{"url_path":"/sec/sony/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 Key Information","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-06-18","source_url":"https://www.sec.gov/Archives/edgar/data/313838/0001193125-26-274893-index.html","accession_number":"0001193125-26-274893","cik":"0000313838","ticker":"SONY","issuer_name":"Sony Group Corp","edgar_url":"https://www.sec.gov/Archives/edgar/data/313838/0001193125-26-274893-index.html","primary_entity_key":"0000313838","primary_entity_name":"Sony Group Corp"},"word_count":8481,"has_tables":true,"body_markdown":"Item 3.\n\nKey Information\n\n \n\nA.\n\n[Reserved]\n\n \n\nB.\n\nCapitalization and Indebtedness\n\nNot Applicable\n\n \n\nC.\n\nReasons for the Offer and Use of Proceeds\n\nNot Applicable\n\n \n\nD.\n\nRisk Factors\n\nThis section contains forward-looking statements that are subject to the Cautionary Statement appearing on page 2 of this annual report. Risks to Sony are also discussed elsewhere in this annual report.\n\nSony must overcome increasingly intense competition, which could lead to lower revenue or operating margins.\n\nSony has several business segments in different industries with many product and service categories, which cause it to compete with many existing and new competitors ranging from large multinational companies to highly specialized entities that focus on only one or a few businesses and also, potentially, with outsourced manufacturing service partners that currently supply products to Sony. These competitors may have greater financial, technical, labor and marketing resources available to them than those available to Sony. Sony’s financial condition and operating results depend on its ability to efficiently anticipate and respond to these established and new competitors.\n\nThe competitive factors Sony faces vary depending on the nature of the business. For example, in the Game & Network Services (“G&NS”), Music and Pictures segments, Sony competes for talent, such as game creators, artists, songwriters, actors, directors and producers, and for entertainment content that is created, acquired, licensed and/or distributed. Competition for talent and appealing content can lead to lower profitability if the higher costs required for such talent and content acquisition cannot be recouped through greater sales. In addition, the evolution of innovative technologies such as artificial intelligence (“AI”) and the use of them by competitors may impact Sony’s existing business models. In the G&NS, Music and Pictures segments, operating results can be impacted by worldwide consumer acceptance of their products, which is difficult to predict, and by alternative forms of entertainment and leisure activities available to consumers, as well as by competing products released or sold at or near the same time.\n\nIn the G&NS, Entertainment, Technology & Services (“ET&S”) and Imaging & Sensing Solutions (“I&SS”) segments, Sony competes on the basis of various factors including price and function, and price competition can lead to lower margins when costs cannot be reduced at a proportional rate. Even for those products where Sony believes it has a strong competitive advantage, such as image sensors, it is possible that its competitors’ technological capabilities will accelerate such that Sony would be unable to maintain its advantageous market position. Additionally, in terms of consumer electronics products, to produce products that appeal to changing and increasingly diverse consumer preferences, including constantly changing consumer interest in minimizing energy consumption and selecting materials with environmental considerations in mind for both products and packaging, or to overcome the fact that a relatively high percentage of consumers already possess similar products, Sony must develop superior technology, anticipate consumer tastes, and rapidly develop attractive and differentiated products with competitive prices and features. Sony faces increasingly intense pricing pressure from competitors, retailer consolidation, new sales/distribution channels, and shorter product cycles in a variety of consumer product categories. If Sony is unable to maintain its advantageous market position in the fields in which it has a technological or other competitive advantage, Sony is unable to effectively\n\n \n\n- 6 -\n\n##### Table of Contents\n\nanticipate and counter the ongoing price erosion that frequently affects its consumer products or the cost pressures affecting its businesses, there is a change in existing business models or consumer preferences, or the average prices of Sony’s products decrease faster than Sony is able to reduce manufacturing costs, Sony’s operating results and financial condition may be adversely impacted.\n\nTo remain competitive and stimulate customer demand, Sony must invest in research and development to achieve product and service innovations and successfully manage frequent introductions of such new products and services.\n\nTo strengthen the competitiveness of its products and services, Sony continues to invest in research and development (“R&D”), particularly in growth areas such as the G&NS and I&SS segments. However, Sony may not be successful in investing in R&D if it fails to identify products, services and market trends with significant growth potential. In addition, Sony’s investments may not yield the innovation or the expected results quickly enough, or competitors may lead Sony in technological innovation. This may hinder Sony’s ability to commercialize new and competitive products and services.\n\nSony must continually introduce and enhance products and services, and stimulate and sustain customer demand for them. Sales of these products and services are particularly sensitive to consumer demand in the year-end holiday season. In the G&NS segment, the successful introduction and penetration of gaming platforms, including game streaming, is a significant factor driving sales and profitability, and this success is affected by the ability to provide customers with attractive software line-ups and online services. However, there is no assurance that major contributors to this effort, such as third-party software developers and publishers, will continue to develop and release software, and transaction terms for software and related services with such contributors may be subject to change. In addition, Sony believes that integrating its hardware, software, including AI, entertainment content and network services and minimizing their energy consumption, as well as investing in R&D to effect such integration, is essential in generating revenue growth and profitability. However, this strategy depends on its ability to further develop AI and network services technologies, coordinate and prioritize strategic and operational issues among Sony’s various business units and sales channels, continually introduce enhanced, energy efficient and competitively priced hardware that is seamlessly connected to energy efficient network platforms with user interfaces that are innovative and attractive to consumers and also standardize technological and interface specifications industry-wide and across Sony’s networked products and business units. In addition, the G&NS, Music and Pictures segments must invest substantial amounts, which may include significant upfront investments, in internally developed software titles, artist advances, music catalogs, motion picture productions, television productions and broadcast programming before knowing whether their products will receive customer acceptance. Furthermore, underperformance of Pictures’ products in the initial distribution market is correlated with weak performance in subsequent distribution markets, which would have an adverse effect on Sony’s results in the year of initial release as well as future years.