Square Enix Remains Profitable Despite Losses From Its Gaming Division

Square Enix's second and third financial quarters saw steep losses in the wake of the Marvel's Avengers launch.

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Square Enix has released its latest earnings report, and despite its gaming side operating at a loss for the last two consecutive quarters, the company has managed to achieve year-on-year growth and remain profitable in the process. Over the course of nine months that ended in December 2020, Square Enix reported an increase in net sales of 33.7% when compared to the same period in 2019.

This saw the company's operating income rise by 47.7% to 41,022 million yen and while it was profitable, those figures were down by 4.3% when compared to 2019's numbers. Final Fantasy VII Remake proved to be a big hit for Square Enix, as its Q1 release saw net sales that were more than double that of the company's best period in 2019, earning 34.1 billion yen.

The second and third quarters of the year were less successful though, as Square Enix suffered a decline in net sales and operating income despite it despite earning 18.8 billion yen in that period. A loss of approximately 5 billion yen was recorded during this period.

This fall in profits lines up with the release of Marvel's Avengers in Q2, which not only had tepid reviews but also struggled to establish a healthy playerbase and sold below expectations. Sales on MMO games such as Final Fantasy XIV and Dragon Quest X also dipped in 2020, but the division still managed to remain profitable thanks to players generating revenue inside of those games.

Marvel's Avengers
Marvel's Avengers

Net sales and operating income rose year on year for games on smart devices and PC browsers, with Dragon Quest Walk, Final Fantasy Brave Exvius, and Dragon Quest Tact proving to be standout titles. COVID-19 resulted in a terrible Q1 for Square Enix's amusement and arcade businesses, but by Q3 these divisions began to operate at a profit once again. The segment still booked an operating loss overall due to closures in mid-June in an effort to combat the COVID-19 pandemic.

As February has kicked off, numerous other companies have begun posting financial results. PlayStation has recorded a blockbuster year with 4.5 million sales of the PlayStation 5 across the world, while EA also has plenty of reasons to smile as its Star Wars license has earned over $3 billion for the company so far.

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