would appreciate that. And this time, you've made an upward revision of JPY 120 billion. But if you were to divide this, JPY 80 billion less is the tariff refund and the rest is foreign exchange? Or is there an upturn in your actual business? Can you explain that?

That's the first question. And the second question about I&SS, the second quarter and after the demand based on the user -- well, smartphone, North America, China, the memory cost increase will impact. And so what about that? And other than that, digital camera, the price is going up slightly and automotive FA also, can you give the outlook?

Thank you very much. About the tariff refund and the detail of the refund. This we cannot disclose all the details. But as a way of thinking, the most of the first refund is going to game and the rest is going to SEC. So please understand that, that is the case. So that's for the second quarter. And well, the OP upward revision, a large part is the tax impact and the positive impact of the exchange rate. That's for sure. But what about the actual business? In the first quarter, as you see, the fundamentals are very strong. But generally speaking, it's just the first quarter, only 3 months.

And have we seen a major change in the forecast? Well, no, so far, it's as we forecast in May. But content, semiconductors, there is a possibility that it could go up. And the second question about the semiconductor second quarter and after the demand outlook. Again, we will continue to -- we think the mobile sensor will be the most important, but Horii can give the details, please.

Thank you for the question. Yes. As you understand, from the second quarter and after, there is a bit of uncertainty in the market. And therefore, we have tried to be on the conservative side to a certain extent. At this point in time, the second quarter that we're in right now rather than that and the second half of the third quarter and fourth quarter has included more risk. So for the second quarter, we will continue to see that the numbers will be positive. That is our forecast.

About the memory cost increase, how we consider this. And the mobile is, as you say, but for other categories, likewise, to a certain extent, it will have an impact on the final product market. We are taking this into account. And it's difficult to say things in general. But for commercial products, we think that it will be around 10% impact on the demand. That is all.

So can you give a total for just the first quarter, the refund?

About 70% of the refund took place in the first quarter. So of the JPY 80 billion, about 70% took place in the first quarter. Yes.

Well, it is time to close the Sony Group's first quarter results briefing. Thank you very much for your attendance today.

Thank you very much for taking time to join us today. We will now begin the Sony Group Corporation's Corporate Strategy and Earnings Announcement Presentation. I am [ Ishii ] from Corporate Communications. I'll be serving as MC.

First, Hiroki Totoki, President and CEO of Sony Group Corporation will explain our corporate strategy. This will be followed by Lin Tao, who will present the FY 2025 financial results and the full year forecast for FY 2026.

Please note that to ensure our international participants can hear from the speakers directly, the English version of the presentation will be delivered via a prerecorded video. Afterwards, we will move on to the Q&A session. The total duration is scheduled to be approximately 100 minutes.

Totoki-san, please.

Hello, and thank you for joining us. Today, I'd like to share a brief update on Sony's business, our corporate priorities and direction as we enter the final year of our current mid-range plan. It has been a truly exceptional year for Sony since our last corporate strategy presentation, a year marked by strong performance and record results across many of our key businesses as we continue to focus and build on our creative entertainment vision.

And we continue to evolve our business portfolio as we seek new opportunities for growth and meet new challenges in a rapidly changing market. Two years ago, we kicked off the current mid-range plan, highlighting the evolution of our business direction in entertainment, IP, content creation and real-time creation technology. And we launched our creative entertainment vision, our long-term vision, which seeks to leverage the power of technology to empower creators deliver new experiences across both physical and digital space and maximize the value of IPs.

Sony's purpose to fill the world with emotion through creativity and technology is at the heart of our creative entertainment vision and is driving success and potential growth opportunities across our Sony Group businesses, including our GMS segment, whose PlayStation platform now hosts over 125 million active users around the world, who enjoy their favorite titles wherever they are and connect with their friend through game play.

Sony's Music businesses, which have enjoyed tremendous success and growth through their efforts to nurture and build strong relationships with a growing roster of outstanding talent, digital streaming platforms and global audiences. Our Pictures business, which continued to produce and distribute strong film and TV content and serve as an important hub for cross-company collaborations such as miniaturization productions, film and TV adaptations of game IP.

Our ETN segment is expanding its sports business by advancing offsetting technologies and high engagement initiatives and investing in athlete performance tracking solutions while inspiring creators by enabling high-quality innovative content production. And underpinning that creativity at this very core is the evolution of image sensors in our I&SS segment.

We also have anime, which cuts across several of our businesses and remains an important growth sector for Sony and a key part of our creative entertainment vision. Sony's strengths come from the synergies and collaboration effort that exist across Sony Group companies and with our strategic partners spanning production, fan engagement, marketing and global distribution to deliver anime at scale to worldwide audiences.

The explosive worldwide growth of anime is demonstrated by last year's massive global hit film, Demon Slayer: Kimetsu no Yaiba Infinity Castle, which was produced by Aniplex and our partners and the rapid growth of Crunchyroll.

Crunchyroll now serves more than 21 million paid subscribers globally as an anime distribution platform with a library of more than 50,000 episodes, including many of the most popular and current series from Japan, subtitles and in 13 languages. In addition, we enabled expanding global fund participation in voting through MyAnimeList for the first time for the upcoming Crunchyroll Anime Awards through our partnership with Gaudiy.

And this fall, Crunchyroll will host its first year Crunchyroll Annual Future Forum in New York, bringing together leaders across anime, gaming, music, film and emerging technology to strengthen relationships with Japanese publishers and creators globally. During this MRP, we also continue to shape our world portfolio.

Last fall, we completed the partial spin-off of the financial service business. And in March, Sony Corporation entered into definitive agreement with TCL, forming a strategic partnership for BRAVIA TVs B2B flat panel displays, home theater and home audio components, strengthening the resilience of each of those businesses. All the while, we have continued to invest and lean into areas where we see ongoing growth and competitive advantage.

Building on the strategic partnerships announced with Bandai Namco Holdings last summer, we are further strengthening our position in anime, an important growth sector for us in addition to other areas. Our recent agreement with WildBrain to acquire their stake in Ping Holdings increased Sony's ownership stake to 80% to expand its beloved and globally recognized brand and ongoing investment in music, following major deals to acquire the Pink Floyd and Queen catalogs, Sony Music Group recently announced a partnership with GIC, the Singapore sovereign wealth fund to further build our music IP investments.

Together, these strategic decisions reflect the ongoing evolution of Sony Group's business direction towards entertainment, IP and creation technology, which now represents 67% of Sony's consolidated sales.

Overall, it was a very strong year in terms of performance we will change direction on a few strategic initiatives, pivoting better pushing us moving forward. We decided to wind down our Pixomondo visual effects business and focus on new technologies. We downwardly revised our projections and recorded an impairment loss against long-lived assets at [Fung ].

And due to Honda's reassessment of its EV strategy, we discontinued the development and production of Sony Honda Mobility's Filer models. This strategic shift were made on the back of strong fiscal year 2025 performance to position the company for future growth. You will hear more details on each of these moves as well as our financial results from our CFO, Lin Tao, shortly.

And now I would like to turn to the topic of AI. When we think about further growth at Sony Group, AI is one of the most important themes for us to consider, especially the potential it holds for us across Sony Group businesses to unlock new value creation and capture new opportunities for growth across our entertainment businesses. Let me start by stating a core principle that guides our thinking about AI.

Human creativity must remain at the center. AI is a powerful tool, but it's not a replacement for artists or creators. It is an amplifier of human imagination and catalyst for new possibilities. Great content comes from deep personal experiences unique perspectives and a strong inner motivation to express something meaningful.

[indiscernible] to such stories, characters and worlds that of a deep emotional connection. We believe the most memorable experiences will always be created by humans and enjoyed by people. AI can assist in that process, but it will not replace human imagination, creativity and emotions. AI brings new opportunities to the world of entertainment, not only in terms of efficiency, but in empowering creators to expand their creativity.

Additionally, we believe AI will make it easier to take on more innovative and ambitious projects, projects that were previously difficult to pursue due to constraints of cost and time. For example, this shift represents a significant opportunity for PlayStation as a platform as more diverse and innovative content is created and overall game industry continues to evolve.

PlayStation can connect more fans with more games, further strengthening its value. At Sony Pictures, we are scaling AI and other advanced technology across workflows to accelerate production time lines and increase output and have invested more than $50 million to date in AI capabilities across production planning, content protection, enterprise productivity, data analytics, innovation and 3D conversion.

Sony Music is encouraged by the increased number of companies who agree that intellectual property rights need to be respected and therefore, want to negotiate licenses for new products with them. These partnerships will lead to business expansion that will also benefit consumers and creators. To drive such efforts, Sony Music is actively pursuing an industry-wide standard to label AI content for further transparency with consumers.

Alongside our own efforts, we are currently engaged in a collaborative pilot initiative with Bandai Namco Holdings to explore how generative AI and the latest technologies can most effectively contribute to realizing a creator's vision in the realm of video production. Through these explorations, we have identified massive gains in speed and productivity per person as well as how to concretely address the shortcomings of generative AI based on the understanding of the strengths and weaknesses of the models.

One example of the weaknesses is the lack of consistency and controllability, which is demanded by creators and those involved in production. We have accumulated know-how to resolve such issues by utilizing various AI models as well as fine-tuning models with technology and proprietary data to consistently generate output of intended style with accuracy and cost that will be necessary for deployment.

On the other hand, we have also identified opportunities where AI can produce highly sophisticated and realistic outputs, which were not feasible before due to production time constraints. We hope to contribute to the overall growth of the industry through such collaborations and by combining Sony's expertise in audio, video processing, spatial and 3G technology with generative AI to create a creative first production environment that is safe and secure to use while maximizing their artistic sensitivity and output.

Now I would like to introduce Hideaki Nishino, President and CEO of Sony Interactive Entertainment, to say a few words about how we see AI strengthening our efforts in one of our most important growth areas, games.

At PlayStation, our goal is always to be the best place to play and the best place to publish. We see AI as a powerful tool to help us in this mission. For our players, this will mean gaming experience like never before, more immersion, more adventures and fresh ways to enjoy their favorite characters.

For our publishers, this will mean a more efficient production environment and a better discovery to ensure their games reach the right audience. AI is lowering the barriers to creation, accelerating the development cycles and enabling more creators to enter the market. As a result, we expect to see a meaningful increase in the volume and diversity of the content available to the players.

Our platform's low will be critical in ensuring players find the right content in an increasingly crowded landscape. Our studios and their IP will also continue to be a key differentiator. When players have more choice, they will gravitate towards trusted franchises they know will deliver the high-quality experiences. Within our studios, game developers are automating repetitive workflows, improving software engineering productivity and accelerating areas like quality assurance, 3D modeling and animation through new AI-powered tools.

For example, our teams created a tool we call [indiscernible], that quickly animates 3D facial model based on the performance capture. Importantly, we're not replacing human performers, but rather optimizing how we process the data from these live captures. With Mockingbird, animation work that would have taken hours can now be completed in a fraction of a second.

We've already seen the teams at [ Noida ], San Diego Studio and other adaptive tool including in these titles like Horizon Zero Dawn Remastered. Another example is a tool we built for animating hair. This is often a labor intensive process given the volume of strands that must be created.

Our teams have accelerated this process by taking videos of real hair styles and having an AI tool output a 3D model with hundreds of strand models. These practical applications allow our teams to spend less time on manual, high effort task and to instead invest their time into building richer worlds and game play for our players.

AI tools in the hands of our teams will enable not only efficiency but also new types of experiences for fans. For example, Gran Turismo's AI-powered racing agent, Sophy, has added a level of competitive game play or even our most seasoned drivers. Taking this further, our world-class creatives have already shown the ability to create amazing prototypes where NPCs with their own personalities can create a living dynamic world for the players to explore.

As AI capabilities evolve, the role of our creators will remain unchanged. The vision, the design and the emotional impact of our games will always come from the talent of our studios and performers. AI is meant to augment their capabilities not to replace them. AI is also already a part of our platform business.

To take one example, over the last 3 years, AI-powered tools ensure the transactions were routed efficiently over the payment networks generating over $700 million of incremental revenue. We are building on this success with ongoing projects that will use machine learning to provide the best value possible to our customers.

As AI brings more choices to players than ever, the value of our platform will lie in its ability to recommend and personalize at scale. We've already seen how AI models can outperform manual curation, and this will continue to improve. Our AI capabilities will evolve into a consumer-centric experience that not only suggests the next game a player might enjoy, but also the next game play moment subscription, accessory or merchandise that best reflects their passion.

Beyond the store, our recently updated PlayStation Spectral Super Resolution available on the PS5 Pro uses machine learning to enhance image clarity, delivering 4K visuals at high frame rates. With PSSR, games like SAROS and Ghost of Yotei have never looked sharper. Through our investments in AI and machine learning, we will continue to push the [indiscernible] forward. We believe AI will unleash the creativity of our studios, power a more curated platform and enhance the PlayStation experience for both players and creators. With our global player base, deep library of IP and integrated ecosystem, AI is a powerful tool for us to deliver a truly cutting-edge entertainment experience.