\n\nThe successful introductions of, and transitions to, new products and services depend on a number of factors, such as the timely and successful completion of development efforts, market acceptance, planning and executing an effective marketing strategy, managing new product introductions, managing production ramp-up issues, the availability of application software for new products, quality control and the concentration of consumer demand in the year-end holiday season. If Sony cannot achieve the expected results from its investment in R&D, adequately manage frequent introductions of new products and services and obtain consumer acceptance of its new products and services, or if Sony is not successful in implementing its integration strategy, Sony’s reputation, operating results and financial condition may be adversely impacted.\n\nSony’s strategic initiatives, including acquisitions, joint ventures, investments, capital expenditures and restructurings, may not be successful in achieving their strategic objectives.\n\nSony actively engages in acquisitions, joint ventures, capital expenditures and other strategic investments to acquire new technologies, efficiently develop new businesses and enhance its business competitiveness. For example, in the fiscal year ended March 31, 2025, Sony acquired additional shares of KADOKAWA Corporation. In the fiscal year ended March 31, 2026, Sony acquired shares of Bandai Namco Holdings Inc. (“Bandai Namco”) and acquired an additional equity interest in Peanuts Holdings LLC (“Peanuts Holdings”).\n\nIn some cases, the completion of mergers, acquisitions and joint ventures is subject to certain closing conditions, including regulatory approvals. As a result of anti-trust laws and regulations and anti-trust regulatory authorities becoming stricter, regulatory reviews following the signing of a definitive agreement may take longer than expected, or Sony may fail to obtain regulatory approvals. Also, closing conditions for mergers and acquisitions, which are set forth in definitive agreements, may not be satisfied due to unanticipated changes in\n\n \n\n- 7 -\n\n##### Table of Contents\n\nthe strategies or financial conditions of the organizations to be merged or acquired, leading to mergers and acquisitions not proceeding as expected, or the definitive agreements being changed or terminated. As a result, Sony may lose business opportunities and may not realize some or all of the initially expected results of mergers and acquisitions. As of the date of this report, mergers, acquisitions and joint ventures for which Sony has already signed definitive agreements and whose completions are subject to regulatory approvals include the establishment of a joint venture through a strategic partnership in the home entertainment field between Sony Corporation and TCL Electronics Holdings Limited and its subsidiaries (collectively, “TCL”), for which definitive agreements were signed in March 2026.\n\nWhile Sony performs a comprehensive analysis and evaluation of merged or acquired organizations prior to their merger or acquisition from various perspectives such as technology, accounting, tax, finance, human resources (“HR”), and legal, Sony’s financial results may be adversely affected by factors including the significant cost of the acquisition and/or integration expenses, IT and information security risks introduced from newly merged or acquired organizations, failure to achieve initially expected synergies, failure to generate expected revenue and cost improvements, loss of key personnel and assumption of liabilities.\n\nWhen establishing joint ventures and strategic partnerships, Sony’s financial and operating results may be adversely affected by strategic or cultural differences with partners, conflicts of interest, failure to achieve synergies, additional funding or debt guarantees required to maintain the joint venture or partnership, requirements to buy out a joint venture partner, sell its shares or dissolve a partnership, insufficient management control including control over cash flow, loss of proprietary technology and know-how, impairment losses and reputational harm from the actions or activities of a joint venture that uses the Sony brand. For example, Sony Honda Mobility Inc. (“Sony Honda Mobility”), a joint venture between Sony Group Corporation and Honda Motor Co., Ltd. (“Honda”), decided to discontinue the development and launch of its electric vehicle models and downsize its business as a result of Honda’s reassessment of its automobile electrification strategy announced in March 2026. Consequently, Sony recorded an additional 44.9 billion yen loss of equity method investment in the fiscal year ended March 31, 2026. Refer to Note 8 of the consolidated financial statements for details.\n\nSony invests heavily in production facilities and equipment, including fabrication facilities used to make image sensors for smartphones and other products. Sony may not be able to execute these capital expenditures as planned or recover these capital expenditures in part or full or in the planned timeframe due to the competitive environment, lower-than-expected consumer demand, changes in the financial condition or business decisions of Sony’s major customers, or delays in the procurement of production facilities and equipment. Sony invested 227.4 billion yen and 246.7 billion yen of capital in the fiscal years ended March 31, 2025 and 2026, respectively, mainly for the purpose of increasing image sensor production capacity.\n\nFurther, Sony is implementing initiatives for restructuring and transformation to enhance profitability, business autonomy and shareholder value or to clearly position each business within the overall business portfolio. However, the expected benefits of these initiatives, including the expected level of profitability, may not be realized due to internal and external impediments or market conditions worsening beyond expectations. If Sony is not successful in achieving its restructuring and transformation initiatives, Sony’s operating results, financial condition, reputation, competitiveness or profitability may be adversely affected.\n\nSony’s sales and profitability may be affected by the operating performance of wholesalers, retailers, other resellers and third-party distributors.\n\nSony is dependent for the distribution of its products on wholesalers, retailers, other resellers and third-party distributors, many of whom also distribute competitors’ products. For example, in some cases, the Pictures segment depends on third parties to theatrically exhibit its motion pictures, and to operate cable, satellite, internet and other distribution systems to distribute its motion pictures and television programming. A decline in the licensing fees received from these third parties may adversely affect the Pictures segment’s sales. The Pictures segment’s various television networks are also distributed on third-party cable, satellite and other distribution systems and the failure to renew, or the renewal on less favorable terms of, television carriage contracts (broadcasting agreements) with these third-party distributors may adversely affect the Pictures segment’s ability to generate advertising and subscription sales through these networks.