Sony (SONY.US) reported better-than-expected second-quarter earnings, driven by strong performance in its entertainment segment and a rebound in demand for high-end smartphone image sensors. The company also raised its full-year profit outlook.

For the quarter ending September, Sony posted revenue of ¥3.108 trillion ($28.3 billion), up 5% year-over-year and surpassing market expectations of ¥2.985 trillion. Operating profit rose 10% to ¥429 billion, significantly exceeding analysts' estimates of ¥398.4 billion.

The Tokyo-based conglomerate now forecasts full-year operating profit of ¥1.43 trillion ($93 billion) for the fiscal year ending March 2025, a 7.5% increase from prior guidance. It also raised its annual revenue projection by ¥300 billion (3%). Additionally, the company expects tariff-related losses from U.S. duties to narrow to ¥50 billion from an earlier estimate of ¥70 billion.

This improvement follows the U.S.-Japan trade agreement in July, which reduced tariffs on Japanese exports from an initially proposed 25% to 15%, effective August 7. Sony also announced a new ¥100 billion share buyback program.

Buoyed by the positive results, Sony shares surged 6.7% in Tokyo trading, marking their biggest intraday gain in over a month.

**Segment Performance:** - **Music Business:** Profit jumped 27.65% to ¥115.4 billion, fueled by blockbuster films like *Demon Slayer: Infinity Castle*. - **Imaging & Sensing Solutions:** Profit soared nearly 50% to ¥138.3 billion, becoming the quarter’s top-performing division. This unit develops advanced semiconductors for smartphones, automotive, and industrial systems. Sony also raised its sales and profit outlook for the segment, reflecting optimism about smartphone market recovery despite competition from Samsung (SSNLF.US). Apple (AAPL.US) remains a key client for its high-end mobile camera sensors. - **Game & Network Services:** Despite remaining Sony’s largest revenue contributor, profit fell 13.26% to ¥120.4 billion. The company sold 3.9 million PlayStation 5 consoles, with software sales growing but monthly active users dipping slightly to 119 million.

Kazunori Ito, research director at Morningstar, noted: "Sony is clearly preparing for a next-gen console launch, but the PS5 lifecycle appears more durable than expected. Hardware sales held steady year-over-year despite a lack of major game releases."

Having transformed from a consumer electronics brand into a global entertainment powerhouse, Sony continues to leverage its ecosystem—including hit mobile games (*Fate/Grand Order*), cross-platform IP (*Demon Slayer*), and music acts like YOASOBI—to drive growth during traditional gaming off-seasons.

With the PS5 approaching its fifth anniversary, attention is shifting to its successor. Nintendo’s (NTDOY.US) upcoming Switch 2, which will be backward-compatible and a likely holiday-season favorite, poses a challenge. Sony has hinted at reducing PS5 marketing spend to focus on profitability—a typical precursor to new hardware—while banking on first-party AAA titles like *Ghost of Yotei* and major third-party releases such as *Grand Theft Auto VI* from Take-Two (TTWO.US).