PKSHA Technology (3993) FY2026 Q2 Earnings Report

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Executive Summary

The first half resulted in higher revenue but lower profit, with revenue expanding sharply while profit declined, making the monetization of growth a key challenge. Revenue was ¥187.1B (¥100.7B in the previous year, +85.8%), Operating Income was ¥33.5B (¥35.2B in the previous year, △4.8%), Profit Before Tax was ¥30.7B (△6.0%), and Net Income (consolidated net income) was ¥19.4B (△8.4%), of which net income attributable to owners of the parent was ¥18.7B (△11.2%). The primary driver of revenue growth was the substantial expansion of the AIPoweredWorker segment, while lower gross margins and higher SG&A expenses weighed on profit.

Factors Affecting Performance

【Revenue】Revenue grew strongly to ¥187.1B, up +85.8% year on year. By segment, AIPoweredWorker expanded sharply to ¥66.7B (+634.7%), driving overall growth, followed by AISaaS at ¥55.3B (+32.9%) and AIResearchSolution at ¥65.1B (+30.1%). All three segments recorded revenue growth, with the growth driver concentrated in the new expansion of AIPoweredWorker.

【Profit and Loss】Cost of revenue was ¥95.1B, up +106.9% year on year, exceeding the revenue growth rate, while the gross margin declined to 49.2% from 54.4% in the previous year. SG&A expenses also increased to ¥58.0B (+74.2%), and the Operating Income margin contracted substantially to 17.9% from 34.9% in the previous year. The reversal of other income of ¥14.1B recorded in the previous year was also a factor behind the declines in Profit Before Tax and Net Income. Accordingly, the first half resulted in higher revenue but lower profit.

Segment Analysis

AIResearchSolution recorded revenue of ¥65.1B (+30.1%), Operating Income of ¥18.9B (+59.7%), and a profit margin of 29.0%, showing the highest profit growth rate among the three segments. AISaaS recorded revenue of ¥55.3B (+32.9%), Operating Income of ¥18.6B (+21.7%), and a profit margin of 33.5%, maintaining the highest profitability. AIPoweredWorker expanded sharply to revenue of ¥66.7B (+634.7%), but its profit margin remained at 8.0%, indicating slower monetization than the other two segments. The decline in the company-wide profit margin is considered primarily attributable to the expanding composition of the low-profitability AIPoweredWorker segment.

Key Financial Indicators

【Profitability】The Operating Income margin declined substantially to 17.9% from 34.9% in the previous year, but remains at a certain level. The Net Income margin was 10.0%, and annualized ROE was 10.7%.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥28.6B, approximately 1.5 times net income attributable to owners of the parent of ¥18.7B, indicating solid cash backing for earnings. Meanwhile, the increase in trade receivables resulted in a ¥7.2B cash outflow in OCF, making collection management against rapidly expanding revenue an area requiring attention.【Investment Efficiency】Capital expenditures were modest at ¥1.0B, and Free Cash Flow was secured at a surplus of ¥14.5B.【Financial Soundness】The Equity Ratio was high at 66.4%, while interest-bearing debt remained at 17.3% of net assets. Short-term borrowings declined 80.6% year on year to ¥14.6B, while long-term borrowings increased 129.8% to ¥48.3B, indicating progress toward lengthening the maturity of borrowings.

Cash Flow Analysis

OCF was ¥28.6B, an increase of +16.5% compared with the same period of the previous year, and remained above net income attributable to owners of the parent of ¥18.7B. From OCF before taxes and other adjustments of ¥36.3B, payments of ¥7.6B for corporate income taxes, ¥0.8B for interest, and ¥4.5B for lease payments were deducted, while the increase in trade receivables was a ¥7.2B cash outflow factor, suggesting an extension of collection periods accompanying the rapid increase in revenue. Investing Cash Flow was an outflow of ¥14.0B, including the acquisition of intangible assets and subsidiaries; as this remained within the range of OCF, Free Cash Flow was a surplus of ¥14.5B. Financing Cash Flow was an outflow of ¥49.8B, including the reduction of short-term borrowings and the acquisition of treasury shares of ¥1.4B. Cash and cash equivalents were ¥158.3B, a decline of ¥35.3B from the end of the previous fiscal year, but financial flexibility remains high.