\n\nSony invests in programs to incentivize wholesalers, retailers, and other resellers and third-party distributors to position and promote Sony’s products, but there is no assurance that these programs will provide a significant return or incremental revenue by persuading consumers to buy Sony’s products instead of competitors’ products.\n\nThe operating results and financial condition of many wholesalers, retailers, other resellers and third-party distributors have been adversely impacted by competition, especially from online retailers, and weak economic\n\n \n\n- 8 -\n\n##### Table of Contents\n\nconditions. If their financial condition continues to weaken, they stop distributing Sony’s products, or uncertainty regarding demand for Sony’s products or other factors cause them to reduce their ordering, marketing, subsidizing, or distributing Sony’s products, Sony’s operating results and financial condition may be adversely impacted.\n\nAs a global company, Sony is subject to a wide range of laws and regulations in many countries and a growing focus on sustainability efforts, including corporate social responsibility from external stakeholders including shareholders, consumers, local communities and non-governmental organizations (“NGOs”). Those laws and regulations, as well as external stakeholder and regulator focus, might change in significant ways, leading to an increase in the costs of Sony’s operations, a curtailment of Sony’s activities, and/or an adverse effect on Sony’s reputation.\n\nAs a global company, Sony is subject to the laws and regulations of many countries throughout the world that affect its business operations in a number of areas, including advertising, promotions, consumer protection, import and export requirements, anti-corruption, anti-trust, environmental protection (including decarbonizing regulations in connection with actions against climate change and regulations on the use and/or spillage of hazardous substances such as specific organic fluorine compounds), data privacy and data protection, product security, content and broadcast regulation, development and utilization of AI, intellectual property, labor, occupational health and safety, product liability, taxation (including taxes from certain revenue on digital services), foreign investment, government procurement, foreign exchange controls, and economic sanctions.\n\nCompliance with these laws and regulations may be onerous and expensive. These laws and regulations continue to develop and may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance and doing business. Any such developments could occur frequently and without warning and could make Sony’s products or services less attractive to its customers, delay or prohibit introduction of new products or services in one or more regions or cause Sony to change or limit its business practices. For example, imposition of restrictive trade measures such as tariffs and export controls in the United States and elsewhere, as well as retaliatory actions against such measures, could result in increased customs duties applicable to Sony’s products or increased costs for procuring parts and components, and could limit or prohibit the sales of Sony’s products and services to certain of its current or potential customers, which may adversely affect Sony’s operating results and financial condition. In addition, changes in laws or regulations or the judicial interpretation thereof that Sony relies on or Sony is subject to in conducting its operations, including online operations, as well as Sony’s failure to anticipate such changes, may subject Sony to greater risk of liability, increase the costs of compliance, or limit Sony’s ability to engage in or expand certain operations or lead to discontinuance of certain operations. In addition, regulators in Europe and other countries are moving forward with legislation related to AI. As Sony develops and uses AI, there is a possibility that the cost of complying with these laws and regulations may increase.\n\nViolation of applicable laws or regulations by Sony, its officers or employees, third-party suppliers, business partners or agents may subject Sony to monetary fines, penalties, legal judgments, restrictions on business operations and/or reputational damage. Additionally, there is a growing global focus by regulators and external stakeholders on sustainability efforts, including those relating to climate change and respect for human rights in supply chains, as well as increasing regulatory obligations of public disclosures regarding these matters. For example, there is increased attention on labor practices, including work environments at electronic component and product manufacturers and original equipment manufacturers/original design manufacturers (OEM/ODM) operating in Asia. Increased regulation or public pressure in this area could cause Sony’s compliance costs to increase, particularly since Sony uses many parts, components and materials to manufacture its products and relies on suppliers to provide these parts, components and materials. A finding of non-compliance, or the perception that Sony has not responded appropriately to growing external stakeholder concern for such issues, whether or not Sony is legally required to do so, may adversely affect Sony’s reputation, operating results and financial condition.\n\nSony must manage its large volume of and widespread procurement from third-party suppliers and business partners to control inventory levels, availability, costs and quality of parts, components, materials, software and network services within volatile markets.\n\nSony’s products and services rely on a large volume of third-party suppliers and business partners for parts, components, materials, software and network services, including semiconductors, chipsets for PlayStation® game consoles and mobile products, liquid crystal display (“LCD”) panels and the Android OS that is used in mobile products, televisions and services. As a result, external suppliers’ and partners’ supply shortages, fluctuations in pricing, quality issues, discontinued support, changes in business terms or prioritization of customers outside the\n\n \n\n- 9 -\n\n##### Table of Contents\n\nelectronics area or of Sony’s competitors can adversely affect Sony’s operating results, brand and reputation. For example, since the latter half of the fiscal year ended March 31, 2026, a global surge in demand for memory semiconductors has led to price increases and supply shortages. Although Sony is striving to minimize the impact by securing procurement at reasonable prices through discussions with third-party suppliers and measures in product design and sales strategy, worsened or prolonged price increases or supply shortages could adversely affect the operating results of the G&NS, ET&S and I&SS segments. Reliance on third-party software and technologies may make it increasingly difficult for Sony to differentiate its products from competitors’ products. Also, shortages or delayed shipments of critical parts or components may result in a reduction or suspension of production at Sony’s or its business partners’ manufacturing sites, particularly where Sony is substantially reliant on one supplier, where there is limited production capacity for custom parts or components, or where there are initial manufacturing capacity constraints for products, parts or components that use new technologies.