Thank you, Nishino-san. I would like to now turn to our Imaging & Sensing Solutions, I&SS business. Sony's imaging sensors have evolved as electronic [ eye ] that accurately capture the real world, driven by our relentless proceed of fundamental advancement that go beyond competing on specifications alone.

Our #1 priority is to deliver the best possible imaging experience for our customers. To do so, we scrutinize and optimize every aspect of the sensor from the pixel structure, stacking and layering technologies through to the [indiscernible] processes and final packaging. Sony possesses deep expertise cultivated over many years in analog domain spanning design, development and manufacturing together with our comprehensive ability to integrate and refine these elements as a whole. This is our competitive strength, and it's not something that can be easily replicated.

Starting from our core mobile applications, we are developing higher density by advancing process technologies with enhanced fabrication precision, together with stacking technologies to further improve performance. At last year's corporator strategy presentation, I discussed our direction for pursuing growth in the I&SS business and improving profitability with a strong focus on financial discipline.

As part of that effort, today, we announced the signing of a nonbinding memorandum of understanding with TSMC to form a strategic partnership for the development and manufacturing of next generation image sensors.

Under the proposed partnership, we intend to establish a joint venture with Sony being the majority and controlling shareholder to set up development and production lines in Sony's newly constructed farm in Koshi City, Kumamoto. As part of our partnership, we intended to explore emerging new opportunities in fiscal AI applications, such as automotive and robotics, paving the way for future growth innovations and expanding technological advancement.

I'd like to close today by addressing the technological and geopolitical disruptions which together have greatly impacted international supply chains and drastically upbranded traditional ways of doing business around the world. One such technological disruption is the current memory shortage, which is being driven by surging AI infrastructure demand and is impacting entire industries including gaming, smartphones, laptops, memory cards and other products.

Our businesses are managing this issue very carefully. As I will be able to contain a negative impact of increased memory cost in the current fiscal year and is engaged in ongoing negotiation with suppliers to miss demand beyond the current fiscal year. In our I&SS business, while a volume-driven low-end smartphone market is impacted by the rising cost of memory, our main customer base and demand in the high-end segment remains strong. We will continue to monitor and proactively manage the situation and you will hear more about this in the upcoming earnings presentation.

Looking ahead, we are optimistic about the environment in which we are operating and the strength and diversity of our businesses and employees in driving continued success for Sony. At the same time, we are very aware of the seismic changes taking place in the world in which we all live and work.

With ongoing unrest in the Middle East and unpredictable shifting tariff pressures we are navigating a period of geopolitical complexity that present us with new challenges and uncertainty across market, partnerships and supply chains. In this environment, adaptability will be crucially important. We cannot rely on assumptions that have supported us in the past, and we remain ready to pursue innovative ways of finding growth in the future. Thank you. I will now hand the meeting over to Lin Tao.

Hello, everyone. Today, I will explain the content shown here. Sales of continuing operation in FY '25 increased 4%, compared to the previous fiscal year to JPY 12,796 billion and operating income increased 13% to JPY 1,447.5 billion, both record highs.

Net income decreased 3% to JPY 1,039 billion, primarily due to the absence of a decrease in tax expense from the dissolution of a subsidiary recorded in the previous fiscal year. The financial results by segment are shown here. When you look at the factors causing the change from our February forecast, for operating income. You can see that we recorded approximately JPY 190 billion in items not included in our previous forecast, including impairment losses on assets at Bungie and [ Pixel ] models as well as losses related to the downsizing of the business of Sony Honda Mobility.

Excluding these items, operating income significantly exceeded our forecast overall, primarily due to an increased profit in G&NS and I&SS segment. Our consolidated results forecast for FY '26 is sales of JPY 12.3 billion, operating income of JPY 1.6 billion and net income of JPY 1.160 billion. We expect operating cash flow to be JPY 1.500 billion. The results forecast for each segment is shown here.

Now I will turn to an overview to each business. First is the G&NS segment. In FY '25, sales were essentially flat year-on-year at JPY 4,685. 7 billion as the decline in PS5 hardware sales was offset mainly by foreign exchange rates and higher revenue from network services and third-party software. Operating income increased 12% year-on-year to JPY 463.3 billion and reached a record high for the segment, primarily due to a higher sales and the positive impact of exchange -- foreign exchange rates.

Despite the impairment of assets at Bungie, excluding the JPY 138.4 billion in onetime items, operating income increased 45% year-on-year. For FY '26, we forecast sales of JPY 4,420 billion and operating income of JPY 600 billion. Compared to the result of FY '25, excluding onetime items, this operating income forecast is essentially flat year-on-year. That is because we have incorporated an increase in investments of the next-generation platform in the FY '26 forecast.

Excluding these factors, we expect steady double-digit growth in the profit generated by our current business. The number of monthly active users across the PS platform in March increased 1% compared to last March to 125 million accounts, a record high. And total play time in the fourth quarter ended March 31, 2026, increased 1% compared to the same quarter of the previous fiscal year, with user engagement remaining solid.

Cumulative PS5 unit sales as of the end of March exceeded 93 million. This expanded installed base contributed to stable profits from software and network services. We plan to base our PS5 hardware sales in FY '26 on the volume of memory, we can procure at reasonable prices and we expect hardware profitability to be essentially the same as FY '25. If circumstances change going forward, we plan to manage the impact on profitability by flexibly adjusting among other things, unit sales and promotional plans.

In our studio business, earnings from Bungie's title portfolio did not reach our expectations. So we downwardly revised our business plan and impaired the full amount of the fixed assets related to Bungie except for goodwill. Player receptions to Marathon is strong, with the game receiving a metacritic score of 82 and more than 90% of the player review on Steam being positive. Engagement metrics such as retention also remain at a high level.

Going forward, we aim to improve the performance of the game by working to retain highly engaged core users through the introduction of additional content, further improvements in the game play experience and expansion of the user base. We have many appealing first-party titles scheduled in FY '26, including SAROS released in April and Marvel's Wolverine slated for release in September. We expect the contribution to earnings of first-party titles to exceed FY '25.

Next is the Music segment. In FY '25, sales increased 15% year-on-year to JPY 2,120.1 billion. Operating income increased 25% year-on-year to JPY 447 billion, primarily due to the impact of the higher sales and the revaluation gain recorded in connection with the acquisition of an additional equity interest in Peanuts Holdings, even when excluding these onetime items, Operating income reached a record high. For FY '26, we forecast sales of JPY 2.140 billion and operating income of JPY 400 billion.

Excluding onetime items, we expect the amount of operating income to be at the same level as the previous fiscal year primarily because growth in streaming revenue is expected to be offset primarily by the absence of the prior fiscal year hit title, Demon Slayer: Kimetsu no Yaiba The Movie Infinity Castle.

In FY '25, U.S. dollar basis streaming revenue increased 9% year-on-year in recorded music and 14% in music publishing. We expect the mid- to long-term average growth rate of the music market to be in the mid- to high single digits, and we intend to continue to invest in high-quality music catalogs going forward with the aim of growing stable earnings. Due to the release of Michael, a biopic about Michael Jackson Sales at SMG have increased due to a significant increase in streams of music by Michael Jackson, whose music catalog SMG jointly owns. We expect that streams in other countries will also increase as the film is released theatrically around the world, including in Japan.

Next is the Pictures segment. In FY '25, sales were essentially flat year-on-year at JPY 1.993 billion. because lower revenue from theatrical release films was offset primarily by increased Crunchyroll revenue resulting from higher paid subscribers and the hit Demon Slayer. Operating income increased approximately 13% year-on-year, excluding the impairment losses on the asset of [ Pixel ] model, which operates VFX and virtual production business and related shutdown costs.

However, including these factors, operating income decreased 11% year-on-year to JPY 104.9 billion. For FY '26, we forecast sales of JPY 1,630 billion and operating income of JPY 145 billion. At SPE, we are continuing to work to create and strengthen franchises by adapting appealing fan-supported IP into films. Recently, SP and PlayStation production announced the film adaptation of Bloodborne game IP owned by SIE and preparation of the film adaptation of Helldivers have begun.

In addition, we plan to release Spider-Man: Brand New Day in July 2026 and Jumanji: Open World in December 2026. The trailer for Spider-Man released in March surpassed 1 billion views in the first 4 days after its release, a record high in the film industry, reflecting exceptionally strong anticipation from fan worldwide.

Next is the ET&S segment. In FY '25, sales decreased 6% year-on-year to JPY 2,265 billion, and operating income decreased 17% to JPY 158.6 billion, mainly due to the impact of lower sales. For FY '26, we forecast sales of JPY 2,250 billion and operating income of JPY 150 billion. Market conditions in Q4 trended essentially in line with our February forecast despite geopolitical risk in various regions and concerns about a macroeconomic slowdown.

The financial results for the segment and our inventory level were also essentially in line with our forecast. In this segment, we expect to contain at approximately JPY 30 billion, the impact of the increase in memory prices on our FY '26 forecast through procurement, design and sales actions in various regions.

If memory prices deviate from our current assumptions going forward, we aim to maintain profitability by flexibly adjusting our sales strategy with an eye on foreign exchange rates and the competitive environment. At the end of March, Sony entered into a definitive agreement with TCL regarding a strategic partnership in the home entertainment field. Based on the memorandum of understanding we signed in January, the definitive agreements codify, among other things, an outline of a new JV that will operate the business, the business domain covered by the JV, the enterprise value of the business in question and the consideration to be paid for the transfer.

The JV is scheduled to commence operation in April 2027, and we have incorporated approximately JPY 20 billion of expenses in the FY '26 operating income forecast, including project implementation costs necessary to execute the partnership, system migration costs and personnel-related costs. Excluding the impact of these expenses and the impact of memory market conditions I mentioned earlier, we expect FY '26 operating income to improve across our business. led by the imaging business.

Last is the I&SS segment. FY '25 sales increased 20% year-on-year to JPY 2,051.5 billion, mainly due to higher average selling prices and higher unit sales of mobile sensors. Operating income increased 37% year-on-year to JPY 357.3 billion and reached a record high, primarily due to the impact of the higher sales despite the recording of onetime restructuring costs, including losses on the sales of our equity interest in an overseas subsidiary and asset impairments.

In FY '26, we forecast sales of JPY 2,070 billion and operating income of JPY 400 billion. In Q4, the impact of memory market conditions gradually became more apparent in the smartphone market, especially in the low end but our mobile sensor sales exceeded our forecast, primarily due to strong shipments to our major customer. In FY '26, we're taking a cautious view of the growth of the sensor market due to our view that the trend towards larger-sized sensors for smartphones will moderate. And the uncertainty regarding the impact of memory market conditions will remain.

As a result, we have incorporated into our FY '26 forecast a slight year-on-year decrease in the overall sales of mobile sensors. Given this operating environment, we plan to emphasize efficiency when managing our business in FY '26, including through fixed cost control and yield improvements. In FY '25, Q4, we increased our effort to address low profitability business compared to our initial plan and we have reflected the benefit of those efforts in our FY '26 operating income forecast, which is essentially flat compared to the previous fiscal year if restructuring costs are excluded.

In our next mid-range plan period, we expect sales of this segment to return to growth, driven by a renewed acceleration towards larger-sized sensors. During FY '26, we intend to establish the infrastructure necessary to support this growth, and we plan to make thorough preparations. As explained earlier by Mr. Totoki in the corporate strategy part, Sony and TSMC have today entered into a memorandum of understanding to pursue a strategic partnership for the development and manufacturing of next-generation image sensors.

This partnership aims to significantly enhance the future technological competitiveness of image sensors, including through increased density, by combining the advanced design expertise of Sony, a leader in the image sensor industry and the process and manufacturing technologies of TSMC which boasts the world's largest semiconductor production scale.

From a financial perspective, we believe that this partnership will improve the cash flow of the I&SS business, reduce invested capital and improve profitability by lowering investment in production facilities and mitigating equipment procurement costs. Furthermore, we anticipate that this partnership will increase the flexibility of our capital allocation across the Sony Group.

Now I will explain the impact on our consolidated results of the discontinuation of the launch of Sony Honda Mobility's EV model and the downsizing of the business, which we announced in March. As a result of the discontinuation Sony Honda Mobility expects to record additional losses in FY '25 and FY '26, resulting from items such as asset impairments and compensation payments to business partners.

We account for Sony Honda Mobility under the equity method, and we recorded an additional JPY 44.9 billion loss in all others in Q4 based on our share of the business. We have incorporated JPY 30 billion of additional losses in our FY '26 results forecast. But a portion of that amount is expected to be offset by a decrease in running costs due to the downsizing of Sony Honda Mobilities business.

