Sega says its full-year net loss has fallen 66% after dumping Dreamcast and concentrating on software production.
The full-year loss narrowed to £96m (€152m) from £279m (€443m).
Sega says it expects full-year profits to March 2003 to hit more than €150m.
Sega ditched its unprofitable Dreamcast console in March last year, and focused on making games software for Sony, Nintendo and Microsoft.
The creator of Sonic the Hedgehog and Ecco the Dolphin also restructured its business by selling subsidiaries that weren't related to games.