Spending less money and shortening development cycles is the exact thing Square needs to do and has needed to do for a very long time now.
Absolutely agreed. They need to play it safe for a time until they're in a more secure financial position. I may not enjoy iOS games, but I can understand their decision.
That said, game development is not SE's only money-maker, they publish western games in Japan, as well as manga and anime, and create figurines, collectable card games and VNs (in the "game category, but I can't think of a single VN from SE that has a western release, so...) as well. They also have merchandising, like soundtrack CDs and concerts. SE as a brand is much, much larger than their games.
FFXI is also still a solid money-maker for them, even after ~12 years. That's impressive in itself. I think if they can get ARR out, and it's decent, they'll have more long-term financial security. After they break even from XIV's disaster, that is.
Edit: I have no idea how DQX did though.
It was the tenth best selling game of 2012 in Japan, selling over 609,783 copies. In November 2012, Dragon Quest X exceeded 400,000 subscribers. In its first week on sale, the Wii U version of the game sold 33,302 copies, coming in as the number 6 best selling game of that period.
Which is probably...not too good, considering FFXI was at 500,000 subscibers 8 years after its release (I think it's at 200,000 or so now?)