In FY '25, the G&NS Music and I&SS segments. The profit growth driver of Sony Group achieved record high profits and business momentum remained strong. In FY '26, we expect the profit-generating capability of each of our business to further improve compared to the previous fiscal year despite the uncertain business environment. And we think that we have been able to demonstrate the high level of resilience of our business portfolio.

Finally, I will explain the progress of our fifth mid-range plan. The group-wide financial targets under the current mid-reach plan are an average annual consolidated operating income growth rate of 10% or more and the 3-year cumulative operating income margin of 10% or more. Based on the FY '26 operating income forecast presented today, we expect the average annual operating income growth rate to be 16% and the 3-year cumulative operating income margin to be 11.7%, both exceeding our targets.

Regarding capital allocation for this mid-range plan period, we revised our forecast for 3-year cumulative operating cash flow, our primary source of funds from JPY 4.8 trillion to JPY 5.7 trillion considering the previous fiscal year results. In the mid-range plan, strengthening shareholder return is one of our key initiatives. So we plan to allocate the additional capital primarily to higher shareholder returns. For FY '26, we have established a share repurchase facility of JPY 500 billion. We also intend to accelerate the pace of dividend increase, raising the annual dividend amount JPY 10 from the previous fiscal year to JPY 35. This concludes my remarks.

That was the presentation from Totoki Nishino and Tao. The media Q&A session will begin at 4:55 p.m. and the investors and analysts QA will begin at 5:15. Each Q&A session is scheduled to last approximately 20 minutes. [Operator Instructions].

We would now like to begin the Q&A session. Those on stage are Hiroki Totoki, President and CEO. Lin Tao, CFO, Corporate Executive Officer. Hirotoshi Korenaga, Senior Vice President in charge of Accounting. Naoya Horii, Senior Vice President in charge of Corporate Planning and Control. We will take questions from the media.

[Operator Instructions] [ Yoshida-san ], please ask your question.

Yes, I am Yoshida from Nikkei. I have 2 questions. The first question about the establishment of the joint venture with TSMC, which was just announced in the equity market, the low synergy with the entertainment area. So the possibility of spin out has been pointed out. But Sony, so this MOU agreement is based on Sony being the major or controlling shareholders.

So I would like to hear the background. And I would like to hear from Totoki-san about the stock prices. So with the surge of the semiconductor memory prices and not seen as an AI title, the stock prices have been going down these few days and the stock prices have not really made a rebound. But based on what you have just explained, do you think you now have a good explanation to the market?

Thank you for the questions. About the joint venture establishment with TSMC, our I&SS business, the possibility of spinning that out, we have never talked about that openly, though that was a speculative story. So what we have been saying about I&SS is this burden of CapEx to reduce the burden of CapEx and increase profitability at the same time need ingenuity.

And I have been saying that a number of times. And last fiscal year, I talked about the fab-light strategy, which we want to pursue. And the JV with TSMC is the first step towards this fab-light strategy. Up until now, I we have been an [ IDM ] doing the -- from the development and research of image centers to the fabrication. But in the future, we want to work with partners in the manufacturing of fabrication. So that's why we have signed this MOU with TSMC. And so what we announced today is in alignment with what we have been saying until last year.

The second question, about the share prices. Rather than being unique to Sony, I think this is -- really pertains to the entire sector. First is the shortage of memory. So that's why growth is really -- might be inhibited. And also, there might be a deterioration in the cost structure. So that is the first point.

And with the advancement of AI, generally speaking, the entertainment industry -- content production become easier with AI, leading to an increased number of content in the market. So people will be -- we will be taking -- competing over the user's time -- so maybe the enter time -- so there might be anxiety that the entertainment business cannot grow as before. What we have explained today explained our stance towards the situation and what we are working on and what we have achieved so far.

So we have given the direction. Having said that, AI itself will continue to grow very quickly, and I think new business models will also come up. And we need to be able to respond flexibly to the developments. What -- how the market sees us is not -- the market perspective is not something that we can change by ourselves. But as we have been doing up till now, we will try to give a highly high resolution and high quality information. Thank you.

So you'll take the next question. From [ NHK, Tamura-san ], please.

And for myself, I'd like to ask about the business you have in the United States. And you had alluded to about the adaptability from the CEO, Totoki-san. So in the United States, there has been the tariffs. So 10% tariffs, it has been decided that it is illegal so that in the United States, there is uncertainty regarding the direction of the tariffs. So about the Trump administration's tariff business, how do you see it? And especially after this court judgment about the tariffs.

Thank you for the question. And as you have alluded to, so this reciprocal tariffs, yes. So the stance for that and how do we see into the future? It's quite difficult to say, and the uncertainty has increased. But from our side, we can say that our external activities about the intelligence and we do as early as possible to get the accurate as possible information and so that we can have the first insight into the future.

And then we will take quick action, and we repeat such response. And having said that, even if we foresee the assumption is that is only for the short term and it changes quite rapidly. And that is the geopolitical situation that we are in now. And so as much as possible that we would do what we will not be too much decided by what we think is right now, but we'll be quite flexible in getting to this issue.

Next question, please. [indiscernible] business, [indiscernible], please.

Two questions. At the joint venture with TSMC. Well, I think that the logic will be TSMC and others. And Sony, it will be doing the images, and Sony will be finishing up. But the [ Pixel ] part, I think that your capability differentiating capability would be the image capability.

But I think that you have been constantly talking about the difficulty of having very precise images and fabrication precision. But with joint venture, I think is there not such concern that this will be a challenge? And what is your expectation towards the joint venture? Is it financial expectation or others? That's my first question.

And the second question about AI and the increase in content, and it will be a race against others in terms of capturing the users' time. And so LBE and other entertainment experience, I think that this in itself is also important in terms of capturing the users' time it's not just LBE but other new entertainment experience. What is your take on this currently?

Well, about the joint venture with TSMC. Well, up until now, we have been doing the pixels and TSMC was doing the logic. But the pixel part, well, about the pixels, too, I think that this requires development capability and process technology. So these are 2 separate things. Well, like IDM, we have tried to integrate this horizontally, vertically.

But with this TCMC joint venture, what will be strengthened is that we'll have the world's top-class semiconductor process technology. So because of TCMC's capability, I think this will be a major evolution on our part. And another thing is that as a result, there will be a greater scalability towards the future.

Well, image sensors, in order to supply image sensors in the past, we had to rely on the supply capability of our fab. So this was a limiter. But in addition to mobile image sensors, physical AI, the sensors will be playing a major role in physical AI, too.

So considering this future demand, we have to prepare ourselves. And therefore, this joint venture will have great significance on this front. But TSMC also has this expectation towards future demand and capturing future demand through this joint venture. And the financial impact is there, but on the one hand, but with TCMC, we want to secure a solid position as the #1 sensor supplier. And so please understand that this is what we're aiming towards.

And another about the competition of trying to capture the users' time with the increase in entertainment content. LBE is a new entertainment experience, engagement. fun engagement will be deepened as a result of LBE. And the technology needed for this and the business model required is being promoted right now.

And we are doing experiments, POC on this front. And other -- we are entering into partnership with different companies to promote this business model. That is the current status. Thank you.

We would like to move on to the next question. [ Nishita-san ].

I have 2 questions. The first question about Sony and Honda. So this is depreciation based on the equity method. So this business will be changing due to Honda. So do you intend to ask Honda to bear more burden -- and about -- next is about memory shortage. There won't be -- there will be a big impact on gaming consoles.

And for the entire industry, I think there might be a problem with supply because the game consoles prices are going up. So maybe the PS5 will be fine. But looking at the coming 1 to 3 years, the gaming console prices, how would that be impacted? Would you give us a breakdown on that?

Thank you for the question. About the first question about the joint venture of Sony Honda -- of course, the revision of Honda strategy was one big cause for this. However, the electric vehicles, the environment surrounding the EVs have changed, especially in North America, and we fully understand that. So the 3 companies discussed on who will be burdening what. So we made this comprehensive decision. So we don't need -- HSM will not be claiming for any more damages to Honda.

So the numbers that we have told you today are definitive, more or less definitive. And about your second question about the memory shortage, -- of course, the memory prices going up would increase the cost of the BOM. So the cost of manufacturing will go up. And if that leads to passing on price -- cost to prices, there would be a big impact on the gaming console prices.

And as we explained earlier, for calendar year 2026, the necessary volume has been secured. And another point and about the -- and we have, to a certain extent, agreed on the price itself. So the console prices and promotion profitability. So we would like to strike a balance on our promotion with our promotion budget, and that cost is already factored in.

About the upcoming generations, future generations, gaming consoles, we have not yet decided on at what timing we will launch the new console at what prices. So we would like to really observe and follow the situation. The memory prices, looking at the current circumstances, the memory prices is expected to be very high also in FY '27 because there will still be a shortage in supply. So under that assumption, what can we will like to think about -- think carefully what we can do.

The -- how can we reduce the other costs of the hardware other than the semiconductor. And also, we might think of new ways of selling the product. So we would like to think about -- we will do various simulations, including changing business models to come up with the best solution and strategy. But having said that, even under this situation, we have 125 million active -- monthly active users enjoying games on our platform. So that itself is growing. So it's not that the demand has gone down. So I think we can think of ways to get through this.

Yes. So due to a limited amount of type, so the next person would be the last question. From [ Televio Goa from TV Tokyo].

Yes. My name is [ Goto ] from [ TV Tokyo ]. I'd like to ask Totoki-san the CEO, so that the price increase, so the PlayStation 5, you said that it is fine that you're not going to have the price increase. That's the first question. And the second question is about the expected business results. So there is uncertainty in the geopolitical situation, but you would have the record high net profit. So how do you assess the risk in the background? So what kind of assumption do you have in order to make that record high net profit?

Thank you for the question. And about PS5, as we have said, we had just had the price increase so that for the next price increase, we don't have that in plan. And we would keep this current price so that we would manage the business based on this current price.

And about the expected business, the uncertainty about that in geopolitical sense, yes, in a geopolitical sense, we have several factors that are uncertainty, but we have the best estimation so that we would manage risk so that we would keep the forecast that we have -- we intend to make and in various ways so that we evaluate risk and we have policies against risk so that for the next year and this year also that we have the record high profit, keep on having the record high profit.

It's now time to end the Q&A for the media. For the investors and analysts, we would start at 17:15.

[Break]

We'd now like to begin at the investors Q&A session. I am [indiscernible] from IR. I'll be emceeing this session. Those onstage remain unchanged. We will begin the Q&A. [Operator Instructions].

BofA Securities, Hirakawa-san, please.

Hirakawa from BOF Securities. Two questions. So first about AI. econd is about mobility. First, AI as you've explained, we've got to understand that platform will become more important in AI. And I think that this will appeal to people's emotion. But for other areas like the piracy, might be piracy, but people who can enjoy to a certain extent with AI, such a market will exist.

And Disney, well, they dissolve this, but they try to monetize with AI players. And at Sony, especially when it comes to AI, is it a possibility that you try to monetize by tying up with AI? What is your position currently? That's my first question.

The second question about mobility business. In this mobility business, as Totoki-san has said, in the U.S., the environment surrounding EV vehicles has changed significantly. And from smartphone to mobility, I think that this is still effective. And in the future, well, [indiscernible] be discontinued, but I think there might be future opportunities. And this Sony Mobility, this experience, how can you leverage on this going forward?

Well, about your first question. I'm using AI what kind of monetization can we do? Well, we, on our part have been undertaking different initiatives. On this front, we need to think about partners and it might be difficult, and there might be pushbacks for us to reveal everything that we're doing to our partners. And therefore, we have to be careful in addressing this issue.

Therefore, for example, like Disney, tying up with AI players and monetizing. Well, if you ask if we are not thinking of any such things well, we understand that there are different options available but it's not a specific player that we have in mind. But instead, we are thinking of different types of AIs that can provide service. We want to tie up with different types of AIs going forward.

Now if we specify a specific player to work with, it might be appealing to a certain extent. But on the other hand, this might confine our action. We want to have a good balance. That is our current thinking. About mobility. As you say, our biggest challenge is STV, software-defined vehicle. The way of producing cars has changed significantly. And what can we do in this context? What's the motivation to start this joint venture?

Autonomous driving will become possible in the future. Then the indoor of the vehicle will have a value as an entertainment space. So we wanted to do different experiments to this end. The knowledge we acquired here is valid. Well, the way of making cars, well, it's not a distant future, but I think will change significantly. And the users' demand will also change.

Therefore, the people who have acquired this experience with -- between Honda and Sony, they will return to their companies, and we want to leverage this talent and think about how we can use this asset that we have with us. I think that the people who have gone through this experience should be actively leveraged within our group. I want them to play an important role within our group. And in the future, in various ways, we want to engage with mobility. That is all. Thank you.

