* Sees FY PS5 sales of 21 million units

* Sony sold 8.2 mln PS5 units in Q3

* Sees gradual decline in unit sales from next fiscal year

* Gaming business profit fell 26%

* Financial business listing planned for Oct. 2025

TOKYO, Feb 14 (Reuters) - Japan's Sony slashed the full-year sales forecast for its PlayStation 5 console on Wednesday and said it plans to list its financial business next year as it focuses on entertainment and image sensors.

Sony cut its PS5 sales forecast for the year ending March to 21 million units, from 25 million units previously, after weaker-than-expected sales over the year-end shopping season.

The company said it expects a gradual decline in unit sales from the next financial year and that it does not plan to release any major franchise titles in the coming fiscal year.

Sony, which in 2023 said it was examining a partial spin-off of its financial business, said it plans to list Sony Financial Group in October 2025 and retain a stake of just under 20%.

The company's operating profit in the October-December quarter jumped 10% to 463.3 billion yen ($3.08 billion), beating an average estimate of 428 billion yen from 11 analysts polled by LSEG, as strong performance by the financial, movies and music businesses offset weakness in games.

Known as the inventor of the Walkman, Sony has transformed from an electronics manufacturer into an entertainment and tech behemoth spanning movies, music, games and chips.

Sony sold 8.2 million PlayStation 5 units in the third quarter, which spans the year-end shopping period, compared with 7.1 million units a year earlier.

Operating profit at the games business fell by around a quarter, hit by higher losses from hardware due to promotions and lower sales of first-party titles.

"Sony tried hard with promotions, bundles and discount but the sales target was too ambitious from the get-go," said Serkan Toto, founder of consultancy Kantan Games.

"In the end they will probably land closer to 22-23 million units," Toto added.

Monthly active users on the PlayStation network, a measure of engagement with the platform, reached 123 million units at the end of the quarter from 107 million three months earlier.

Sony said it has sold 10 million copies of "Marvel's Spider-Man 2", which launched on Oct. 20, with the company also rolling out a slim version of the console from November to boost sales.

Nintendo last week hiked its full-year Switch forecast to 15.5 million units, from 15 million units previously, as the Kyoto-based company extends the lifecycle of the aging console.

Xbox maker Microsoft is due to share updates on its games business on Thursday amid speculation the company will bring its titles to other platforms.

"If big third-party titles grow that will be a positive factor and we hope to utilise that momentum," Sony President Hiroki Totoki told a news briefing.

Sony, a leading maker of image sensors for smartphones, said profit at its chips division rose 18% on higher sales.

TSMC said last week it will build a second fab in Japan in partnership with companies including Sony in a vote of confidence by the leading contract chipmaker in the country.

Last month Sony scrapped plans for a $10 billion merger of its Indian business with Zee Entertainment which would have created a TV juggernaut.

The Indian market has great growth potential on a long-term basis, Totoki said.

"If we can find another opportunity that would replace this type of plan we will actively look at that and we also need to reformulate our organic growth strategy," Totoki said.

Sony's shares closed down 0.5% ahead of earnings. They have gained 9% this year.

($1 = 150.5400 yen)

(Reporting by Sam Nussey; Editing by Himani Sarkar and Miral Fahmy)