Despite facing pressure from soaring memory chip costs, Sony Group achieved strong profit growth, supported by favorable exchange rates and its diversified business portfolio, and raised its full-year performance outlook. However, its core gaming hardware business is encountering supply chain cost challenges.

The Japanese technology and entertainment giant reported on Thursday that operating profit for the December quarter surged 22% year-over-year to 515 billion yen, exceeding market expectations of 468.9 billion yen. Revenue reached 3.71 trillion yen (approximately $236.8 billion), slightly above the forecasted 3.69 trillion yen and representing a 1% increase from the previous year. This marks a strong rebound for Sony after a year-over-year profit decline in the preceding quarter.

Sony subsequently raised its full-year operating profit forecast to 1.54 trillion yen, an increase of 110 billion yen, or 8%, from its previous projection. The company also lifted its annual revenue outlook by 300 billion yen to 12.3 trillion yen, a 3% increase, while maintaining its estimated loss related to U.S. tariff impacts at 50 billion yen.

Following the earnings release, Sony's stock initially rose more than 5% but later reversed to a decline of 0.87%. The company's largest revenue source, its gaming business, showed weakness. Meanwhile, market research firm TrendForce predicted on Monday that contract prices for conventional DRAM chips this quarter are expected to surge by 90% to 95% compared to the previous three months, posing a potential cost concern for PlayStation console manufacturing.

The gaming business is under pressure, with hardware sales slowing. Sony's Game & Network Services segment reported quarterly sales of 1.613 trillion yen, a decrease of 68.7 billion yen from the same period last year. This division includes the popular PlayStation home console brand and is Sony's primary revenue driver.

Although the business has benefited in recent quarters from a shift toward digital game purchases and growth in the PlayStation Plus subscription service, hardware shipment growth has remained sluggish. Sony's hardware operations are expected to face headwinds from rising component costs this year.

The sharp increase in DRAM prices presents a cost risk. PlayStation consoles rely on Dynamic Random-Access Memory (DRAM) chips, which are currently in short supply due to surging demand from artificial intelligence and data center operators.

According to a report released by TrendForce on Monday, contract prices for conventional DRAM chips this quarter are projected to rise by 90% to 95% compared to the prior three-month period. Last month, a top semiconductor industry CEO told CNBC that the memory chip shortage is expected to persist until 2027.

Strong performance in the music and imaging segments partially offset the pressure from the gaming business. Sony's music business saw revenue grow 12.6% year-over-year in the December quarter, driven by increases in live events, merchandise sales, and streaming services.

Concurrently, revenue for the Imaging & Sensing Solutions business grew by more than 20%. This division focuses on developing and manufacturing semiconductor-based imaging and sensing technologies.