We would like to now move on to the next question. JPMorgan Securities. Ayada-san, please.

This is Ayada from JPMorgan Securities. I also have 2 questions. The first question is about game and network service. What is the long-term growth upside? What is Totoki-san's view on the growth upside of game and network service? So profit is going up, but maybe the MAU is struggling to grow. And also, the first party is also fluctuating year-by-year.

So if the profitability is to increase in the long term, what are the factors supporting that? Do you think MAU will still grow in emerging countries? And also, as you said in the presentation, if the platform engagement goes up with AI, maybe that would increase the ARPU. Or are there other things you can do in the first-party game area? So please tell me about the upside of gaming.

And next is about catalog investment on music business. Compared to other major players, you have been very active in investing in music catalogs. In the catalog investment market, AI, there's a risk of AI-generated music. So this trading market, the valuation of the catalog in this market, so what would be the impact on that? If you have any take on that, please share with it.

Is the valuation going up or down? Or is there no impact here? And based on this, you also told us that you will be actively investing in catalog going forward. Would there be -- with AI -- spread of AI give an impact on your stance on this investment.

Thank you for the question. About the first point, the long-term future upside of Gaming and Network Services. So that was a long-term question. So I would like to explain from the perspective, long-term perspective.

Myself, I believe we need an evolution in the gaming content. Maybe -- so I think there's a high possibility that AI will bring about this evolution. Why I think so? The gaming industry is becoming very mature. And the large portion of the market share is really relying on large franchises of major publishers.

Before COVID, I thought it was Fortnite, came into the market. This was a large-scale live service game. So that was a very innovative event in the industry. For the entire gaming industry, Fortnite was certainly a tailwind. For the entertainment market, innovativeness, the niceness is novelty is extremely important.

And when we talk about large franchises, they are spending like JPY 50 billion on AI, and they will be developing games, and this will take 5 to 6 years the number of titles will be limited. So it will be very risk -- so it's very difficult to take risk. However, if the bar goes down, there will be more possibility of new games coming up. So that would lead to the industry becoming more active. Of course, there's a flip side. There might be some disruption. So that might be a concern, too. But this new wave and innovation, I think, will lead to the further expansion of the market. This is what I believe.

So how can we grasp this opportunity? And what kind of -- and what kind of business model should we develop to respond to that? So really grasping this opportunity is something that we need to do, the most important thing.

About your second question about the music catalog. The GenAI, the AI-generated titles have come into the hit chart. But the percentage overall percentage of AI-generated music is still very low. When we talk about catalogs, for evergreen catalogs, we don't think the prices of evergreen catalog titles are going down. So they are still very popular as investment targets.

The pieces -- music pieces generated composed by AI, would they compete against evergreen catalogs? I don't think that is really conceivable. The reason being, the evergreen catalogs are based on individual experience. So they are really listened to for a long period of time, and these listeners go to live music performances and that is something which AI cannot offer by itself.

However, AI's advancement is extremely fast. So we need to be able to respond very flexibly to such changes. What kind of business model should we develop so that we can increase our resilience. And maybe you remember that at one time, there was a strong focus on distribution. And music DIY platform for distribution was really debated very actively. Back then, the label service were seen to be to -- seem to disappear. So that's seen as this intermination, but that has not happened.

And back then, we acquired a DIY platform company while holding a label service, we were building such platform at the same time. And through -- and the insight this offers is very important. So what business model -- so not only protecting the existing businesses, we need to really go and grasp the new opportunities. Thank you. That was all.

So next question. From SMBC Nikko Securities, Katsura-san, please.

Yes. This is Katsura from SMC Nico Securities. So I have 2 questions about capital allocation and SMS. So first about the capital allocation. Well, the strategic investment in the 2 years' time, what has been the level of strategic investment? And in the environment, how do you see that in the entertainment business or the multiple is going down across the industry, but there is another view that there is opportunity, but your stock price is going down drastically. So the capital allocation is going up, but CFO also has said that, that is going to be given back to the shareholders. So how do you think about that? That is the first question.

And for the mid-range plan, this is the last year of the mid-range plan. So that from yourself, can you tell about what you think for the next mid-range plan? So the second SMS and TSMC joint venture. And so from the [ METI ] announcement, JPY 80 billion investment subsidy. I think that was the number. And for the semiconductors, the business surrounding the semiconductors is a national security kind of a challenge and against such background.

So how do you think about that? And with the TSMC, you have the joint venture and the -- I think it is a good combination for gaining up the share, but the profitability. So you have not gone past the past peaks. So in the mid- to long-term range, how do you think about it? That's the second question.

Thank you very much for the question. And about the capital allocation, so CFO Lin Tao would answer, and then I would follow up with that. And about the second question, I will be answering that. So okay. So I'll ask CFO, Lin Tao, to answer.

About the strategic investment in the midrange plan, so JPY 1.8 trillion frame has been set. And as of now, so they already decided about JPY 1 trillion, a little bit over JPY 1 trillion level. We had already implemented. So JPY 1.8 trillion, a strategic investment frame, we have not changed that, and we are giving back to the shareholders so that the capital allocation the operating cash flow, the capability is higher now than the past.

So that for the -- we are having the strategic investment, but we can also give back to the shareholders. return to the shareholders. I think we have that kind of power now.

And all right. So about the next mid-range plan, how do we think about it? So the next mid-range plan. Well, we are now working on that. So I don't think we can say anything in a concise way, but about the geopolitical we had discussed. But those conditions change very rapidly so that we cannot say anything certain now. But one thing we can say is that until now, we had implemented various investments and how we had varied results and went well, some well.

And from these results, we can have the lessons learned, and we would have the rational price. So for those investments that we like to continue it. And based on that, if we can have free cash flow that generated that is our mission to generate more free cash flow, having invested in the strategic areas and then to return to our shareholders.

And about the joint venture and in the geopolitical situation about the national security and economic security. With TSMC, so in Japan, TSMC is having the attractiveness to expand in this country, Japan. So that's how I see it. And from that kind of a perspective and also in the extension of that perspective, I think this joint venture had come about.

So as you have understood, TSMC is not a company that likes to have joint venture and TSMC would like to control themselves. That has been their style up until now. And in various ways, so the joint venture that we have with us is giving us various opportunities.

And for TSMC as well, it's going to be a big challenge. That's how I see it. And at Sony, we would like to take this opportunity to have a fruitful outcome. And about the ROIC, it's good, but the profitability is not so good. Was that your question, but then -- so the fixed cost or the variable cost, I think that's the difference. And well, I think with the variable cost, then the margin will go down, that is right, as you have said, but the risk would go down as well. So in -- since it's a trade-off, but in this trade-off, to have the optimal answer. And as a total, we want to not squeeze the margin, but to get lessen the burden of investment. So that's the basic way of thinking from us. Thank you.

We are running short of time. The next question now will be the last. [Operator Instructions] Nakane-san from Mizuho Securities.

Nakane from Miso Securities. One question, right. Well, about your activities to improve operation. For example, about R&D, last time, it was JPY 760 billion versus JPY 700 billion this fiscal year. So what is the change? And how are you trying to optimize? Can you explain?

And also, I think that in the different business segments, similar things are happening. For example, pictures ROIC is low and also game where the demand environment is changing. I think operation optimization is being carried out. But it's difficult to see from outside. It would be the [ SGM ]. Any improvements that you see and what you would like to do going forward? And any typical examples that you can share with us, please?

Thank you. About R&D expenditure. Well, that is the question that you've asked. But we have to think about the R&D teams from a cyclical point of view. The environment is changing our business direction is changing. So in line with that, R&D needs to change, to be aligned. I think over the past 2 years, we have focused on this and is scrutinized what is being done.

And as a result, even if we take on a long-term perspective, this R&D, we saw that competitiveness could not be maintained or we did not see an exit from this group. So for such items, we tried to review. And based on that, we have put together next fiscal year's budget. So please take it as is. This is a result of scrutiny. And also, the different initiatives being taken at the low ROIC business.

What we're going to do about that? Well, we do have discussions to that end -- but within different business and industries, it's difficult to just compare based on ROIC. So if you compare yourself to other companies, we could say that our ROIC or margin is inferior. And if we see that, that is the case, we understand we have to take measures.

For example, structural reform. We have not made announcements, but in different business segments, we are constantly carry out structural reform and we overall try to maintain our competitiveness and boost our profitability. As for KPIs, it's difficult to say, but as for ROIC, for each segment, we have the ROIC numbers. So this has been disclosed. I hope that you refer to those numbers. That is all. Thank you.

Thank you very much. As I first said, we would like to thank you for taking part in our presentation today. Once again, thank you very much for your attendance.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

[Interpreted] It's now time to begin the Sony Group Corporation Earnings Announcement. I am [ Ishii ] from the Corporate Communications Department, and I will be your moderator today. Today, Lin Tao, Corporate Executive Officer and CFO, will present the FY 2025 third quarter results and full year forecast, followed by a Q&A session.

The entire session is expected to last 65 minutes. To ensure our international audience can hear the presentation in Ms. Tao's own words, the English language earnings presentation will be delivered via a prerecorded video.

Today, I will explain the content shown here.

Sales of continuing operations in FY '25 Q3 increased 1% compared to the same quarter of the previous fiscal year to JPY 3,713.7 billion, and operating income increased 22% to JPY 515 billion. Both were record highs for the third quarter. Net income increased 11% to JPY 377.3 billion.

The financial results by segment are shown here. We upwardly revised our full year sales forecast from the previous forecast 3% to JPY 12,300 billion, operating income 8% to JPY 1,540 billion and net income 8% to JPY 1,130 billion. We increased our forecast for operating cash flow 9% to JPY 1,630 billion. The forecast for each segment is shown here.

Now I will turn to an overview of each business. First is the G&NS segment. FY '25 Q3 sales decreased 4% year-on-year, primarily due to lower hardware unit sales.

Operating income increased 19% year-on-year, primarily due to the positive impact of foreign exchange rates and the impact of increased sales and network services and first-party software, setting a record for the third quarter in this segment. We upwardly revised our FY '25 sales forecast 4% from the previous forecast to JPY 4,630 billion and our operating income forecast 2% to JPY 510 billion.

User engagement trended well during the quarter with the number of monthly active users across all of the PlayStation in December increasing 2% compared to the last December to a record high of 132 million accounts, and total play time for the quarter increased 0.4% year-on-year. Although conditions in the console hardware market during year-end selling season were more challenging than expected, we were able to steadily expand our PS5 installed base in line with our original plan and exceeded 92 million units on a cumulative selling basis.

While PS5 hardware unit sales have decreased moderately in latter half of the console cycle, software revenue from the PlayStation Store reached a record high during the quarter, primarily driven by the contribution of major third-party franchise titles and new hit releases. PlayStation Plus significantly contributed to the results of the quarter as the shift to higher tiers of the service continued.

As for securing a supply of memory, we are already in a position to secure the minimum quantity necessary to manage the year-end selling season of next fiscal year. Going forward, we intend to further negotiate with various suppliers to secure enough supply to meet the demand of our customers.

Given the stage of our console cycle, our hardware sales strategy can be adjusted flexibly, and we intend to minimize the impact of the increased memory cost on this segment going forward by prioritizing monetization of the installed base to date and striving to further expand our software and network service revenue.

In the Studio business, Ghost of Yotei, a tentpole title we released in October, exceeded the sales of the previous title in the same period of time and significantly contributed to the financial results of the quarter.

Our established live service titles like Helldivers 2 and MLB The Show also contributed stable recurring revenue. We expect that Marathon, which is scheduled to be released on March 5, will be enjoyed by many users, thanks to Bungie having strengthened the gaming experience. Next fiscal year, we plan to release new titles such as Saros and Marvel's Wolverine, and we intend to enhance our effort to increase the revenue of our Studio business.

Next is Music segment, primarily due to an increase in live events, sales and streaming revenue in Recorded Music, FY '25 Q3 sales increased 13% year-on-year. Operating income increased 9%, reaching a record high for the third quarter, excluding onetime items.

On a U.S. dollar basis, streaming revenues for the quarter increased 5% year-on-year in Recorded Music and 13% in Music Publishing. We upwardly revised our sales forecast 4% from the previous forecast to JPY 2,050 billion and our operating income forecast 16% to JPY 445 billion. We incorporated a remeasurement gain of approximately JPY 45 billion from the acquisition of an additional equity interest in Peanuts Holdings and the forecast for operating income.

SMG artists delivered hits during the quarter and the sales of SMG continued to increase by double digits year-on-year, like in the previous quarter. Rosalia new album Lux reached #1 globally in its first week on Spotify and Peso Pluma's collaborative album Dinastia as one of the most streamed on Spotify. These global successes and global hit artists are the result of SMG's strategic focus on discovering local artists and supporting their musical endeavors.

