For the fiscal year ended 3/31/23 Square Enix (9684.T-JP: Tokyo) reported a 6% decline in revenue to ¥343,267 million (close to $3 billion).  The Digital Entertainment division, which accounts for 72% of sales, saw a 12% decline.


It was a turbulent year for Square Enix.  Last May, the company sold its Western-based Eidos division to the Embracer Group.  Early this year the game Forspoken had a disappointing launch.  In March, CEO Yosuke Matsuda stepped down.

Given the challenges, the overall results are not that bad.  DFC has felt that Square Enix has been trying to do much and should narrow its focus.  The biggest concern is a push into blockchain games with the creation of a Blockchain Entertainment Business Division.  With its latest earnings report, the company emphasized it is moving forward with its plans in blockchain, including possibly establishing a Corporate Venture Capital unit.

The emphasis on blockchain games is a concern.  Square’s mobile and browser game sales were down 13% and new title launches have not been able to offset the decline in existing titles.  The mobile and blockchain business does not seem to synergize with the AAA game focused HD and MMO business segments.

Overall Square Enix is forecasting moderate 5% sales growth for fiscal 2024 (ending 3/31/24).  Much could depend on the upcoming June 22 launch of Final Fantasy XVI.  Final Fantasy XVI is a PlayStation 5 exclusive.  If this title meets expectations, it could be a key PS5 title for 2023 and also help grow Square’s Final Fantasy XIV MMO (MMO revenue declined 14% in FY 23).

Square Enix remains one of the initial stocks in the DFC Intelligence Video Game Stock Portfolio.  So far in 2023, the stock has been up about 10%.  DFC believes Final Fantasy XVI should be a strong performer, but we remain concerned about blockchain ventures.