Ever since the Sony Group reported a 36.5% surge in its net profit for the quarter ending September, it has been making headlines. Owing to the tech giant’s exceptional prowess in the gaming and network services division, we are bullish on the stock even with its modest 15% YTD returns.

Sony Group Corporation is a global technology and entertainment company that operates in a wide range of sectors, including electronics, gaming, music, and film. Established in 1946 and headquartered in Tokyo, Sony thrives on its ability to manufacture a system that effectively integrates hardware (devices), software (operating systems), and content (music and movies) to make its already user-friendly products even more user-friendly.

Key Sony consumer electronics include televisions (Bravia), cameras (Alpha series), audio devices (headphones and speakers), and gaming consoles (PlayStation). Sony generates revenue through film production, music licensing, subscription services (such as PlayStation Plus), and entertainment services, particularly Sony Pictures and Sony Music. From hardware sales, subscription software, and entertainment content to financial services, the revenue drivers are well-diversified.

Sony also caters to a diversified set of customers, mainly individual consumers in pursuit of finer electronics and entertainment content, and business clients requiring professional solutions. The end market is spread across consumer electronics, gaming, film and television production, and music, with significant operations in North America, Europe, and Asia Pacific regions.

The gaming segment, already contributing as much as 28.9% to the company’s total sales, along with the network sector, nearly tripled to 138.8 billion yen ($0.9 billion) quarter over quarter. The release of a beefier version of its PlayStation 5 console just a day earlier has positioned the company for continued growth through this quarter as well.

Over the years, the Japanese tech titan has spent billions of dollars in acquisitions to advance its entertainment content production. As a consequence, the entertainment segment which had a contribution of 30% 10 years ago, now accounts for nearly 60% of the total sales.

Our bullish thesis on SONY is based on the company’s plans to spin off insurance and online banking units with further strengthening of and focus on the core entertainment sector in 2025. The highly anticipated launch of a next-generation Nintendo Switch model and the release of Grand Theft Auto VI in the preceding year could further expedite the growth prospects.