Many SMG artists and songwriters received accolades and nominations at the 68th Annual Grammy Awards held in the U.S. earlier this month, with Bad Bunny winning Album of the Year for Debi Tirar Mas Fotos as Beyonce did last year.

In Visual Media and Platform, the theatrical release of Demon Slayer: Kimetsu No Yaiba The Movie: Infinity Castle, which has exceeded JPY 100 billion in global box office revenue, continued to contribute and the mobile game Fate/Grand Order, which celebrated its 10th anniversary in July 2025, contributed more to our results than expected.

Next is the Picture segment. FY '25 Q3 sales decreased 11% year-on-year and operating income decreased 9%, primarily because the same quarter of the previous fiscal year benefited from the contribution of the blockbuster film, Venom: The Last Dance and licensing revenue from other theatrical released films. Our forecast is unchanged from the previous forecast.

In January, SPE signed a new Pay-1 licensing agreement with Netflix. Through this agreement, Netflix will stream on a global basis SPE's future theatrical films and the Pay-1 window, the initial window within long TV licensing period that follows the theatrical and home entertainment periods. This agreement is an industry-first global licensing deal that will enable SPE to secure an even more stable revenue base during the period of the deal. Furthermore, the signing of this agreement is proof of SPE's excellent production capabilities and the power of its appealing IP. As an independent production company, we will continue to pursue other licensing opportunities with a wide range of distribution partners beyond the Pay-1 window.

Now I will explain our additional investment in Peanuts IP, which we announced in December as an initiative that spans our music and picture segments. Through this transaction, Sony will gain ownership of 80% of Peanuts worldwide, which owns the rights and manages the business of Peanuts IP, one of the world's leading evergreen IPs.

While closely collaborating with the family of Mr. Schulz, the creator of Peanuts, which owns the remaining 20%, we aim to further grow the scale of the business and further increase the value of the brand over the long term by leveraging the strength of the Sony Group.

Specifically, we aim to enhance SMEJ's music, video and event business by leveraging Peanuts IP and collaborating with SMEJ's artists and content. Furthermore, by utilizing SPE's production capabilities and distribution network, we aim to make Peanuts IP more accessible to a wider audience and share its charm with people all over the world. The transaction is expected to close during the current fiscal year, subject to certain closing conditions, including regulatory approvals by the relevant authorities.

Next is the ET&S segment. FY '25 Q3 sales decreased 7% year-on-year and operating income decreased 23% year-on-year, primarily due to the impact of lower sales, partially offset by an improvement in operating expenses. Our full year forecast remains unchanged from the previous forecast.

Despite a continued decline in sales in China due to reduced government subsidies and weakness in the overall market during the shopping season for Singles Day, demand in the global interchangeable lens camera market during the quarter remained strong year-on-year, mainly in Asia. The Alpha 7 Mark 5 released in December has been selling well as a new product for the volume zone of the full-frame mirrorless single-lens reflex camera market, and we expect it will continue to contribute to sales in the fourth quarter ending March 31, 2026.

Regarding the impact of the situation in the market for memory, we are almost in a position to secure the quantity we need through the year-end selling season for next fiscal year. We will continue to monitor the situation while working to minimize the impact on profitability.

On January 20, Sony signed an MOU with TCL aimed at forming a strategic partnership in the home entertainment field. In the MOU, both companies agreed that a joint venture between the 2 companies would operate Sony's home entertainment business, and we are negotiating the details with the intention of executing a definitive agreement by the end of March.

By leveraging Sony's high definition and high fidelity technology, brand strength and operational management capability while utilizing TCL's advanced display technology, cost competitiveness and vertical supply chain strength, the joint venture aims to further strengthen the competitiveness of this business and realize sustainable growth.

Last is the I&SS segment. FY '25 Q3 sales increased 21% year-on-year and operating income increased 35%, both of which were record highs for the third quarter for the segment. These are primarily due to an increase in sales volume and unit prices of mobile image sensors. We upwardly revised our sales forecast 5% to JPY 2,080 billion and operating income forecast 13% to JPY 350 billion, primarily driven by the increase in sales volume and sensors for mobile devices and the impact of foreign exchange rates.

Mobile image sensor sales during the quarter increased significantly year-on-year due to a gradual recovery in the smartphone market, strong shipments for new products from our major customer and higher die-sized sensor. Because recent orders are stable, we believe that the supply chain concerns we mentioned at the previous earnings announcement have receded, and we have upwardly revised our annual shipment forecast for mobile image sensors.

Going forward, we think that the impact of the situation in the memory market will become more apparent, mainly in the form of fewer smartphone made primarily for the low-end market. Since Sony's image sensors are primarily for the high-end market, at this time, we think the impact will be relatively small. We will continue to monitor the situation while keeping in close contact with our customers.

In addition, we are continuing to take action to address low-margin business, as we mentioned at the previous earnings announcement. As a part of that, we have incorporated additional expenses for resource and asset optimization of the relevant business in our forecast for FY '25 Q4. We will continue to focus on improving our business portfolio and raise our profitability.

To summarize, the G&NS, Music and I&SS segment achieved record high operating income and are driving the profit growth of the Sony Group overall this quarter. We believe that the structural profitability of the group is further improving.

Given the continued uncertain business environment, we plan to carefully manage our business and consistently produce results as we approach the fiscal year-end. We intend to take actions this fiscal year to get off to a good start next fiscal year.

As for shareholders' returns, today, we increased the maximum of our share repurchase facility established in November 2025 from JPY 100 billion to JPY 150 billion.

This concludes my remarks.

[Interpreted] That was Ms. Tao. Following the presentation, we will have a Q&A session for the media at 4:20 p.m. and for investors and analysts at 4:45 p.m. Each Q&A session is scheduled to last approximately 20 minutes. [Operator Instructions] Please wait. The session will resume shortly.

Thank you for waiting. We'll start the Q&A session. First, we will introduce you today's speakers. Chief Financial Officer, CFO, Corporate Executive Officer, Lin Tao; Senior Vice President in charge of Accounting, Hirotoshi Korenaga; Senior Vice President in charge of Corporate Planning and Control, Naoya Horii.

We'll take questions from the media. [Operator Instructions] The first question is from Toyo Keizai, Umegaki.

[Interpreted] Yes. I'm Umegaki from Toyo Keizai. Can you hear me?

[Interpreted] Yes.

[Interpreted] All right. So I'd like to ask 2 questions. The first question is about Marathon, and it's going to be released on March 5, I understand. And it has been delayed. And what kind of considerations did you have until you decided to have this? And well, in the past, there were cases that has been stop short, but what kind of a learning do you have? And for the live service game and what is the strategic significance of having that? And this kind of a platform, I think, but to have quite a number of platforms, what is the significance for the group to have such platforms?

[Interpreted] Yes. Thank you for your question. And as for the Marathon, well, it has the user tests and then from the users has feedback for Marathon, and in the game, so what was a good point and not good point and such kind of a feedback we had taken into consideration and we had modified. And this time around, so after the modification, we are very confident to release it on March 5.

And live service, the games significance you asked, but here, what is most important for us is that the live service is a recurring revenue. And recurring revenue means that the hit driven. And if it comes a hit, then for a year, it can bring revenue. If not become a hit, then no revenue. So it's such not the volatility high studio, but it's going to give us a constant amount of revenue every year. So that's the merit of having a hit live service. But -- well, it's not that we want to have -- so to many of them, it's not what we want to have. So the idea is that so-called AAA and live service game would become integrated into a portfolio management style. That's it for me.

[Interpreted] And the second question is about your stock price. And you had announced your earnings results, and it was a JPY 3 plus, but it's almost flat. So that the market valuation is quite severe, I think. And the stock performance is not good because the memory had risen. But it's rather Sony Group, it seems that there has been a harsher view on the Sony Group. So what do you see as a CEO? And you have announced the share buyback, but the market capitalization, in order to raise the market capitalization, if you have any continuous way to keep that going up?

[Interpreted] All right. Thank you for your question. And about the stock price, so we had several information revisions, but it's not performing well. So I think you have various thoughts about that. But one thing is that memory, there are concerns for the memory supply. And as an industry, yes, that is one concern. And the other is the entertainment stock, generally speaking, is because the capital AI-related would go to the AI related. So I think that's why.

And then for us, what we can do is that as a business, we will look at the fundamentals to make it even stronger. And the profitability, we would improve so that the portfolio can be optimized. And for us, Sony, long-term strategy, we believe in that so that we would implement that, so that the business performance can be improved and such measures would be communicated, messaged to the stock market so that the stock market would value our approach, and we are going to put our efforts into it. That's all for me.

[Interpreted] The AI...

[Interpreted] Excuse me, but that's the end of your 2 questions.

Next question [indiscernible] from Nikkei, please.

[Interpreted] I also have 2 questions. First, about ET&S structural reform. Today, you have mentioned that the TV business, you're going to move to a joint venture with TCL. And you talked about synergies. So separating the TV business, what's the intent of that?

And Home Entertainment, what's the scope? I'm sure that the details are being still discussed. So to the extent possible, can you describe the range that this covers?

And also, smartphone also positioned as a structural reform business. And you have hit to explain that they will be continued. Has there not been any change to that status? Is an option to collaborate with external source?

[Interpreted] Thank you. For the smartphone, we don't have such plans. So with TCL, we have a strategic partnership for Home Entertainment. So this is about the review of portfolio, and we are constantly doing that to deal with the changing business environment. So optimizing that is the management mission. So Sony has assets that we have accumulated over many years, and we're combining that with the strength of TCL. And so Home Entertainment business, including TV, can grow more through this partnership. That is the background to this partnership.

And what the scope of what business to be covered, Horii will explain.

[Interpreted] Thank you for the question. So this strategic partnership, the scope of that, as you point out, it's TV. and home audio, those are the areas that we assume will be included. As you point out, the details are still being discussed. So at the appropriate timing, we would like to communicate to you. At this point of time, TV and home audio will be included in the scope.

[Interpreted] Thank you. Second question about the game business. So this was mentioned in the previous question. So with the surging memory price, so you have secured the supply until the next year-end campaign. So you maybe have secured supply, but will there be impact of the rising prices? For example, PS5, any price increases or the successor, the timing that it will be introduced? And what will be the impact to the next fiscal year? Can you give us your assumptions, please?

[Interpreted] So PS5 next fiscal year and onwards, what would be the impact there. So for the business results for next fiscal year, we would like to inform you at the appropriate time. But our thinking is what we'd like to share with you. That is PS5 since launch, it's in the sixth year. So 92 million unit installed base on a sell-in basis, we already have established. So we have been able to develop a very robust ecosystem. And this fiscal year as well, the majority of the sales is software content and network service. And these areas, next fiscal year onwards, are going to continue to make significant contributions, and that will be the part that will not be impacted by the memory price.

Now as for the new PlayStation hardware sales due to cost increases, there will be some impact. However, it's in the latter part of the life cycle. So that means that in terms of hardware sales, it's been expected all along that it will gradually decline or slow down. So there are several or a wide range of choices or options that we can take. So that's our basic thinking there.

[Interpreted] Moving on to the next question. So I'm very sorry. Please ask both of your questions at the beginning. [ Yomiuri Newspaper, Nakayama-san ], please.

[Interpreted] So this is Nakayama from Yomiuri. Do you hear me? So I have two questions. Number one, about music. The streaming revenue growth rate, this -- so do you think the music streaming service will continue to do well? We would like to hear your prospects. And about I&SS, the image sensor for mobile, do you have any background on the increase in the unit price of image sensors for mobile?

[Interpreted] About -- I will answer the question on the music business first. The music market, we see will continue to grow in the mid- to long term. Of course, the extent of growth will differ due to the timing, but we believe there will be a constant growth of -- to about 5 to middle to latter single digit. And there are 2 drivers to this. First is DSP that is a platform that we offer service on. The ARPU or ARPU is going up, and also the number of users going up. So the average revenue per user and the number of users going up is driving the growth.

The second point about I&SS semiconductor, Horii will answer.

[Interpreted] The sensor -- so this is the background of increase in the selling price of mobile sensors. As you know, in smartphone products, there is -- the camera feature is a main reason for increase in price. So the smartphone manufacturers are working to increase the camera resolutions as well as the camera features. The image sensors that we provide to the manufacturers, we want to increase the size as well as increase the resolution and add new features. So large-scale image sensors as well as increased performance is leading to higher price, and that is really contributing to our results this year. That's all. Thank you.

[Interpreted] All right. So we take another question. [indiscernible] [ Yamamoto-san ], please.

