Earlier in May, Sony released its fiscal year report for the past twelve months. Amongst the inevitable dryness of financial reporting it offered an intriguing look into the wider economic challenges the PlayStation platform-holder is facing, and the solutions it has in mind. And all that is framed, notably, in the run up to the inevitable next generation of consoles.

Not only that, a coinciding presentation by CEO Hiroki Totoki put Sony’s keen interest in AI on full display, with the company seemingly embracing the technology, in certain forms, even as it admits the generative AI boom has hurt its console sales.

To dig through Sony’s big business reveals, Eurogamer spoke with Rhys Elliot, video game analyst at Alinea Analytics, to uncover what all these numbers and corporate talk means for the games industry giant – and likewise, what it all means for you.

The impact of RAM shortages: lower PS5 sales, potentially higher prices?

First off, AI. Within the fiscal report Sony shared its expectations that PS5 hardware sales would decrease due to the AI-driven memory shortage. But how big a deal would a decrease in hardware sales actually be for the company?

Elliot describes this as: “Bigger than the segment-level numbers suggest, smaller than existential”. He argues that the PS5 is in its sixth year of its life cycle, and the install base is large enough that software, services and network revenue can keep things on the up and up.

Still, this doesn’t mean it’s a non-issue for Sony. Totoki’s own expectations are that hardware shortages may persist through to 2027. He’s not alone, with other CEOs and industry leaders agreeing that AI-driven shortages aren’t going to go away any time soon. “Sony’s response, like it says in the report, is to base FY26 PS5 sales on the memory volume it can procure at reasonable prices and ‘flexibly adjust’ unit sales and promotional plans,” Elliot says. In non-corpo talk, he believes this suggests Sony is “willing to underproduce consoles” rather than “soak up” the increased costs of producing them. It may even suggest Sony could raise prices further if these pressures continue.

However, Elliot notes a wildcard that could shake things up for Sony and its expectations. “The elephant in the room is GTA 6. PlayStation is the lead marketing platform, and historically, Sony captures around two-thirds of multiplatform GTA install bases.” If GTA 6 releases in 2026, as it’s still slated to, the PS5 may even outperform these cautious estimates by Sony, but Elliot believes Sony’s strategy is dependent on third party releases, which is “not the ideal place to be if you’re a platform holder.”

Next-gen delays and fewer PS6 exclusives – but more big games for the PS5?

The report also included mention of 2026’s operating forecast being largely flat due to investment into the next generation of consoles. I asked Elliot how big an impact memory shortages would have on this next generation, to which he responded with a comparison to similar hardware issues around the launch of the PS5.

“Totoki outright said that they haven’t yet decided on PS6 timing. This is loads more open-ended than the FY25 results headline implied,” Elliot said. “It looks like timing and price point are now genuinely under review. The memory shortages are part of that. “It’s ironic, as we had the semiconductor shortages during the PS5 launch.

In fact, Elliot suggests these hardware issues could have a knock-on effect on the games themselves. Sony’s tentpole first-party studios, for instance, are now much more likely to release their next games on PS5 than they are to wait for the PS6. “Naughty Dog, Insomniac, and Santa Monica’s next titles probably ship cross-gen rather than PS6 exclusive. Given the diminishing returns of new hardware these days – and the influx of new PS5 users via GTA 6 – it’s not as much of an issue as it was for the PS4-to-PS5 transition,” Elliot says.

Elliot also believes Sony has learned from the semi-conductor problem that plagued the PS5, and is better suited now for a tumultuous launch environment. “A 2028 launch window gives the hardware team another 12 to 18 months for memory pricing to normalise. The semiconductor shortages around PS5’s launch did genuine damage to that generation’s first three years of momentum, and Sony has demonstrably learned from that experience.” As such, a controlled delay may be better than a “constrained launch”, according to Elliot. This is especially true as “Xbox is not a direct competitor anymore.”

What could Sony’s CEO mean by “changing business models”?

Coming back to Sony, Totoki also noted that the company may consider “changing business models”, specifically in the context of selling the next generation of PlayStation with those above factors in mind. In the context of future consoles, Elliot pointed to two possible options Sony might take moving forward:

The first is hardware financing, or subscription models: “Sony pays for the BOM – bill of materials, sorry I am an analyst – upfront,” Elliot said. “Then the customer pays over 24-36 months. Microsoft has piloted this through Xbox All Access. Apple does it for iPhones. It moves the affordability problem from “Can you afford $700 today?” to “Can you afford $25 a month?”

A second option in Elliot’s mind is to follow Xbox’s lead, and offer different tiers of hardware at launch: “A premium PS6 at conventional pricing alongside a lower-spec version at a meaningfully lower price point. So basically an Xbox Series S situation. This is the easiest model change to execute. Elliot also suggested Sony’s rumoured portable console could also be part of a two-tiered plan.

As for general strategy shifts for Sony, Elliot does also point to two substantial events that could lead to a pivot: its struggle to deliver on its live service bets, and China’s growth in appetite for games in recent years.