\n\nSony places orders for parts and components in line with production and inventory plans determined in advance based on its forecast of consumer demand, which is highly volatile and difficult to predict. Inaccurate forecasts of consumer demand or inadequate business planning can lead to a shortage or excess inventory, which can disrupt production plans and result in lost sales opportunities or inventory adjustments, respectively. Sony writes down the value of its inventory when the underlying parts, components or products have become obsolete, when inventory levels exceed the amount expected to be used, or when the value of the inventory is otherwise recorded at a value higher than net realizable value. Such lost sales opportunities, inventory adjustments, or shortages of parts and components have had and may have an adverse impact on Sony’s operating results and financial condition.\n\nSony’s sales, profitability and operations are sensitive to global and regional economic and political trends and conditions.\n\nSony’s sales and profitability are sensitive to economic trends in its major markets, such as inflation. In the fiscal year ended March 31, 2026, 10.6%, 32.6% and 22.7% of Sony’s sales were attributable to Japan, the U.S. and Europe, respectively. These markets may be subject to significant economic downturns, resulting in an adverse impact on Sony’s operating results and financial condition. An actual or expected deterioration of economic conditions in any of Sony’s major markets may result in a decline in consumers’ consumption and adverse impacts on the businesses of commercial customers, resulting in reduced demand for Sony’s products and services.\n\nIn addition, Sony’s operations are conducted in many countries and regions around the world, and these international operations, particularly in certain emerging markets, can create challenges. For example, in the ET&S, I&SS and G&NS segments, production and procurement of products, parts and components in China and other Asian countries and regions increase the time necessary to supply products to other markets worldwide, which can make it more difficult to meet changing customer demand in a timely manner. Further, in certain countries and regions, Sony may encounter difficulty in planning and managing operations due to unfavorable political or economic factors, such as armed conflicts, deterioration in foreign relations, changes in trade and tariff policies, non-compliance with expected business conduct and a lack of adequate infrastructure. If international or domestic political and military instability disrupts Sony’s business operations or those of its business partners, Sony’s operating results and financial condition may be adversely affected. Additionally, if such uncertain situations lead to price increases or supply shortages of materials and components, or prolonged lead times for shipping or increased transportation costs due to logistics disruptions, Sony’s production and transportation costs may increase, and Sony’s operating results and financial condition may be adversely affected. For example, as a response to the worsening of the situation in Ukraine and Russia that began in the fiscal year ended March 31, 2022, as of the date of this report, Sony has suspended its business in Russia. If this situation worsens further in the future, it could create global uncertainty, possibly leading to the worsening of Sony’s businesses in other regions or a deterioration in global economic conditions resulting in an adverse impact on Sony’s operating results and financial condition. In addition, worsened or prolonged price increases for crude oil and the impact on crude oil supply due to the rapid deterioration of the situation in the Middle East from the latter half of the fiscal year ended March 31, 2026 may adversely affect the operating results of the G&NS, ET&S and I&SS segments.\n\nForeign exchange rate fluctuations can affect Sony’s operating results and financial condition.\n\nSony’s operating results and financial condition are sensitive to foreign exchange rate fluctuations because many of Sony’s products are sold in countries other than the ones in which they were developed and/or manufactured. For example, within Sony’s electronics area, R&D and headquarters’ overhead costs are incurred mainly in yen, and manufacturing costs, including material costs, costs of procurement of parts and components,\n\n \n\n- 10 -\n\n##### Table of Contents\n\nand costs of outsourced manufacturing services, are incurred mainly in U.S. dollars and yen. Sales are recorded in yen, U.S. dollars, euros, Chinese renminbi, and local currencies of other areas, including emerging markets. Consequently, foreign exchange rate fluctuations have had and may have an adverse impact on Sony’s operating results, especially when the yen weakens significantly against the U.S. dollar, when the yen strengthens significantly against the euro, or when the U.S. dollar strengthens against emerging market currencies. Sony’s operating results may also be adversely impacted by foreign exchange rate fluctuations since Sony’s consolidated statements of income are prepared by translating the local currency denominated operating results of its subsidiaries around the world into yen. Furthermore, as Sony’s businesses have expanded in China and other areas, including emerging markets, the impact of fluctuations of foreign currency exchange rates in these areas against the U.S. dollar and yen has increased. Mid- to long-term changes in exchange rate levels may interfere with Sony’s global allocation of resources and hinder Sony’s ability to engage in R&D, procurement, production, logistics, and sales activities while maintaining profitability.\n\nAlthough Sony seeks to reduce its exposure to foreign exchange risk by hedging a portion of its net short-term foreign currency exposure shortly before the transactions occur, such hedging activity may not offset, or may offset only a portion of, the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place.\n\nMoreover, since Sony’s consolidated statements of financial position are prepared by translating the local currency denominated assets and liabilities of its subsidiaries around the world into yen, Sony’s equity capital may be adversely impacted when the yen strengthens significantly against the U.S. dollar, the euro and/or other foreign currencies.\n\nRatings downgrades or significant volatility and disruption in the global financial markets may adversely affect the availability and cost of Sony’s funding.\n\nSony’s credit ratings may be adversely impacted by unfavorable operating results and a decline in its financial condition. Any credit rating downgrades may, in turn, result in an increase in Sony’s cost of funding and may have an adverse impact on Sony’s ability to access commercial paper (“CP”) or mid- to long-term debt markets on acceptable terms.