[Interpreted] Yes. My name is Yamamoto. So let me ask questions. So about the structural reform and TCL, so we have the strategic alliance, but the display to have the higher resolution. And Home Entertainment, I think though you have the high resolution, I think it is contributing to the technology and also the common kind of R&D. Do you separate the 2, the technology and the common R&D base in order to have the next phase of development? So about the strategic alliance, would you tell us your direction or your strategy?

[Interpreted] Yes. Thank you for the question. So first, so we have the basic agreement. And for the technology and for what kind of assets can we have through the joint venture to have the definitive contract, so we are in discussion in order to aim for the final agreement. So if it is confirmed, then we would tell you when it is confirmed.

[Interpreted] Running short on time. So the next one will be the last question. Shino-san of Asahi Shimbun, please. Shino-san, do you hear?

Well, then, we'll move on to the next person from [ Mainichi Shimbun, Shino-san ], please.

[Interpreted] This is Shino from Mainichi Shimbun. Earlier, you talked about the PlayStation 5 life cycle that you're entering the latter half of the life cycle. But last November, you talked about the Japanese dedicated model for PlayStation, a relatively cheap, lower price model for the Japanese market. So what's the reason for introducing this kind of model in the latter part of the life cycle? And what will be the impact to the financial results? Has there been impact from introducing this new model?

[Interpreted] So the Japan model introduction, well, that was to enhance the presence of PlayStation in the Japanese market. It's one part of that effort. Compared with the global model, it was more reasonably priced. And so publishers and users appreciated that more affordable price. And after launch, in terms of sell-through, it has created an uplift.

Now this was not a special model just for that seasonal effort. But for the mid- to long term for the Japanese market, we think that this had a strategic significance. So we want many users to buy this so that publishers will make great games. So we think in that regard, this will have a mid- to long-term impact.

[Interpreted] Now it's time to conclude the Q&A session for the media. So the Q&A session for investors and analysts will start from 4:45.

Thank you for waiting. We will now begin the Q&A session for investors and analysts. I am [ Kondo ] from the IR Department, and I will be your moderator. The speakers will be the same 3 individuals as in the media session.

We will now start the Q&A session. [Operator Instructions] JPMorgan, Ayada-san, please.

[Interpreted] I'm Ayada from JPMorgan. I have 2 questions. The first question is about gaming. The play time and so what do you think about the status of play time and spending in the holiday season? Active users have gone up 2%, but play time is flat and software network revenue is going up. But thinking about the price up, I think in terms of value or volume, it's more or less flat. So it seems like it's dwindling a little bit. Is it because of the economic cycle, business cycle or console cycle? Or is this impact from the title lineup? Or are people using time for things other than game. So we would like your take on that.

Your second question, so this might be an abstract question. The impact of AI to the entertainment industry, how should we see that? For music production and game development, already 90% of creators use AI, so -- based on the data. So by the creators using AI, if there's more content, that would be a very positive effect on platforms such as PlayStation and Crunchyroll or if users use more of their casual -- more time in casual content using AI, would that be negative? So I think the repercussions will be different, whether it's music, anime games or video production. So please share your view.

[Interpreted] Thank you for the question. About the engagement of games in the holiday season, I think this is transitioning quite well. Of course, the play time, I think there are many factors influencing the play time. But I think the biggest factor, I think, is whether there are hit games. Up until now, the games, maybe the large-scale games, which everyone has been playing up until now, the engagement has gone down. And instead, the players are playing new games. As a platform, we see a momentum. But depending on the game title, how that is played and the play time will be different.

Towards the next fiscal year, the large-scale titles will be launched. So I'm very optimistic about this. And about how we see AI, as you say, music, game and animation, how AI is used or the positioning of AI is different. There is high affinity between AI and game and animation. In the long term, I think it's a very positive thing that there will be more content. But there would be impact in many areas, especially how you develop and produce. So this process from idea to game, I think, would be changing. But it's still early in the day to say what the impact would be and what would be the impact on the cost. So at this point of time, it's difficult to really say. But what we can say right now is to use a lot of AI. So we promote using AI, especially in game production. And if that disrupts the existing process, we should be the one disrupting rather than the one being disrupted. That's all. Thank you.

[Interpreted] Thank you. All right. So next question from BofA Securities, Mr. Hirakawa.

[Interpreted] Yes. BofA Securities. My name is Hirakawa. So first question is -- well, it's a rather abstract question, but this is the second year of the midterm business plan, but the operating profit growth is like 10% average as you go. And then this year, it has progressed very smoothly. And the concern from the market is that the next year, the profit level because of the memory or the untransparent price movements, then it might not be so smooth.

Then what I want to ask you here is now in the midterm business plan, so what kind of certainty do you have? And what kind of risk factors do you have in achieving or what kind of upside do you have? So if you can allude to that is the first question.

And the second question is about what you have said. So image sensor, I&SS, so what I have heard is the high end is so ASP rise and the volume expansion, you can have both. So that, I think, was the main thing that you wanted to message to us.

[Interpreted] Okay. Thank you for the question. And about the midterm plan, so the second year and the year are going on quite smoothly. Yes, that is the feeling we have. About the memory price surge, and we can understand the concern from the market about this. And this earnings results for the next year, I think we can go into this more deeper. But basically speaking, we would have the momentum very strong here and the memory cost rise. So we have to manage that, and that's the kind of a direction we have and the profitability, of course, we have in mind.

And for the attainment of the midterm plan, how certain we are or how confident we are? So it depends on each business segment, but this is a game and Sony Pictures. So next year's software lineup is quite good. So for those segments, I think we have quite a positive kind of outlook. And for the detail, I don't think I can go into here. So when the earnings results for the 2025 fiscal year, I can maybe tell you more about it.

And the ESP and the semiconductor and the volume, okay. For this question, I would like to ask Horii-san to answer.

[Interpreted] All right. Thank you for the question. So in the speech, we have said that this year, what we have seen this year, okay, and what we are seeing SP and the volume also, we have momentum. So for next year, it's like a launch pad, let's say, that it's in a good position. So I think we can say that we are in a positive position.

And having said that, in the semiconductor business, there's other businesses like game or [indiscernible] and -- so memory market condition effect. And let's say, the selection or the options range is different is what I feel. So the final product manufacturers, well, so what kind of measures would they be taking because of this memory market condition? And we would like to have a close contact communication with the customers so that we can have a good understanding of each of the customers we have, and that's procedure we take. But I think we are rather in a passive mode concerning this because of this kind of a characteristic business. And for next year, I think we have a good launch pad in place. And that's exactly what you have pointed out.

[Interpreted] Next, from Mizuho Securities, Nakane-san. please.

[Interpreted] Two questions. First, so expanding the share buyback. So before you used it up, the facility is being expanded. I think this is the first time you're doing that. You have higher cash flow. Stock price is low. I think those are the backgrounds. So talk about what discussions you had in the Board meeting, and what's the message of expanding this facility in addition to what's in the release? That's the first question.

Second, about the Home Entertainment separation. So from development, design, manufacture, that part, I think it's easy to separate cleanly. But for sales, you have the common platform and domestic and overseas, I think it's still quite a huge size. I understand that the details are still to be worked out. But for the next fiscal year in terms of sales, how is it going to be handled? And on the ET&S side, inclusive of structural reform, is there a possibility of some adjustments to be made? Give us some clues, please.

[Interpreted] Thank you for the questions. First, about increasing the facility to repurchase shares. So as you say, the business results and the cash flow is better than anticipated. So we want to increase our returns based on that. But in terms of the window, that is up until middle of May. So JPY 50 billion increase is what we've decided on this time. So the company's momentum of earnings and the fundamentals, we are confident about that. That is the message that we would like you to take from this increase in the facility.

About the ET&S, for next fiscal year, basically, ET&S will continue to operate. It will have its budget in the same way, and we will communicate in that way. For the joint venture, it's to start from April of fiscal '27. So in terms of the additional structural reform for the portfolio, it's always dynamic. So looking at the business situation, it's our job to optimize that. It's one of our main missions. As of now, nothing has been decided yet. That's all.

[Interpreted] SMBC Nikko Securities, Katsura-san, please.

[Interpreted] So I'm Katsura from SMBC Nikko Securities. I have 2 questions on game and semiconductor. About the gaming question, this quarter, how we see the profit. The third quarter, so the -- compared to the real profitability of second and third quarter -- first and second quarters, I think the third quarter profit has gone down. This is about the domestic version of hardware and you did also promotion activity.

And also the procurement side, there has been -- maybe you purchased memory in order to secure the inventory. So the landing of the third quarter and also the full year, so the postponement of first-party title might be a negative factor. So these numbers seemed a little bit low. So maybe you have included some of the countermeasures towards the next term. And the second point is I&SS. You said you will be taking measures in the fourth quarter. So if you can say, we would like you to share us the scale of this measure. So my question is about your plan towards the next year.

[Interpreted] Thank you for the question. About the third quarter profitability for gaming going down compared to the first and second quarter. So there was -- the main reason was the end of the year sale promotion of the hardware. In addition to the Japan domestic model, we did global promotion. and that led to many users purchasing the console. And that -- due to that, the profit went down in the third quarter, but this will contribute to the mid- to long-term lifetime value. And towards the end of the fiscal year, as of now, the inventory, we do not have any plans to do anything extraordinary on the inventory. I&SS, we have factored in a part of that into the fourth quarter. Horii will respond.

[Interpreted] So as we have explained, the business balance within I&SS segment and some of the assets depreciation amortization done in acceleration. So this type of treatment is currently being processed. And about the scale, about JPY 20 billion, so this onetime cost of JPY 20 billion will be factored into the fourth quarter.

[Interpreted] All right. So we have not much remaining time. So the next question is going to be the last. [Operator Instructions] [ Munakata from Goldman Sachs ].

[Interpreted] Yes. My name is Munakata from Goldman Sachs. I think you have been saying about the generative AI. I'd like to ask a question about that. And so last week, so Project Genie was announced. And basically speaking, so generative AI, I think there's opportunity and also a threat. So in the stock market, so the generative AI, so the creation might be done by that so that a very interesting game can be made in an instance. So that I think a threat is more strong here. But in the game creation, so there has been some comments that to have it in a positive manner. But with the generative AI becoming -- developing, so what is the strength of your game studios and game development? What is your strength in that? So I appreciate you to ask -- to answer this question.

[Interpreted] Well, but the generative AI, so in very various ways, there are trials going on and now is in a test stage, I think. And there are very interesting things that's happening. But before -- I think it's before the commercialization. And as for game, it's not just game, but -- so AI, I think it can be in a toolbox that there's a very strong tool in the toolbox. That's kind of a feeling we have against AI. So tool itself, it's not going to be a business. So I think we need the sensitivity of artists and the tool to integrate in order to have another business chance or to have entertainment. So that's the kind of understanding we have.

In that sense, AI, I don't think it's a threat. But -- so that the creators can use AI fast way. And then we are going to help them make it the commercial product. So I think that's a Sony's mission. Thank you.

[Interpreted] With that, we would like to conclude the earnings announcement of Sony Group.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Hello, everyone. Today, I will explain the content shown here. Sales of continuing operations for the quarter increased 5% compared to the same quarter of the previous fiscal year to JPY 3,107.9 billion and operating income increased 10% to JPY 429 billion. Both were record highs for the second quarter. Net income increased 7% to JPY 311.4 billion. The financial results by segment are shown here.

As for our full year result forecast, we upwardly revised sales from our previous forecast 3% to JPY 12 trillion, operating income 8% to JPY 1,430 billion, and net income 8% to JPY 150 billion. We expect that the impact of additional U.S. tariffs on the operating income of our continuing operations, to decrease JPY 20 billion from our previous forecast to JPY 50 billion, and we have reflected impact in the forecast for each segment from this quarter. We upwardly revised our forecast for operating cash flow 18% to JPY 1.5 billion. The forecast for each segment are shown here.

Now I will turn to an overview of each business. First is the G&NS segment. FY '25 Q2 sales increased 4% year-on-year primarily due to the growth of network service revenue and the software sales. Despite the impact of the increase in sales, operating income decreased 13% year-on-year. This was primarily due to the recording of approximately JPY 49.8 billion in nonrecurring losses resulting from an impairment of intangible and other assets and the correction in the amount of previously capitalized development costs. Excluding these nonrecurring items, operating income would have increased 23%.

We upwardly revised our sales forecast 3% from the previous forecast to JPY 4,470 billion. This is primarily due to the impact of foreign exchange rates. Despite the negative impact of the nonrecurring items and the inclusion of a JPY 30 billion tariff impact that we are recording from this quarter, our JPY 500 billion operating income forecast is unchanged from the previous forecast. This is primarily due to the positive impact of foreign exchange rates.

