Sony on Tuesday raised its annual profit outlook on the back of strong sales of image sensors for smartphones and financial services, after the company reported a smaller-than-expected decline in third-quarter profit.

The company's operating profit came in at 300.1 billion yen ($2.76 billion) for October-December, from 376.99 billion yen in the same period a year earlier.

Excluding the impact of one-off items including last year’s gain linked to the acquisition of music publisher EMI, profit rose 6%.

For the quarter ended December 31, 2019, Sony's profit at its sensing division rose to 75.2 billion yen from 46.5 billion yen in the same period a year earlier.

Meanwhile, Sony’s gaming business saw profit fall to 53.5 billion yen from 73.1 billion yen as sales of its six-year-old PlayStation 4 console continued to decline.

The firm has said the PlayStation 5, scheduled for release this year, will feature better graphics, advanced haptic controllers and other improvements.

The Japanese entertainment and electronics firm also raised its annual profit forecast to 880 billion yen from 840 billion yen. Sony expects consolidated sales and operating revenue (sales) for the fiscal year ending March 31, 2020 to be higher than the company's October forecast due to higher-than-expected sales primarily in the Financial Services and Imaging & Sensing Solutions (I&SS) segments, partially offset by lower-than-expected sales in the Game & Network Services (G&NS) and Electronics Products & Solutions (EP&S) segments.

Sales of Sony's Game & Network Services (G&NS) segment are expected to be lower than the October forecast primarily due to lower-than-expected software sales of non-first-party titles.

Electronics Products & Solutions (EP&S) sales are expected to be lower than the October forecast due to lower-than-expected sales of televisions, digital cameras and broadcast- and professional-use products, reflecting a downturn in the market.

Sales of Sony's Imaging & Sensing Solutions (I&SS) segment are expected to be higher than the October forecast due to higher-than-expected sales of image sensors for mobile products, resulting from an improvement in product mix and higher-than-expected unit sales.

Sony's Financial Services revenue is expected to be higher than the October forecast primarily due to an improvement in investment performance in the separate accounts at Sony Life Insurance Co. Ltd. (“Sony Life”). Operating income is expected to be lower than the October forecast primarily due to an overall deterioration in the provision of policy reserves for minimum guarantees for variable life insurance, resulting from market fluctuations and other factors, and net gains and losses on derivative transactions to hedge market risks for products at Sony Life.

Sony’s sensor business continued to thrive as smartphone makers compete to adopt larger image sensors and multiple lenses on embedded cameras for improved picture quality.

The Japanese firm controls about a half of the world’s image sensor market, supplying most global smartphone makers including Apple and Huawei Technologies Co Ltd.

At the press conference in Tokyo, CFO Totoki got several questions about the coronavirus and how it could affect the business. Many customers incorporate Sony’s image sensors into smartphones and camera modules assembled in China so disruption is a risk, while production stoppages could also affect the supply of PlayStation 4 consoles, he said. Whether Sony will meet the new full-year targets depends on the severity of the virus outbreak, Totoki said.

“We can’t rule out the possibility that the impact will be significant enough to force us to roll back” the higher earnings targets announced today, Totoki said.