\n\nAdditionally, global financial markets may experience significant levels of volatility and disruption, generally putting downward pressure on financial and other asset prices and impacting credit availability. Historically, Sony’s primary sources of funds have been cash flows from operations, the issuance of CP and mid- to long-term debt, as well as borrowings from banks and other institutional lenders. There can be no assurance that such sources will continue to be available on acceptable terms or be sufficient to meet Sony’s needs.\n\nAs a result, Sony may seek other sources of financing to fund operations, such as the draw-down of funds from contractually committed lines of credit from financial institutions or the sale of assets, in order to repay CP and mid- to long-term debt as they become due, and to meet other operational and liquidity needs. However, such funding sources may also not be available at acceptable terms or be sufficient to meet Sony’s requirements. As a result, Sony’s operating results, financial condition and liquidity may be adversely affected.\n\nSony’s success depends on the ability to recruit, retain and maintain productive relations with diverse people who embrace a challenging spirit and possess the ambition to grow.\n\nIn order to continue to create content, develop services, design, manufacture, market, and sell products, in increasingly competitive markets, personnel with a high level of expertise and broad experience are essential. Accordingly, Sony must attract, retain and maintain productive relations with both internal and external key personnel, including management professionals, creative talent who drive new value creation, and technology professionals with expertise in AI and other technologies. However, such key personnel are in high demand. In addition, business divestitures, restructuring or other transformation initiatives may lead to an unintended loss of experienced employees or know-how. Actual or threatened work slowdowns or stoppages related to unionized workers, particularly in the entertainment field, could lead to delayed releases or cost increases. Furthermore, in Japan, with a declining workforce due to the falling birthrate and aging population, intensifying competition among companies for specialized talent, and rising labor costs, it may become difficult to secure the necessary talent if Sony’s HR system is inadequate in its design and operations. If these incidents occur or if Sony is unable to attract, retain and maintain productive relations with employees with high levels of expertise and broad experience as well as key management professionals, Sony’s operating results and financial condition may be adversely affected.\n\n \n\n- 11 -\n\n##### Table of Contents\n\nSony’s intellectual property might be subject to unauthorized use or theft and it might encounter restrictions in its use of intellectual property owned by third parties.\n\nSony’s intellectual property might be subject to unauthorized use or theft. For example, digital technology, the availability of digital media, global internet penetration and the proliferation of AI technology, including generative AI, impact Sony’s ability to protect its copyrighted content from unauthorized duplication, digital theft and counterfeiting, putting pressure on legitimate sales of products and services. Sony has incurred and will continue to incur expenses to help protect its intellectual property rights; however, Sony’s various initiatives to prevent such unauthorized use or theft of intellectual property might not achieve their intended result, which could adversely affect Sony’s competitive position and the value of its investment in R&D. Additionally, Sony’s intellectual property rights may be challenged or invalidated, or such intellectual property rights may not be sufficient to provide Sony with competitive advantages.\n\nMany of Sony’s products and services are designed, developed or manufactured under the license of patents and other intellectual property rights owned by third parties. Based upon past experience and industry practice, Sony believes it will be able to obtain or renew licenses relating to various intellectual property rights that its business needs in the future; however, such licenses may not be available at all or on acceptable terms, and as a consequence Sony may need to redesign or discontinue its marketing, selling or distribution of such products and services.\n\nClaims have been and may be asserted against Sony that its products or services, including third-party parts, components, software and network services used in Sony’s products or services, infringe the intellectual property rights of other parties. Such claims may be asserted by competitors or by other rights holders, particularly as products and services evolve to include new technologies and enhanced functionality. Such claims might require Sony to enter into settlement or license agreements, pay significant damage awards, face an injunction or refrain from marketing, selling or distributing certain of its products and services.\n\nThe failure to prevent unauthorized use or theft of Sony’s intellectual property rights by third parties, the failure to enter into licenses for necessary third-party intellectual property rights, the invalidation of Sony’s intellectual property rights or the settlement of an infringement claim against Sony by others may adversely impact Sony’s reputation, operating results and financial condition.\n\nChanges in consumer behavior resulting from new technologies and distribution platforms, as well as increasing concentration of digital music distributors and creation of content by distributors themselves, may adversely affect operating results in the Music and Pictures segments.\n\nTechnology, particularly digital technology, used in the Music and Pictures segments continues to evolve, rapidly leading to alternative methods and platforms for the discovery and consumption of digital content. These technological advancements have changed consumer behavior and empowered consumers to seek more control over when, where and how they consume digital content.\n\nThe impact of the prevalence of digital streaming networks and other new media on traditional television and in-theater motion picture viewership could adversely affect the operating results of the Pictures segment.\n\nFurthermore, as more music and video content is consumed over digital streaming networks, digital music distributors are becoming increasingly concentrated, which may decrease the competitiveness of Sony’s music content and adversely affect its pricing. In addition, digital music and video distributors may increase the amount of content they create for their own services by leveraging technologies such as generative AI, which may reduce the demand for content created or produced by Sony. If Sony is unable to adequately respond to these changes or fails to effectively adapt to new market changes, Sony’s operating results and financial condition may be adversely impacted.\n\nSony’s facilities and operations are subject to damage and disruption as a result of catastrophic disasters, outages, pandemic diseases, or similar events that could lead to supply chain, manufacturing and other business disruptions and have an adverse impact on Sony’s operating results.