Our PlayStation platform continues to demonstrate its strength as the best place to play and best place to publish. User engagement trended well with a number of monthly active users across all of the peers in September, increasing 3% and compared to the last September to 119 million accounts, and total play time for the quarter also increased 1% year-on-year. Game software and network service sales are steadily growing. We expect this trend to continue in the second half due to a continued shift to higher tiers in our network service business and the contribution of first-party titles.

As for PS5 hardware, we plan to expand the installed base during the year-end sales season while continuing to balance that expansion with the profitability of the entire segment. Although performance varies by title, our live service game overall accounted for more than 40% of our first-party software revenue, similar to the previous quarter and are a recurring source of revenue.

Regarding Destiny 2, partially due to the changes in the competitive environment. The level of sales and user engagement have not reached to the expectation we had at the time of the acquisition of Bungie. While we will continue to make improvements we downwardly revised the business projection for the time being and recorded an impairment loss against a portion of the assets at Bungie.

On the other hand, Helldivers 2, which was also released for Xbox in August of this year, is doing extremely well, not only attracting new users on Xbox but also seeing increased engagement from existing users on PS5 and PC. This resulted in a significant increase in sales of the title year-on-year.

MLB The Show 25, released in March also continued to perform well during the quarter. In a single-player AAA title space, following the release of Death Stranding 2: On The Beach in June, we released Ghost of Yotei in October. Ghost of Yotei surpassed 3.3 million units sold globally as of November 2, becoming a major hit like its predecessor. Building on this recent progress, we aim to strengthen our studio business and expand our IP franchises through continuous learning and improvement.

Next is the Music segment. FY '25 Q2 sales increased 21% year-on-year, and operating income increased 28%, reaching record highs for the second quarter. This was primarily due to a higher Visual Media and Platform revenue, driven primarily by the success of the theatrical release of Demon Slayer: Kimetsu no Yaiba Infinity Castle. It was also due to an increase in streaming revenue.

On a U.S. dollar basis, streaming revenue for the quarter increased 12% year-on-year in recorded music and 25% in Music Publishing. We have upwardly revised our full year forecast for sales 6% to JPY 1,980 billion compared to the previous forecast and operating income 7% to JPY 385 billion.

During the quarter, SMEJ made great strides, recording its highest ever quarterly sales and operating income and contributing significantly to the growth of this segment. Demon Slayer produced by Aniplex became a global hit due to our collaboration with Toho for distribution in Japan as well as the strengthening and expanding of distribution overseas by Crunchyroll and Sony Pictures. As of October 13, 77.53 million people worldwide, including in Japan, have seen the movie and the total box office revenue has exceeded JPY 94.8 billion.

Kokuho has enjoyed a long run in theaters in Japan and has captivated a large audience. being selected as Japan's entry to the 98th Academy Awards in the Best International Feature Film category. The successes of Demon Slayer and Kokuho are examples of how we can increase the value of IP by discovering appealing IP and combining them with the production capability of talented creators. We look forward to attracting not only fans but also many creators and actors.

In recorded music, IRIS OUT and JANE DOE by Kenshi Yonezu, an artist affiliated with SMEJ, have been breaking records on music charts, both in Japan and overseas. Thanks to synergy with the theatrical release of the anime Chainsaw Man, the movie Resi Arc.

Outside of Japan, SMG is also achieving very strong results. The global success of artists and songwriters such as Tyler, the Creator and Bad Bunny, has led to a double-digit increase year-on-year of sales and operating income for the quarter. In addition, SMG is further enhancing its relationship with DSPs. It entered into licensing agreements with Spotify during the quarter and in collaboration with several other record labels agreed to support Spotify's efforts to ensure that AI is used in a manner that will benefit artists and songwriters.

Next is the Picture segment. FY '25, Q2 sales decreased 3% year-on-year and operating income decreased 25%. This was primarily due to the impact of a decrease in sales from theatrical release, which benefited from hits like it ends with us in the same quarter of the previous fiscal year. Partially offsetting the decrease in operating income was the impact of higher sales at Crunchyroll.

There is no change to our full year forecast for sales and operating income. Crunchyroll continues to work to enhance the 360-degree IP experience of anime fans through the theatrical distribution of Demon Slayer, the launch of Crunchyroll Manga service and other efforts. Crunchyroll Manga, which currently digitally distributes hundreds of popular Japanese manga titles, has been positively received by fans and publishers since its launch in October. We expect it will contribute to an increase in fan engagement and growth in subscribers.

In Television Productions, new season of popular existing series were released this quarter such as Doc, Gen V and Twisted Metal. In Motion Pictures, productions has begun on the major titles, Spider-Man: Brand New Day and the next Jumanji, which are scheduled to be released next fiscal year. Fans are easily awaiting the 2 titles with 5 years having passed since the previous Spider-Man film, Spider-Man: No Way Home and 7 years have passed since the previous Jumanji film Jumanji: The Next Level.

Next is the ET&S segment. FY '25 Q2 sales decreased 7% year-on-year, primarily due to a decrease in unit sales of TVs. Operating income decreased 13% year-on-year, primarily due to the impact of the decrease in sales, partially offset by reductions in operating expenses. We have slightly increased our full year forecast for sales from the previous forecast to JPY 2,300 tillion, and we have decreased our operating income forecast 11% to JPY 160 billion, reflecting a JPY 20 billion impact from tariffs from this quarter.

In the Imaging markets, demand has slowed in 2 regions. China, where government subsidies that last through the first quarter ended June 30, significantly declined and the U.S. primarily due to the impact of additional tariffs. However, this decrease in demand is essentially in line with our previous forecast, and global demand remains solid, primarily because of Asia.

The severe operating environment for TVs and smartphones continues, but we are adapting by proactively reducing operating expenses and have been able to minimize the impact on profitability. At the segment level, there are no major changes to the demand outlook for the year-end sales season and second half of the fiscal year. We plan to continue to control costs and inventory and operate our business cautiously.

In our Sports business, which is a growth area, we completed the acquisition of STATSports in October. STATSports excels in active tracking technology, which collects and analyzes real-time data on athlete's physical condition and performance during games. By combining this data with the optical tracking technology of Hawk-Eye and KinaTrax, we aim to provide industry-leading sports data solutions to teams and athletes around the world. We also hope to accelerate the growth of our sports business overall.

Last is the I&SS segment. Sales for the quarter increased 15% year-on-year and operating income increased 50%, both reaching record quarterly highs for the segment. This was primarily due to a higher unit prices resulting from larger-sized sensor for mobile devices and increased sales volume of sensors for consumer cameras. We upwardly revised our full year forecast for sales 2% to JPY 1,990 billion and operating income 11% to JPY 310 billion, primarily due to the impact of foreign exchange rates. Based on the trends in the final product market and the demand forecast from our customers to date, we have decided not to include any impact from tariffs in this forecast for this segment.

The smartphone market continued to show signs of gradual recovery on the global basis. Sales of mobile sensor during the quarter increased significantly year-on-year due to higher unit prices resulting from larger sensors being used in new products by our major customer and a higher shipment volume than our previous forecast. In addition, growth of the market for cameras that use new video shooting styles such as handhelds contributed to the growth in sales.

Our customers might have brought forward the purchase of components during the first half of the fiscal year due to the additional tariffs and other factors. Therefore, we have kept our fiscal year sales forecast unchanged from the previous forecast when the impact of foreign exchange rate is excluded. We expect sales for the fiscal year to increase an already significant 11% from the previous fiscal year.

During the third quarter ending December 31, 2025, we plan to carefully assess the possibility of another upward revision. The higher sales of image sensors and our fixed cost management through an accelerated review of low-profit business and the shift of resources and costs to priority areas are contributing significantly to profit growth this fiscal year.

During this mid-range plan period we intend to continue to focus on improving the efficiency of business operations and product development. In the next mid-range plan period, we aim to build on those efforts by continuing to work to improve the profitability of the business by considering measures that balance business expansion with improved efficiency of capital expenditure.

To summarize, excluding nonrecurring items, the G&NS music and I&SS segment all achieved record high operating income during the quarter and we believe that our business momentum is strong. Looking ahead to the second half of the fiscal year, given the uncertain business environment, we intend to continue to operate our business cautiously while striving to steadily achieve results.

The upwardly revised operating income forecast for this fiscal year presented today, projects an average annual growth rate of operating income of 18% compared to the final year of our fourth mid-range plan and a cumulative operating income margin for the fifth mid-range plan to date of 11.3%. This demonstrates that we are making steady progress towards achieving the targets of our fifth midrange plan.

As for shareholder return, we established today a share repurchase facility of a maximum of JPY 100 billion to be executed by May 2026. And we successfully completed the partial spinoff of the financial service business on October 1. We would like to reiterate our sincere gratitude to our shareholders and investors.

This concludes my remarks.

[Operator Instructions] To answer your questions we have on the podium Lin Tao, CFO, Corporate Executive Officer; Hirotoshi Korenaga, Senior Vice President in Charge of Accounting; Naoya Horii, Senior Vice President in charge of Corporate Planning and Control, Disc Manufacturing Business and Storage Media Business. [Operator Instructions]

The first one is from NHK, Mr. Taruno -- or Ms. Taruno, please.

I have 2 questions. You have just explained the results this time in and out of Japan, what about the market conditions as you see it, including the consumer behaviors and activities. That's my first question.

And the second is that Demon Slayer or Kokuho have become such a big hit. There's a music and pictures related content business. How are you going to grow these content-related businesses? And what kind of initiatives are you going to continue?

Thank you for your questions. First, about the market conditions and the business sentiment in and out of Japan. For Japan and the U.S., it seems that there's some stability quite recently. However, we are doing business globally and U.S. economy is something that we focus on. In the latter half -- towards the latter half of the year, it seems that there's signs of slowing down in U.S. economy.

In terms of inflation, inflation rate is going up and the job applicant ratio is coming down and statistics because of the closure of the government services, we don't have much data, but it seems to me there's a lack of transparency or certainty. Towards the latter half of this year, we are being cautious and trying to be conservative in our business operation.

About your second question, Demon Slayer and Kokuho, thanks to your patronage, in Japan and outside Japan, they have become such a big hit. And then they contributed a big positive impact on our business. Going forward, content -- as content IP, we will continue to adopt the titles to the films and the motion pictures. And then partnering with the distributors, both in Japan, we would like to grow this business.

Well, not only Demon Slayers, but especially in Hollywood the box office revenue -- very high box office revenue was achieved. And I think culturally, this gives us a big power. So Japanese content make it successful in Hollywood going forward is good not only for Sony, but for content publishers of Japan as a whole. Going forward, in addition to the deployment of IPs, 360 degrees utilizations and LPs, merchandising, we will make an effort to expand this. Thank you very much.

We will take the next question, Yoshida-san from Nikkei.

This is Yoshida from Nikkei. I do have 2 questions. The first one is as follows: the live service in game business and the development status of Marathon and whether you wish to launch it this year, have you made any changes to the plan? That's the first question.

And then also looking at the actual performance of add-on service from July and in September and you recorded the underperformance for the first time in 13 quarters. And then this might have been attributable to the delay in the live service or new title releases? That's the first question.

And second question, so you said that the Demon Slayer has really culturally significant impact. And what is the reason in your view that these titles are exceeding your expectation in terms of performance?

Thank you very much for your question. The first question with regards to the developments set of Marathon is we are still working on it. And from October 22 and in 28 for a week, there was a technical test that involves 80,000 people. And as a result, the gameplay and then retention, those are the key KPIs that we tested on. And then we are in the process of analyzing the performance against those KPIs. And as needed, we will make corrections. And then we are fully dedicated to launching the title as scheduled. And then yes, we assume that we will launch this within this year. And that is included in the forecast.

And with regards to add-on compared to last fiscal year, there has been a reduction, as you mentioned. But with regard to add-on and whether it's add-on or full game -- and it really depends on the most popular titles, most played by the gamers and users. So we don't believe that this represents a reduction of slowdown. And as we gear up for the year-end sales season, and we have launched new titles, and I hope that the performance will be even strengthened.

And then second question. So Demon Slayer upside and the reason for it. First, as a content business or thinking about the nature of the content business, it's really difficult to accurately predict the performance. And then the previous title was really successful during the pandemic. And at the time of the launch, we had a lot of confidence. However, in this final exceeded the expectation, and this could be attributable to the great performance in overseas market. In Hollywood, and we generated top growth in revenue, and that was unprecedented. So from that perspective, we were able to deliver performance that was unexpected.

Let's go to the next question from Toyo Keizai, Umegak-san.

I have 2 questions. The first question is about Music segment. 25 million, I think, was the upward revision that you made in operating income. I wonder how much of the contribution was from the Demon Slayer. I understood that it was already reflected in the forecast. But in the visual media platform, it was like a JPY 200 billion revenue. So what kind of contribution did this upside impact to make.