With Bungie’s $765m impairment loss, the Concord disaster, and Marathon’s middling splash, it’s clear Sony has struggled to build a Western live-service portfolio. For Elliot, Helldivers 2 is the blueprint for success, not Bungie. The big question is now whether Sony continues its attempts, or pivots to partnerships and licensing.

There’s also China. Stellar Blade sold 2.3m copies on Steam, with 45 percent of the audience in China, a market PS5 hardware structurally cannot reach right now. It’s worth noting that while you can buy a PS5 in China, it’s restricted to a curated selection of approved games. Yet, at the same time, Chinese players can obtain unrestricted PS5s to hop on games like Stellar Blade, which they have been doing en masse. Elliot points out that Sony has yet to pull the lever on Chinese localisation and regional pricing on a first-party PC port, and describes it as an “untapped upside” and “strategic blind spot” for the company.

What is Sony really doing with AI?

Sony also announced a partnership with Bandai Namco Holdings for an AI and future technology pilot. Elliot describes himself as skeptical about generative AI, by analyst standards, and sees this as a continuation of the wider business partnership between the two giants.

For Elliot this is really a continuation of Sony and Bandai’s 2025 partnership. That partnership, among things like “IP expansion” and “joint content development”, included what Sony described as “jointly developing and operating entertainment-related technologies and services”, which Elliot believes this AI pilot announcement is a part of.

The speed at which this partnership was announced does, for Elliot, indicate this is a priority for both companies. However, he also adds: “A more cynical read is that this announcement was for more fickle shareholders, who see ‘generative AI’ and start drooling and investing willy-nilly.”

Still, there were some underappreciated moments from Sony’s AI stance. This includes the $700m of revenue gained from AI-powered payment routing (which optimises payment processing to hasten it and save money) which Elliot highlighted, which is a major benefit for Sony regardless of what you feel about consistency and IP rights problems. Then, there’s the PSSR note, technology similar to Nvidia’s DLSS which uses AI to upscale textures to a higher quality without requiring added GPU strain.

“I’ve played Saros and Ghost of Yotei via my Pro, and it does work very well,” Elliot said. “Machine learning is now table stakes for first-party visual fidelity. Add the AI ghost patent – an AI support ghost that can assist players stuck in games – earlier this year, and the pattern is clear.”

Still, expect a continuation of this sparse, conservative rollout of AI plans. Elliot expects Sony to announce its plans for consumer AI applications and services long before these actually become usable, and says: “Expect the public messaging to remain conservative for as long as the AI is producing results without controversy.”

“The gap between what Sony says publicly and what it is actually investing in is deliberate. It’s building AI tech while avoiding the PR nightmare of outright saying so – remember what happened with Sven Vinke?”

How’s PlayStation doing overall?

Finally, there are some general lessons we can take from Sony’s big info-dump. In short: things are looking okay for PlayStation – certainly compared to the likes of Xbox – though not without key areas of potential concern.

“Sony’s gaming business is profitable, mature, and visibly in transition,” concludes Elliot. “The headline numbers are genuinely strong, and the FY26 guidance suggests management has line of sight on continued margin expansion through the late cycle.” In other words, those all-important investors are likely to come away from this feeling Sony can potentially continue to grow and do well, even with how old the PS5 is today.

While PS5 hardware sales are slowing down faster than Sony might find ideal – and have now fallen narrowly behind the PS4 by comparison – Elliot believes GTA 6 will reverse that if the console supply is there. The PS5’s cumulative sales of 93.7m is now narrowly behind where PS4 was at the equivalent point, despite the PS5’s higher launch price and pandemic shortages.

Elliot also points to Helldivers 2’s day-and-date PC release working well “for the right kind of title”, and to Stellar Blade as an example of how regional pricing and localisation can unlock the Chinese market – though that is now potentially moot, with the recent report that Sony is set to return to console-only releases for its big first-party games. HBO adaptations such as The Last of Us, too, offset diminishing returns on what an investor might call “legacy IP”, while the Bandai-Sony partnership shows a willingness to expand into areas other companies may be absent.

“All things considered, Sony is the healthier of the two console manufacturers right now,” Elliot says, comparing Sony and Microsoft. “It has a maturing platform business that’s still expanding margin, has one of the strongest current first-party catalogues in the industry, and meaningful unexplored upside in China (I think Steam is very important for that, personally).”

What matters in the next few years, according to Elliot, is whether Sony’s momentum can be carried over to the PS6 launch, or whether a burdensome memory shortage and live-service struggles foil its plans.

“The positive case is that Sony nails it. The pessimistic one needs multiple things to go wrong simultaneously: GTA 6 slipping into 2027, live-service failures, and memory pricing escalating beyond current expectations. Each of these is possible. All three together are unlikely, but it’s a scenario that could turn a transition into a problem.”

If all three of those things happened at once, it would probably be a problem for players, too.