\n\nSony’s headquarters and many of Sony’s state-of-the-art manufacturing sites, including those for image sensors, are located in Japan, where the risk of earthquakes is relatively high. If large-scale earthquakes or other natural disasters occur in Japan, buildings, facilities and inventories could be damaged, and Sony’s business activities, operating results and financial condition could be negatively affected by interruptions in production activities and the recording of recovery costs. In addition, as climate change contributes to rising temperatures, the increased severity and frequency of extreme weather conditions could adversely affect the risks and uncertainties noted above.\n\n \n\n- 12 -\n\n##### Table of Contents\n\nIn addition, offices and facilities used by Sony, its suppliers, external service providers and other business partners for network, information and telecommunications system infrastructure, R&D, procurement of materials, manufacturing, motion picture and television production, logistics, sales, and online and other services are located throughout the world and are subject to possible destruction, temporary inoperability, or other disruptions as a result of unforeseen catastrophes such as natural disasters, pandemic diseases, terrorist acts, armed conflicts, large-scale power outages and large-scale fires. If any of these facilities or offices were to suffer significant damages as a result of any such catastrophe, it may cause suspension of Sony’s business activities and/or delays in design, development, production, shipments or revenue recognition, and may require substantial expenses for the repair or replacement of such facilities or offices. In addition, price increases for raw materials, parts and components, and lower demand from commercial customers may have an adverse impact on Sony’s operating results and financial condition.\n\nSony’s brand image, reputation and business may be harmed and Sony may be subject to legal claims if there is a breach or other compromise of Sony’s information security or that of its third-party service providers or business partners.\n\nSony, its third-party service providers, suppliers and other business partners make extensive use of information technology including AI to support business operations, and to provide network and online services to customers. These operations and services, as well as Sony’s business information, may be compromised by malicious actors, including state-sponsored organizations, criminals and criminal organizations, or intentionally or inadvertently compromised by employees of third-party service providers, suppliers, other business partners or Sony. Such organizations or individuals may use a variety and combination of techniques, such as installing malicious software, exploiting vulnerabilities in information technology, using social engineering to mislead officers, employees or business partners into disclosing credentials and sensitive information, coordinating distributed denial-of-service attacks to render services unavailable, and using AI systems to discover vulnerabilities and to execute more automated, targeted, and coordinated cyberattacks. The increasing adoption of AI by Sony, its business partners, and other third-parties may introduce new vulnerabilities and attack opportunities for malicious actors. If suppliers and other business partners are subjected to cyberattacks, they may become unable to supply parts, materials, and services to Sony, which could consequently impact Sony’s businesses. Sony has previously been the subject of cyberattacks. For further details, refer to “Item 16K. Cybersecurity.”\n\nAs cyberattacks become increasingly sophisticated and automated, and as tools and resources become more readily available, there can be no guarantee that Sony’s actions, security measures and controls designed to prevent, detect or respond to outside intrusion, limit access to data, prevent loss, destruction, alteration, or exfiltration of business information, or limit the negative impact from such attacks can provide absolute security. In addition, Sony’s officers and employees work both in the office and remotely. Although Sony takes measures to ensure that appropriate information security protections are in place for the remote workforce, there can be no guarantee that Sony’s actions, security measures and controls designed to prevent, detect or respond to outside intrusion, limit access to data, prevent loss, destruction, alteration, or exfiltration of business information, or limit the negative impact from such attacks, can provide absolute security. As a result, Sony’s business information, including personally identifiable information, may be lost, destroyed, disclosed, misappropriated, altered, or accessed without consent, and Sony’s information technology systems or operations, or those of its service providers or other business partners, may be disrupted. Malicious adversaries may also use unauthorized access to Sony’s networks as a platform to compromise Sony’s third-party business partners without Sony’s knowledge.\n\nAn information security incident could result in significant remediation costs for Sony. In addition, a disruption to Sony’s network and online services, information technology, or other compromise of its information security may have serious consequences to its business and operations, including lost revenues, damage to relationships with business partners and other third parties, disclosure, alteration, destruction or use of proprietary information and the failure to retain or attract customers. Moreover, such disruptions and breaches may result in a diversion of management’s attention and resources. Further, it may result in adverse media coverage, which may harm Sony’s brand image and reputation. Sony may also be subject to legal claims or legal proceedings, including regulatory investigations and actions. Sony’s cyber insurance may not cover all expenses and losses and, accordingly, such breaches or other compromises of Sony’s information security or that of its third-party service providers or business partners may have an adverse impact on Sony’s operating results and financial condition.\n\n \n\n- 13 -\n\n##### Table of Contents\n\nSony’s reputation, operating results and financial condition may be adversely affected as a result of adverse outcomes of litigation and regulatory actions.\n\nSony faces the risk of litigation and regulatory actions in different countries in connection with its operations. Legal proceedings, including regulatory actions, may seek to recover very large indeterminate amounts or to limit Sony’s operations, and the possibility that they may arise and their magnitude may remain unknown for substantial periods of time. For example, legal proceedings, including regulatory actions, may result from antitrust scrutiny of market practices for alleged anti-competitive conduct. A substantial legal liability or adverse regulatory outcome and the substantial cost to defend the litigation or regulatory actions may have an adverse effect on Sony’s reputation, operating results and financial condition.\n\nSony is subject to financial and reputational risks due to product quality, product security, and liability issues.