Now the next is on Pictures. The JPY 250 billion was the operating income. I believe that in the first half, you had a little bit of a difficulty. The TV production, I understand is kind of going down. You mentioned about the sequels, but I'm wondering what the sequels -- how the sequels will be contributing. Those are the 2 questions.

Thank you very much for the questions. On Music, in the Music segment, the upward revision was the JPY 25 billion upward revision that we meant. The contributions were from Demon Slayer and Kokuho and the streaming music. Kokuho and Demon Slayer, together they contributed about 50% of the upside impact.

And as for the Pictures, the full year forecast for the first half -- the Picture segment -- the nature of the Picture segment tends to have this launch in the latter half rather than in the first half. So please understand that this is a seasonal impact. So TV production and movie production, structurally, we are seeing the depressed business of the industry. So how can we control the cost and produce projects or items that will be very successful?

As for the Pictures segment, Crunchyroll is one of the driving force for growth. The subscribers as well as the sales have both increased since the previous -- from the previous year. So in the Pictures segment, Crunchyroll will be focusing on that in order to grow the business.

Let us proceed to the next question from Yomiuri Newspaper, Nakayama-san please.

My name is Nakayama of Yomiuri Newspaper. I have 2 questions, if I may. One A very detailed question. As you have just said, in the Music, the operating income, half of the upside comes from Demon Slayer and Kokuho. If you could give me a breakdown between Demon Slayer and Kokuho, I would appreciate it.

Second, about the impact of tariffs, JPY 50 billion, and last time you talked about the utilization of the strategic inventory. What would be the background of this JPY 20 billion worth of decline.

Now about the breakdown for each individual title, may I refrain from making comments on the breakdown of each title. And about the tariff impact, Horii will answer.

Thank you for your question. As you rightly pointed out, the impact of the tariff used to be JPY 70 billion, now it's JPY 50 billion. So it's a JPY 20 billion worth of decline. In the I&SS segment, the impact of the tariff in the previous time we incorporated that to a certain extent in the I&SS segment. But if you look at the final product market and the orders received from the customers, we look at these factors. And then this time, in this particular segment, we don't see any further need of incorporating the impact of the tariff in this. So we excluded that. The JPY 20 billion decline comes mainly from I&SS segment.

[Operator Instructions] Narisawa-san from Mainichi Newspaper.

This is a Narisawa from Mainichi. And I have a question about Games segment. PlayStation 5, celebrating sixth anniversary since 2020. And then also this year, the performance is quite good and you're looking to expand the installed base. And as for -- can you talk a little bit about the future strategy?

Thank you very much. This year, we are in year 6 since the launch, and then PS5 has been growing in its installed base. And our view is that -- and compared to conventional console life cycles and looking at the PS4 life cycle, it seems to be getting longer and longer. And especially, the PS4, which was launched in 2013, and it's been over a decade since then, but there are many active users enjoying the console -- and they are enjoying the consoles. And from that perspective, we believe that the PS5 is only in the middle of the journey, and we are really planning to expand it even further.

And as for the year-end sales season, and thinking about the customer lifetime value and then also thinking about the profitability, we want to promote so that we will expand the installed base. And as for the future launches and successors, and then -- we are not in a position to make any comments about that. And that's all we have.

So this concludes the Q&A session for the media app. And the Q&A session for the investors and analysts will commence at 4:40 p.m.

Thanks for waiting. We will now take questions from investors and analysts. I am Kondo from the IR group, and I would serve your moderator. Thank you. The same 3 speakers from the media session will be responding to your questions. And we will now begin the Q&A session. [Operator Instructions]

And SMBC Nikko, Katsura-san, please go ahead.

And this is Katsura from SMBC Nikko. And I would like to ask about G&NS and then I&SS. And the first question is about G&NS. The -- apart from JPY 14.9 billion impairment and the operating income for the second quarter is 15.3%. And in Q1 it's 15.8%. And you are able to achieve this high level of profit with our major titles. And this could be a threshold. And can you talk a little bit about how do you see it? And are there any factors contributing to this great performance? That's the first question.

And then also -- and the NAND flash price is increasing, and then that might have the negative impact on the PS5, the hardware profitability. So what's your plan for the next -- the remainder of the year and the next fiscal year.

And then with regards to I&SS, you said that you are going to strike a good balance between business expansion and the profitability improvement. And in North America, smartphone seems to be doing really well. But 3 months ago, there were a lot of news in with regards to changes in geopolitical situation, what sort of plans that you are planning to take for the midterm? And then do you have any updates? So those are the 2 questions.

Thank you. The first I would like to take the questions on Game. And the profitability in Q2 and the major contributing factor is the ForEx and network service and in SG&A and there was a reduction in M&A expenses. And so from that perspective, we were able to realize a high -- relatively high rate of profitability. Whether this is sustainable or not. That is the question. And basically, the network service, which commands a higher profit and then software and especially a first-party software, if they perform really well, and we should be able to maintain a high level of profitability.

And with regards to memory prices and then with the potential impact on the hardware profitability and then for this fiscal year, and we have already secured all the parts that we need. But because the market is continue to fluctuate, so we keep a close eye on the situation, on the market. And of course, the supplies and then parts and then their prices when they go up, and of course, that will have an impact on the profit of the hardware.

For the FY -- so next fiscal year and onward, and we have already achieved the 80 million installed base for PS5. And assuming this will grow next year instead of additional hardware profitability, and we want to really continue to monetize the installed base that we has already secured, and I think that would be the priority.

And the second question will be addressed by Horii-san.

Thank you very much for your question. First, the first half of the question, so the business expansion for the next year and then also enhancement of the investment efficiency, and we have been able to manage these quite well this year. And then especially on expenses side, we have been able to restrain expenses so that we can generate the sales growth versus previous year. And yes, we want to maintain this and then further improve into the next year.

And as for the -- our response to the geopolitical risks, continuously with regards to production in the U.S., we want to ensure the quality so that we can produce in a stable way and trying to do that in-house, that would be really difficult to achieve. However, and working closely with the different partners or making a joint investment and what else we can do to really address this issue of the U.S. production, there is no clear answer, but we will continue to explore all the options. Thank you.

Next, from Nomura Securities, Okazaki-san.

So this time, the impairment loss, Bungie's intangible assets was reflected in that. In the balance sheet, how much assets do you still have? And what is the risk of the impairment loss?

The second question has to do with the PlayStation 5. In Q1 and Q2, I think you sold more than in the previous year. But towards the end of the year, you said you're going to expand? Well, are you aiming to have an upward revision? Or is the sales going to be more than previous year.

First, on the impairment loss Bungie, this is an impairment loss of Bungie. The intangible assets as well as the tangible assets that they are the target for the impairment loss and goodwill that is reflected -- that is supported by the whole Game segment. So there will not be any impairment loss for the goodwill.

So for this time, Destiny 2, which is a game, performance did not reach the expectation that we had -- when we acquired Bungie. So the balance of the assets well, more specific, it's very difficult to give you specifics. But yes, we still have some intangible assets. And the question of whether there's still any risk remaining or not, Marathon, which is going to be launched and Destiny 2.

The performance -- if the performance is not going to reach what we expect. Of course, there is a risk of impairment loss, but we don't believe that this will impact the whole Game segment, at least at this point in time.

Your second question was about the installed base. In Q1 and Q2, it was more than in the previous year. So on 150 million units is the goal we have for the year. And the number of units, we believe we have forecasted for this year, we believe we can reach that. Thank you.

JPMorgan -- from JPMorgan, Ayada-san, please.

My name is at Ayada from JPMorgan. I have a question about Games and I&SS. One question each. For Games, as has been discussed earlier, network service sales in dollar terms increased by 35% in the second quarter and what will be the breakdown if possible, I would like to know. 2 years ago, there was a price increase, maybe there's an effect from that. And then the shift towards higher-priced products or the number of paying subscribers increase. Well, I think these are possible items, what would be the breakdown in terms of priority?

And I&SS, in the first half, it seems that there is a customers -- some customers brought forward the purchase of the components. But in the third quarter, the input of wafers from 155 to 160, there seems to be a shift. So I guess this backdrop towards the U.S. and the Chinese market, what would be your take on the market conditions. I am sure there is an upside, so please explain the risks and upside both.

The network service and the factors contributing to the increase in sales, as you rightly said, price comes at the top of the list, the price increase. Impact still lingers and then the number of subscribers or users increased compared to the previous year and the product mix. Tier 2 and Tier 3, higher-tier users what we have more and more people go into the higher tiers. I think those are the contributing factors for the increased sales. But, there is some factor contributed to the increase in the operating income. That is to say acquisition of the contents efficient way of acquisition, looking at the data, that contributed to the operating income improvements. And I&SS, please.

Thank you for your question. As you rightly pointed out, in the first half, the shipment -- the sensors shipment exceeded what we expected. And for the full year forecast, we place it unchanged. The supply chain of the set because of the U.S. tariffs or the shift in the production base because of this, there seems to be a certain level of opaqueness or lack of clarity. So what we shipped -- but that -- some of them go directly to the final markets and some of them are still linger in the supply chain. So we have to look at this.

And the third quarter we will continue full capacity wafer import. Opportunistically, if things go well, we can see the increase in sales. And then from next fiscal year onwards, well, of course, we can think of accumulating the strategic inventory as well. So about the amount of volume of the input, we look at these factors.

About our customers, well, I cannot mention each and individual customer situation. But generally, as has been reported in the media, depending on the customers, there are ups and downs and the smartphone market is still on the recovery track, gradual recovery track. That's our understanding. At this point in time, in terms of market and customers, North America, seems to offer a bigger chance and opportunities.

So we will take the next question. Ezawa-san from Citigroup Securities.

This is Ezawa from Citigroup Securities. And in -- we have one question, big question for Game. In -- so there was a mention of the treating R&D capital as an expenses. Can you talk a little bit more about that? And is this related to some sort of impairment or -- and also the titles related to this, if there are any specific titles related to this? And if you could talk about them, that would be great. And then furthermore -- and also the -- and development asset capitalization. And as we run your business, will you foresee, this will happen more often, and that is the one big question.

The next question is also -- and this has to do with the development asset. And if you look at the supplementary presentation and when you look at the depreciation by segment, it appears that there's no apparent increase. However, the depreciation of the development is not really included, I believe, and the capitalization of development for the Game is, what will be the scale of the asset for the gaming development.

Thank you for your questions. So the capitalization and in correction -- and this is not attributable to the nature of the business. This is -- and Korenaga-san will talk more about the details of the revision.

Thank you for the question. So this value is not an impairment of asset. And in the past, and there was the network development, which was treated as the intangible asset and then part of it should not have been capitalized and we found out. So that's why for the past years and then for this fiscal year, we made the correction in one go. And specifically, the network-related asset and R&D are capitalized, but console and hardware R&D are treated as expenses. So this treatment was mistakenly done in the past which we made a correction retroactively. That's all.

And through operational improvements, we will prevent the recurrence. So we believe that this will not happen again. And the next one is the Game capitalization and then the depreciation or monetization. So the depreciation that we gave itself, and we do this in accordance with the rules. So it's not that in all the games are capitalized. And we will work closely with the auditing firm. So at the stage of the development. And basically, we will be able to finalize the value of the asset mailer in the process.

So in terms of value, it's not really that high on an annual basis, and we believe the tens of billets in tens of billions of yen, that level. And then as for the depreciation expenses, so when we launched the content, we started to depreciate and that is the nature of the business. Thank you.

So we have very little time left. So the next person will be the last person to ask questions. [Operator Instructions] From Goldman Sachs Securities, Munakata-san.

This is Munakata from Goldman Sachs Securities. One question on G&NS. So the full year operating profit, I think it was JPY 500 billion, but it was not the tariff impact. It was not included in the forecast. And when you consider these items, I believe that the profitability has improved. And the current platform, I think it's looking at hardware and other services, which the prices are going up. So by looking at the competitors' trends, next year -- after next year, in order to improve your profitability, what will be the upside? It will be probably the game contents and these items, are you planning to revise the prices of the game contents, for example?

Thank you very much for the question. The Game business for next year, well, first, we have to focus on the year-end season and try to expand the installed based units so that we can have 90 million units by the time we start next year. The upside and downside. The upside for next year, the first-party contents, the Insomniac studio is developing that. The Wolverine will be launched -- so tentpole content that's there. And Marathon, it's a live service. So if we can be launched this year, next year, I think we will enjoy revenue, profitability.

On the other hand, the market situation, somebody else asked this question. The components and the supply chain are not very transparent. So we have to be careful about that, looking at the profitability, how to balance that. So going forward, when we plan next year's strategy, we need to take that into account. As for prices, I don't have anything that I can comment.

Since it's time, we'd like to conclude Sony Group Corporation's consolidated financial results presentation. Thank you very much.