SQUARE ENIX HD (9684): 1Q results: Repeat sales leverage growing, sustainability of new mobile games a key issue

Research evidence excerpt

J P M O R G A N

Asia Pacific Equity Research

11 August 2026

SQUARE ENIX HD (9684)

1Q results: Repeat sales leverage growing,

sustainability of new mobile games a key issue

Somewhat positive: 1Q operating profit of ¥17 billion beat our estimate of ¥11.1

billion and the Bloomberg consensus estimate of ¥11.8 billion. Repeat sales were

lifted by an expansion of franchise exposure, including new title announcements

at Summer Game Fest. Initial sales for two new mobile game titles also beat our

estimates. However, considering lingering concerns about the sustainability of

repeat sales after the end of major events and the sustainability of current sales for

new mobile game titles, we have a somewhat positive view.

Repeat sales volume in the high-definition (HD) game business grew 73.2%

YoY to 6.3 million units (our estimate), a strong performance. Many console

game makers have had strong repeat sales in 1Q FY2026. We think overall

sales of past titles may have been lifted by a concentration of new title

announcements in April–June and an expansion of franchise exposure. We

look to confirm this sustainability in trends from 2Q, but expect special events

and new title releases to have a growing positive impact on repeat sales.

However, for Square Enix’s mobile game business, we still have concerns

about the sustainability of new title sales. Based on AppStore rankings and

other external data, sales for two new titles launched in April–June appear

somewhat weak. We see continued issues for this business.

Sales in the massively multiplayer online (MMO) game business totaled ¥12.7

billion, well above our estimate of ¥9.9 billion, buoyed by fan festivals and

other events. However, operating profit of ¥3.6 billion was only slightly above

our estimate of ¥2.6 billion due to costs related to these events and development

costs for expansion packs. We believe the operating margin is likely to top our

estimate when Square Enix releases expansion packs in 4Q FY2026, but note

the short-term possibility of continued expansion pack development costs and

event-related costs in 2Q and 3Q.

Underweight

9684.T, 9684 JP

Price (10 Aug 26):¥2,871

Price Target (Dec-26):¥2,100

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