Sony has cut its annual profit outlook, warning of weaker PlayStation game sales. The forecast comes as Sony revealed it shipped 2.4 million PlayStation 5 consoles in its recent quarter, up only 4 percent from the 2.3 million shipped during the same period last year. PS5 lifetime shipments have now reached 21.7 million.

While hardware sales are slightly up year over year, software sales have plummeted 26 percent. In an investor call, Sony blamed the game slump on a lack of big PlayStation titles this year compared to 2021 and less time spent playing games in general — backed up by monthly active PlayStation Network users dropping 3 percent to 102 million. Sony released its exclusive Gran Turismo 7 and Horizon Forbidden West titles earlier this year, but Elden Ring arrived at the same time across multiple platforms and stole the limelight.

Reuters reports that Sony has now revised its annual profit forecast down 16 percent for its gaming business, as it anticipates another fall in game sales next quarter alongside costs associated with its recent $3.7 billion Bungie acquisition.

Image: Bungie

Sony’s PlayStation game sales are the latest sign that the gaming industry is slowing down after a big boost during the initial stages of the pandemic. Microsoft doesn’t reveal its own Xbox hardware shipments, but the company saw Xbox hardware revenue dip 11 percent in its recent quarter, alongside a 6 percent drop in Xbox content and services revenue, and a 7 percent decline in overall gaming revenue. While Microsoft had a strong fiscal year for Xbox revenue, the company is also warning that gaming revenue and Xbox content and services revenue will both decline next quarter.

Sony previously forecast 18 million PlayStation 5 shipments for its 2022 financial year, and the company hasn’t revised those estimates yet. “Supply has not been sufficient... demand has not gone down. We really need to meet the demand, that is the important thing to do,” said Sony CFO Hiroki Totoki in an investor call today.

Photo Illustration by Grayson Blackmon / The Verge

Sony now hopes hardware shipments will improve later this year, as it believes that it is mostly supply chain disruptions that are affecting PS5 shipments rather than a lack of components. Sony will need to greatly improve its PS5 shipments to meet its 18 million annual projection, though. It needs to hit an average of more than 5 million PS5 shipments per quarter for the rest of the financial year, a target that’s more than double this quarter’s shipments.

New game releases should also help the software sales side, with the highly anticipated God of War Ragnarök set to launch on November 9th and The Last of Us Part I remake on September 2nd.

While PlayStation game sales have dipped overall, 79 percent of PlayStation game sales were digital in the recent quarter, up 11 percent year over year. PlayStation game sales have been trending towards digital in recent years, boosted by the pandemic and a digital-only version of the PS5. Still, nearly 80 percent digital is a big shift if it continues throughout the rest of 2022.

Sony’s new PlayStation Plus Extra and Premium tiers launched in the US last month, but we won’t know their full impact until next quarter. PlayStation Plus subscribers are currently at 47.3 million, up from the 46.3 million at the same point last year, but down from the 48 million in fiscal Q3 2021. Monthly active PlayStation Network users reached 102 million in the recent quarter, down from 105 million year over year.