\n\nSony’s products and services, such as consumer electronics products, non-consumer products, parts and components, semiconductors, software and network services are becoming increasingly sophisticated and complicated as rapid advancements in technologies occur and as demand increases for mobile products and online services. Also, many of Sony’s products are connected to the internet, and regularly communicate with services provided by Sony or third parties.\n\nSony’s efforts to adapt to rapid advancements in technologies and increased demand for mobile products and online services, while also maintaining product quality and product security, may not be successful and may increase exposure to product liability. As a result, Sony may incur both reputational damages and expenses in connection with, for example, product recalls and after-sales services. In addition, Sony may not be successful in introducing after-sales upgrades, enhancements or new features to existing products and services, or in enabling existing products and services to continue to conveniently and effectively integrate with other technologies and online services. Moreover, cyberattacks targeting internet-connected products have increased significantly. For example, customer information and Sony or third-party technical information may be misappropriated, the functionality of Sony’s products and services may be impaired, or Sony’s products may be used in denial-of-service attacks. There can be no guarantee that Sony’s security measures will prevent products from being compromised.\n\nAs a result, the quality of Sony’s existing products and services may not remain satisfactory to consumers and become less marketable, less competitive or obsolete, and Sony’s reputation, operating results and financial condition may be adversely affected. Moreover, allegations of security vulnerability, health and safety issues related to Sony’s products and services, or lawsuits related to product quality, health issues arising from products or product safety, regardless of merit, may adversely impact Sony’s operating results and financial condition, either directly or as a result of the impact on Sony’s brand image and reputation as a producer of high-quality products and services. These issues are relevant to Sony’s products sold directly to customers, whether manufactured by Sony or a third party, and also to products of other companies that are equipped with Sony’s components, such as semiconductors.\n\nSony’s financial results and condition may be adversely affected by its employee benefit obligations.\n\nSony recognizes a net defined benefit liability or asset for its defined benefit pension plans based on (i) the present value of defined benefit obligations (“DBO”) under each pension plan less (ii) the fair value of plan assets, in accordance with the accounting guidance for defined benefit plans. If the fair value of plan assets is in excess of the present value of DBO, the amount of any asset to be recognized is limited to the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan. Any decrease in the fair value of plan assets or increases in the present value of DBO due to a lower discount rate and changes in certain other actuarial assumptions may increase or decrease the net defined benefit liability or asset and may have an adverse effect on Sony’s financial results and condition.\n\nAlso, Sony’s financial results and condition could be adversely affected by future pension funding requirements pursuant to the Japanese Defined Benefit Corporate Pension Plan Act (the “Pension Plan Act”). Under the Pension Plan Act, Sony is required to conduct a periodic actuarial revaluation and to ascertain whether certain financial criteria have been met after the annual accounting closing. In the event that the fair value of plan assets falls below the actuarial reserve required by law and the shortfall may not be recovered within a certain moratorium period permitted by laws and/or special legislative decree, Sony may be required to make an additional contribution to its plans, which may reduce cash flows. Similarly, if Sony is required to make an additional contribution to a foreign plan to meet any funding requirements in accordance with local laws and regulations in each country, Sony’s cash flows might be adversely affected. If Sony is required to increase cash\n\n \n\n- 14 -\n\n##### Table of Contents\n\ncontributions to its pension plans when actuarial assumptions, such as an expected long-term rate of return of the plan assets, are updated for purposes of determining statutory contributions, it may have an adverse impact on Sony’s cash flows.\n\nFurther losses in tax jurisdictions where Sony has assessed deferred tax assets as unrecognized, the inability of Sony to fully utilize its deferred tax assets, limitations on the use of its deferred tax assets under local law, exposure to additional tax liabilities or changes in Sony’s tax rates could adversely affect Sony’s operating results and financial condition.\n\nSony is subject to income taxes in Japan and numerous other jurisdictions, and in the ordinary course of its business there are many situations where the ultimate tax determination can be uncertain, because of the transfer pricing for its intercompany transactions, and because Sony is subject to continuous review by tax authorities of numerous jurisdictions. The calculation of Sony’s tax provision and the carrying value of tax assets, including net operating loss carryforwards and tax credit carryforwards, require significant judgment and the use of estimates, including estimates of future taxable income. At the end of each reporting period, Sony reassesses unrecognized deferred tax assets and determines whether these assets should be recognized. As of March 31, 2026, the unrecognized deferred tax assets amounted to 277.5 billion yen. An increase in unrecognized deferred tax assets may have an adverse impact on Sony’s operating results and financial condition.\n\nDeferred tax assets are evaluated on a jurisdiction-by-jurisdiction basis. As of March 31, 2026, Sony had unrecognized deferred tax assets, principally at some subsidiaries in Japan and overseas. Additionally, deferred tax assets could expire unused or otherwise not be realizable for a variety of reasons including the lack of sufficient taxable income in the appropriate jurisdiction. Sony’s operating results and financial condition could be adversely affected when the deferred tax assets expire unused.\n\nIn some jurisdictions, the use of net operating loss carryforwards or tax credits to reduce taxable income in a subsequent period is limited to a fixed percentage of taxable income or may only be used to offset taxes on income from certain sources. Thus, it is possible that even with significant net operating loss carryforwards or tax credits, Sony could record and pay taxes in a jurisdiction where it has taxable income.\n\nSony’s future effective tax rates may also be unfavorably affected by changes in both the statutory rates and the mix of earnings in countries with differing statutory rates or by other factors such as changes in tax laws and regulations or their interpretation, including minimum tax requirements and limitations or restrictions on various tax deductions and credits, including deductions for royalties and interest.