Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

A day after Nintendo Co. delivered a sweet surprise, compatriot Sony Corp. joined the gaming party with an earnings beat and outlook upgrade.

Numbers were so solid that operating income exceeded analysts' estimates by the widest margin in more than three years.

Sony's September quarter operating income was far better than analysts had expected
Source: Bloomberg

The last time Sony delivered an increase in operating profit (last quarter), more than two-thirds came from one-time factors such as gains from spinoffs or the absence of earlier single-event expenses.

This time, the increase is more tangible: Only 24 percent of it came from one-time gains, mostly in forex. 

Forex to the Fore
Foreign currency gains boosted Sony's operating income in the September quarter
Source: Sony


Solid Gains
Sony relied far less on non-recurring items to expand profit this past quarter
Source: Sony, Bloomberg Gadfly

Star of the show was Sony's semiconductor division, which not only boosted revenue by 18 percent but managed to extract more than 100 yen (88.4 cents) in operating profit for each 100 yen in extra revenue, according to Gadfly calculations. That's after accounting for forex and one-time gains that contributed 35 percent of the profit turnaround.

Then there's games, which raised revenue by 113.3 billion yen while squeezing 28.9 yen of operating profit out of each 100 yen in extra sales -- again, after one-time items.

Smooth Operators
Chips and games were the major contribution to Sony's operating profit growth in the September quarter
Source: Sony, Bloomberg Gadfly
Note: Excludes corporate, adjustments, and financial. Music & pictures have been combined.

At the same time as it released such inspiring results, Sony raised its full-year operating income estimate by 26 percent to 630 billion yen. 

It would be easy to link this greater earnings optimism to improved sales of its games, chips and entertainment divisions. But that would be a stretch. The revenue outlook was increased a mere 2.4 percent to 8.5 trillion yen. The real superstar is the yen. Most of that higher profit will come not from operating leverage but forex leverage.

Three Cheers
Japan's fluctuating yen has been a boost for Sony's operating profit
Source: Bloomberg

With around 68 percent of its revenue coming from outside Japan, Sony is susceptible to exchange-rate fluctuations. In April, the company was forecasting the yen at 105 per dollar. By August this was changed to 110 per dollar, and now it's been tweaked to 112 yen. 

So cheer on Sony's improved sales and operating leverage if you must, but don't forget to cheer on the yen as well.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. In June 2016 it posted a surprise operating profit, when a loss had been expected

To contact the author of this story:
Tim Culpan in Taipei at

To contact the editor responsible for this story:
Matthew Brooker at