Profits falter at Square Enix despite rising game sales

Strong game sales couldn't stop profits from slipping at Square Enix, as rising development costs and underperforming mobile titles took their toll on the Japanese giant. 

According to Square's financials for the six months ended September 30, company-wide sales (shown below) rose by 23.1 percent to 106.3 billion yen ($1.01 billion). Profits, however, dropped by almost the same margin, falling by 25 percent to 5.4 billion yen ($51.5 million). 

In the company's Digital Entertainment division, which houses its video game operations, sales were also on the up, rising to 78.3 billion yen ($747.1 million) from 60.2 billion yen ($574.4 million) in 2015. 

Operating income in the segment dropped off slightly, though, slipping to 12.1 billion yen ($115.4 million) from 12.9 billion yen ($123.1 million). 

Square Enix blames that slight dip on an increase in development cost amortization for new triple-A titles, the disappointing performances of newly launched mobile and PC browser games, and an upfront investment in advertising.  

Still, the Final Fantasy creator seems pleased with the performances of key franchises such as Deus Ex, Tomb Raider, Hitman, and Dragon Quest. 

For context, Square's global physical game sales for the six months totaled 7.07 million units, a sharp increase on the 3.82 million units it managed to shift during the same period last year. 

Worldwide digital games sales are also taking flight, with Square selling 5.87 million digital "full-length games" this year, compared to just 3.16 million in 2015. 

As it stands, Square's financial forecast remains unchanged, and the publisher still expects to see sales of 250 billion yen ($2.29 billion) and profits of 17 billion yen ($156.2 million) by the end of this fiscal year.