- Square Enix saw falling revenue but rising profit in Q1 2025
- Digital entertainment led profits, while merchandising and publishing arms also contributed
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Square Enix’s new strategy is paying off already, with Q1 operating income up significantly and stronger profit margins despite a fall in net sales.
The Japanese games veteran generated ¥69.9 billion ($473.6 million) in net sales during the first quarter of its 2025 financial year, a decline from ¥85.6 billion ($579.9 million) last Q1.
But despite this decline, operating income more than tripled last year’s Q1 sum, at ¥10.8 billion ($73.2 million) versus ¥3 billion ($20.3 million).
This figure was led by digital entertainment including video games, which made a profit of ¥9.7 billion ($65.7 million) during the quarter compared to only ¥2.7 billion ($18.3 million) in Q1 last year. As a result, in this category Square’s operating income margin grew by 17.9 points, up to 22.3%.
It’s quite the turnaround from the “extraordinary losses” recorded in financial year 2024, when Square axed projects and moved to a more selective approach. But that approach appears to be paying off already, with lower expenses carrying this Q1 to much healthier profit margin.
Profiting strategy
Square Enix’s declining net sales were mainly attributed to the lack of new HD game launches in Q1, but reduced development cost amortisation and lower advertising costs were both factors in improving profits. There were also layoffs this quarter as the company set out a new strategy to optimise costs.
Merchandising profits also increased despite declining sales this Q1; out of ¥4.4 billion ($29.8 million) in revenue, the segment made ¥1.6 billion ($10.8 million) in profit at a 36.5% profit margin. That marked a 9.3 points rise year-on-year.
Square’s publication business was up this quarter too, increasing in both net sales and operating profit year-on-year. Strong comic sales meant a ¥2.4 billion ($16.3 million) profit in Q1 with more new releases planned for this fiscal year.
Of course, Square also has more game releases scheduled this year, with Visions of Mana, Romancing Saga 2, Life is Strange Double Exposure, a Dragon Quest III remake and Fantasian Neo Dimension all on the way.
A mobile game based on Final Fantasy XIV, developed with Tencent, is also believed to be in the works; though neither company has formally announced the title, it received a licence approval in China last month.