Earnings Quality

Profit for the first half was well supported by OCF, with OCF approximately 1.5 times net income attributable to owners of the parent and the accrual ratio negative. Meanwhile, other income recorded in the same period of the previous year amounted to ¥14.1B, whereas it was only ¥0.2B in the current period; this reversal contributed to the year-on-year declines in Profit Before Tax and Net Income. The effective tax rate was relatively high at 37.0%, constraining the conversion of Profit Before Tax into Net Income. Financial expenses were ¥2.0B and financial income was ¥0.4B, indicating that interest expense was limited relative to Operating Income. Overall, current-period profit was high quality in terms of cash generation; however, it should be noted that the reversal of the previous year’s temporary non-operating income distorts the comparison.

Earnings Forecasts and Guidance

The Full-Year forecast is revenue of ¥350.0B and forecast EPS of ¥91.76, with no forecast revisions during the current quarter. First-half revenue of ¥187.1B represents progress of 53.5%, slightly exceeding the standard first-half progress rate of 50%. Progress toward net income attributable to owners of the parent of ¥18.7B was 65.4%, representing a comfortable level at the first-half stage against the Full-Year forecast of ¥28.5B (+7.3% year on year). However, first-half Operating Income was below the previous year, and the key focus will be whether revenue growth can be converted into profit growth during the second half.

Shareholder Returns

The dividend per share was ¥0 in both Q1 and Q2, resulting in a Payout Ratio of 0%. The Full-Year forecast dividend is also ¥0, and the company plans to continue paying no dividends. Meanwhile, the company repurchased ¥1.4B of treasury shares during the first half, resulting in a Total Return Ratio (share repurchases only) of approximately 7.7% relative to net income attributable to owners of the parent of ¥18.7B. Free Cash Flow of ¥14.5B remained above ¥10B even after the treasury share repurchase, indicating that current shareholder returns are covered by internally generated cash flow.

Risk Factors

1. Profitability deterioration risk: While revenue expanded sharply by +85.8% year on year, the Operating Income margin declined by approximately 1,700bp to 17.9% from 34.9% in the previous year. If the composition of the low-profitability AIPoweredWorker segment continues to expand, it could affect the pace of recovery in the company-wide profit margin.

2. Liquidity risk arising from an increase in trade receivables: Trade receivables increased +23.6% from the end of the previous fiscal year to ¥52.7B, becoming a ¥7.2B cash outflow factor in OCF. Collection management against rapidly expanding revenue will be a focus going forward.

3. Goodwill and intangible asset impairment risk: Goodwill was ¥135.1B, accounting for 37.2% of net assets, while goodwill and intangible fixed assets combined reached ¥203.3B. If the earnings plans for acquired businesses fall short, impairment risk will increase.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

The Operating Income margin is slightly above the industry median, while the Net Income margin is below the median, indicating relatively heavier non-operating and tax burdens.

Growth and Capital Efficiency

The revenue growth rate is substantially above the industry median, representing an outstanding pace of growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. Revenue demonstrated outstanding growth of +85.8% year on year, including relative to peers in the industry, while the Operating Income margin declined by approximately 1,700bp from the previous year. Monetizing growth will therefore be a key focus going forward.

2. OCF was approximately 1.5 times net income attributable to owners of the parent, indicating solid cash backing for earnings. However, the increase in trade receivables resulted in a cash outflow, and trends in collection periods will determine the sustainability of cash-generation capacity.

3. Profit progress toward the Full-Year forecast was 65.4%, exceeding the standard first-half level, but the company’s forecast remains unchanged. Trends in improvement in the gross margin and SG&A ratio during the second half will be key to evaluating the quality of Full-Year performance.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,085–¥1,151 at a ±1% change in the Cost of Equity, and ¥1,116–¥1,118 at a ±0.1 change in ω.

Notes:

• Since net income progress against the Full-Year forecast (65%) exceeds the standard level (50%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with leading progress tend to exceed their forecasts. Adjustments may be excessive for businesses with strong seasonality).
• Since forecast ROE is below the Cost of Equity, the theoretical value is below Book Value Per Share.
• Goodwill represents a high proportion of net assets, and the assumptions would change significantly if impairment were recognized.
• Net assets as of the end of the quarter are used (there is a timing gap relative to the Full-Year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings flash report data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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