\n\nIn addition to the above, Sony’s businesses may be subject to new forms of gross basis taxation and transactional taxes, including digital service taxes. Although such taxes may not directly impact Sony’s effective tax rate, they may nevertheless have an adverse impact on its operating results and financial condition.\n\nSony could incur asset impairment losses for goodwill, content assets and other intangible assets or other non-current assets.\n\nSony has a significant amount of goodwill, content assets, other intangible assets and other non-current assets, including production facilities and equipment. A decline in financial performance, market capitalization, reduced estimates of future cash flows, changes in global economic conditions or changes in estimates and assumptions used in the impairment analysis, which in many cases requires significant judgment, could result in impairment losses against these assets. Events or changes in circumstances which would indicate impairment include unfavorable variances from or adjustments to established business plans, significant changes in forecasted results or volatility inherent to external markets and industries. The increased levels of global competition and the faster pace of technological change to which Sony is exposed can result in greater volatility of these estimates, assumptions and judgments, and increase the likelihood of impairment losses. Any such loss may adversely affect Sony’s operating results and financial condition. For example, in the G&NS segment in the fiscal year ended March 31, 2026, considering the business environment, as a result of reviewing the future projections for the business operated by Bungie, Inc. (“Bungie”), Sony determined that sufficient future cash flows were not expected to be generated to recover the carrying amount of the assets, and recognized impairment losses of 120.1 billion yen against Bungie’s intangible and other assets. Refer to Note 12 of the consolidated financial statements for details.\n\nHolders of American Depositary Shares have fewer rights than shareholders and may not be able to enforce judgments based on U.S. securities laws.\n\nThe rights of shareholders under Japanese law to take actions, including voting their shares, receiving dividends and distributions, bringing derivative actions, examining Sony’s accounting books and records, and\n\n \n\n- 15 -\n\n##### Table of Contents\n\nexercising appraisal rights, are available only to shareholders of record. Because the depositary, through its custodian agents, is the record holder of the shares underlying the American Depositary Shares (“ADSs”), only the depositary can exercise those rights in connection with the deposited shares. The depositary will make efforts to vote the shares underlying ADSs in accordance with the instructions of ADS holders and will pay the dividends and distributions collected from Sony. However, ADS holders will not be able to bring a derivative action, examine Sony’s accounting books and records, or exercise appraisal rights through the depositary.\n\nSony Group Corporation is incorporated in Japan with limited liability. A majority of Sony’s directors and corporate executive officers are non-U.S. residents, and a substantial portion of the assets of Sony Group Corporation and the assets of Sony’s directors and corporate executive officers are located outside the U.S. As a result, it may be more difficult for investors to enforce against Sony Group Corporation or such persons, judgments obtained in U.S. courts predicated upon civil liability provisions of the federal and state securities laws of the U.S. or similar judgments obtained in other courts outside Japan. There is doubt as to the enforceability in Japanese courts, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated solely upon the federal and state securities laws of the U.S.\n\nPrior notification under the Foreign Exchange and Foreign Trade Act of Japan may be required in the case of an acquisition by a foreign investor of a certain portion of our shares.\n\nBecause Sony is engaged in certain businesses designated by the Foreign Exchange and Foreign Trade Act of Japan (the “FEFTA”) and its related cabinet orders and ministerial ordinances (collectively, the “Foreign Exchange Regulations”), if a foreign investor intends to consummate an acquisition of shares of common stock of Sony Group Corporation and that acquisition constitutes an “inward direct investment” under the Foreign Exchange Regulations, the foreign investor, subject to certain exemptions, must file a prior notification of such inward direct investment with the Minister of Finance and any other competent Ministers. Under the Foreign Exchange Regulations, an “inward direct investment” includes an acquisition by a foreign investor of shares of common stock of Sony Group Corporation, the consummation of which results in such foreign investor, in combination with any existing shareholding, directly or indirectly holding 1% or more of the total number of issued shares of common stock or the total number of voting rights of Sony Group Corporation, unless certain exemptions apply.\n\nIf such prior notification is filed, the proposed acquisition may not be consummated until the prescribed screening period expires. In some cases, the Ministers may extend the screening period, and may recommend or order any modification or the abandonment of such acquisition. In addition, if certain conditions – including those prescribed in light of the national security of Japan – under the Foreign Exchange Regulations are met, the Ministers may order the foreign investor to divest the shares acquired or take other measures. Consequently, any proposed acquisition by a foreign investor of shares of common stock of Sony Group Corporation that constitutes an “inward direct investment” may not be consummated in an expected time frame in accordance with an intended plan, or at all.\n\nAdditionally, if a foreign investor directly or indirectly holds 1% or more of the total voting rights of Sony Group Corporation and, at a general meeting of shareholders, consents to certain proposals having a material influence on the management of Sony Group Corporation such as the (i) election of such foreign investor or any of its related persons (as defined in the Foreign Exchange Regulations) as a director of Sony Group Corporation or (ii) transfer or discontinuation of its business, such consent, subject to certain exemptions, also constitutes an “inward direct investment” requiring prior notification. If such prior notification is filed, such consent cannot be given until the prescribed screening period expires. As a result, such foreign investors may have difficulties giving such consent in accordance with an intended plan, or at all.\n\nThe discussion above is not exhaustive of all possible foreign exchange controls considerations that may apply to a particular investor, and potential investors are advised to satisfy themselves as to the overall foreign exchange controls consequences of the acquisition, ownership and disposition of shares of common stock or voting rights of Sony Group Corporation by consulting their own advisors. For a more detailed discussion on the requirements and procedures regarding the prior notifications under the Foreign Exchange Regulations, refer to “Exchange Controls” in “Item 10. Additional Information.”\n\n \n\n- 16 -\n\n##### Table of Contents"}