Despite Big Wins From ‘Dragon Quest III HD-2D Remake’ And ‘Final Fantasy XIV: Dawntrail’, Square Enix Sees Drop In Quarterly Operating Income “Due To Sharp Profit Decline In Games For Smart Devices”
According to their latest earnings report, while the last three months have seen Square Enix land some major sales wins with Dragon Quest III HD-2D Remake and Final Fantasy XIV: Dawntrail, a significant “profit decline” across their various mobile games has resulted in the Japanese developer suffering a notable drop in operating income compared to the same period last year.
This latest update regarding the Final Fantasy and Kingdom Hearts series’ home studio was first detailed to the public courtesy of Square Enix’s Q3 2025 Fiscal Year earnings call, as held on February 7th.
Therein detailing their cumulative performance across the thus-far-nine months of the relevant fiscal year, the company revealed that while this period had seen them post gains in their amusement (which specifically handles the company’s arcade machine services), merchandising, and ‘digital entertainment’ arms, a dip in business from both their mobile game and manga publishing arms ultimately resulted in their Net Sales likewise falling 3.5% from 257.6 billion JPY to 248.5 billion, and their operating income likewise dropping 4.63% year-over-year from ¥34.9 billion in 2024 to ¥33.3 billion yen in 2025.
(Or in terms of USD, Square Enix’s Net Sales fell from $1.7 billion USD to $1.6 billion and its Operating Income declined from $230 million to $219 million.)
In terms of their HD Games segment – otherwise known as the main video game operations – Square Enix reported that while its Net Sales had fallen ¥6.8 billion (60.0 billion in 2025 compared to 68.8 billion in 2024) on the backs of such recent releases as SaGa Emerald Beyond, the Steam version of the Kingdom Hearts collection, Visions of Mana, Romancing SaGa 2, Life is Strange: Double Exposure, and Fantasian Neo Dimension, the apparently “stronger sales” of Dragon Quest III HD-2D had provided a boost in operating profit by ¥1.9 billion (¥4.6 billion in 2025 compared to ¥2.7 billion in 2024).
(For those curious about this discrepancy, to put it simply, ‘Net Sales’ in accounting terms is essentially ‘how much did a company make after calculating operating income, taxes, and other expenses,’ while ‘Operating Income’ is defined as ‘revenue minus operation expenses’. In other words, while a product may prove profitable in terms of Operating Income, outstanding expenses can cause its Net Sales to go into the negative.)
As for their Digital Entertainment segment, things were doing much better for their multiplayer-centric MMO operations, with Square Enix seeing a ¥9.2 billion yen jump in Net Sales (¥44 billion in 2025 compared to ¥34.8 billion in 2024, and a ¥2.9 billion yen gain in Operating Income (¥17.3 billion in 2025 compared to ¥14.4 billion in 2023), almost all of which came entirely from the efforts of the Final Fantasy XIV and their latest expansion, Dawntrail, with a small bit being provided by the continued operation of Dragon Quest X.
But it was Square Enix’s “Games for Smart Devices/PC Browser” division that really felt the pain over these past nine-months, as it not only lost ¥21.7 billion in Net Sales (¥56.3 billion in 2025 compared to ¥78 billion in 2024), but also ¥7.9 billion in Operating Income (¥5.6 billion in 2025 compared to ¥13.5 billion in 2024).
According to Square Enix, this decline was motivated primarily by “weakness in existing titles, royalty revenue recognized the previous fiscal year, and a content production account valuation write-down” – or, in terms more readily understandable by non-business executives, this result was due to a drop in popularity for existing mobile titles, in revenue compared to last year thanks to previous, and in value thanks to the general concept of ‘devaluation over time’.
Notably, it comes as no surprise that this particular segment is struggling.
At current, Square Enix is actively supporting 12 mobile titles, including Sengoku IXA, Schoolgirl Strikes 2, Final Fantasy Record Keeper, Final Fantasy Brave Exivus, Dragon Quest of the Stars, Romance Saga RE:universe, Dragon Quest Walk, War of the Visions: Final Fantasy Brave Exivus, Dragon Quest Tact, Octopath Traveler: Contest of Champions, Final Fantasy VII Ever Crisis, and Emberstoria.
And while the developer undoubtedly hopes that all of them will capture their max potential audience and continue churning out profits, with the overlap shared between the target demos of many of the above series, the fact that some series even having multiple mobile titles, and the general ‘waves’ of player interest in mobile games as time passes (Sengoku IXA, Schoolgirl Strikers 2, and Final Fantasy Record Keeper are the oldest of the above group at 11-years old, having released all the way back in 2014), it’s unlikely that every single one of their games, or even most of them, will end up generating a significant profit.
Offering a statement on the update, Square Enix leadership asserted in an official press release that “In the Digital Entertainment segment, the HD (High-Definition) Game sub-segment’s net sales for the nine-month period ended December 31, 2024 declined compared with the same period of the previous fiscal year as new titles generated lower sales than releases such as Final Fantasy XVI, the Final Fantasy Pixel Remasters and Dragon Quest Monsters: The Dark Prince had the previous year. However, sub-segment operating income increased mainly due to lower development cost amortization and advertising expenses compared with the same period of the previous year, as well as stronger sales of the November 2024 release Dragon Quest III HD-2D Remake than initially assumed.”
“In the MMO (Massively Multiplayer Online) Game sub-segment, net sales and operating income rose compared with the same period of the previous fiscal year on the launch of Final Fantasy XIV: Dawntrail. the latest expansion pack for Final Fantasy XIV,” they added. “In the Games for Smart Devices/PC Browser sub-segment, net sales and profits declined
compared with the same period of the previous fiscal year despite the launch of Emberstoria in November 2024. This was due to weakness in existing titles, the recognition of royalty revenue in the previous fiscal year, and a valuation write-down associated with the content production account.”
This is not the first time that Square Enix has posted such a discrepancy between their Net Sales and Operating Income.
In providing investors with last year’s annual fiscal report, the company admitted that “Net sales for the fiscal year ended March 31, 2024 totaled ¥356,344 million (an increase of 3.8％ from the prior fiscal year), operating income amounted to ¥32,558 million (a decrease of 26.6％ from the prior fiscal year),” much of which had been led by the twin-combo of the Yen losing value and their cancellation of unannounced-but-now-formerly-in-development titles.
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