PKSHA Technology Inc. FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period, revenue increased substantially due to the rapid expansion of the AI Powered Worker Business, while profit growth was limited by changes in the business mix. Revenue was ¥28.34B (+84.1% YoY), Operating Income was ¥4.68B (+1.6%), Profit Before Tax was ¥4.35B (+1.0%), and Net Income attributable to owners of the parent was ¥2.63B (▲2.0%). The primary driver of revenue growth was the sharp increase in revenue from the AI Powered Worker Business (+619.8% YoY). AI Research & Solution and AI SaaS also maintained growth of more than 30% each; however, the rising proportion of the low-margin AI Powered Worker Business and the lapse of temporary other income recorded in the previous year placed pressure on profit margins.

Factors Affecting Performance

【Revenue】Revenue increased substantially to ¥28.34B, up +84.1% YoY. By segment, AI Powered Worker recorded the largest increase at ¥9.98B (+619.8%), accounting for more than half of the ¥12.95B increase in company-wide revenue. AI Research & Solution recorded ¥9.91B (+30.6%), while AI SaaS recorded ¥8.45B (+31.7%); both existing businesses maintained double-digit growth.

【Profit and Loss】Operating Income was limited to ¥4.68B (+1.6%), and profit growth was modest relative to revenue growth. The gross profit margin declined to 47.9% from 54.3% in the previous year, primarily because the expanding revenue contribution from AI Powered Worker, which had a segment profit margin of 6.8%, diluted the company-wide profit margin. In addition, other income, which had been recorded at ¥1.42B in the previous-year period, decreased to ¥0.05B in the current period, and the lapse of this temporary factor affected the year-on-year comparison of Operating Income. Business profit (gross profit – SG&A expenses) was ¥4.71B (+46.3%), securing profit growth on an operating-business basis. While the results can therefore be characterized as revenue and profit growth on an operating-business basis, Operating Income and Net Income, including the lapse of other income, effectively remained sluggish.

Segment Analysis

All three segments increased revenue, although profitability differed. AI SaaS remained the most profitable, with a profit margin of 33.6% (36.2% in the previous year), although this was down 2.6pt from the previous year. AI Research & Solution improved its profit margin to 25.4% (24.1% in the previous year), indicating improved profitability among the existing businesses. AI Powered Worker expanded rapidly, with revenue approaching seven times the previous-year level, but its profit margin remained limited to 6.8%, substantially below that of the other two businesses. This shift in business mix was the primary factor behind the decline in the company-wide gross profit margin and Operating Income margin.

Key Financial Indicators

【Profitability】The Operating Income margin declined substantially to 16.5% (29.9% in the previous year), although much of the difference was attributable to the presence or absence of temporary other income of ¥1.42B in the previous-year period. The business profit margin on an operating-business basis was 16.6% (20.9% in the previous year). The Net Income margin was approximately 9.7%. 【Cash Quality】Cash and cash equivalents were ¥16.42B, down from ¥19.36B at the end of the previous year, while interest-bearing debt remained limited to ¥6.197B, securing net cash of ¥10.22B. 【Investment Efficiency】ROE (annualized) was 10.0%, reflecting a capital structure with relatively restrained leverage compared with the high Operating Income margin. 【Financial Soundness】The Equity Ratio improved to 65.7% from 63.2% in the previous year, while the Current Ratio remained high at more than 229%. Goodwill was ¥14.10B, representing 38.8% of net assets, indicating a relatively high dependence on M&A-related assets.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is not available, changes in the balance sheet provide insight into funding trends. Cash and cash equivalents decreased by ¥2.94B from ¥19.36B at the end of the previous year to ¥16.42B, while short-term borrowings were substantially reduced from ¥7.51B to ¥1.53B and long-term borrowings increased from ¥2.10B to ¥4.67B. This reflects financing activities that shifted the borrowing structure from short-term to long-term debt, reducing short-term repayment burdens. Retained earnings increased by ¥2.64B from ¥10.22B to ¥12.82B, indicating continued internal retention of profits.

Quality of Earnings

Current-period Operating Income of ¥4.68B was affected by temporary factors. While ¥1.42B was recorded as other income in the previous-year period, this declined to only ¥0.05B in the current period, and the lapse of this income significantly compressed the year-on-year Operating Income growth rate. Business profit (gross profit – SG&A expenses), which indicates the strength of the core business, was ¥4.71B (+46.3%), and the difference from Operating Income resulted from fluctuations in other income and expenses. The effective corporate tax burden relative to Profit Before Tax was approximately 37.2%, somewhat high, making the effective tax rate a factor weighing on profit. Comprehensive Income was ¥2.54B, slightly below Net Income of ¥2.74B, due to a ¥0.20B valuation loss on financial assets measured at fair value through other comprehensive income. The divergence between Net Income and Comprehensive Income was limited, and no significant abnormalities were observed from an accruals perspective.

Earnings Forecast and Guidance

Against the full-year earnings forecast (Revenue of ¥35.00B, EPS of ¥91.84, and dividend of ¥10.00), cumulative Q3 revenue progress was approximately 81.0%, exceeding the standard 75% level. Progress toward Net Income attributable to owners of the parent was also high, and the profit level required in the remaining Q4 is small. Neither the earnings forecast nor the dividend forecast was revised during the quarter.

Shareholder Returns

The Q2 dividend was ¥0 per share, and the full-year forecast remains unchanged at an annual dividend of ¥10.00. Based on the average number of shares outstanding during the period, the estimated total annual dividend is approximately ¥0.31B, and the forecast Payout Ratio against the full-year profit forecast of ¥2.85B is approximately 10.9%, representing conservative shareholder returns relative to the profit level. Treasury shares increased year on year, indicating that shareholder returns other than dividends were also provided to a certain extent; however, data on the Total Return Ratio combining dividends and share repurchases has not been disclosed.

Risk Factors

1. Risk of dilution in the earnings mix: Revenue from the AI Powered Worker Business expanded rapidly by +619.8% YoY, while its segment profit margin remained limited to 6.8%. If the business continues to increase its revenue contribution, this could affect the pace of recovery in the company-wide profit margin.

2. Decline in the profit margin of the existing high-margin business: The segment profit margin of the AI SaaS Business declined to 33.6% from 36.2% in the previous year, a decrease of 2.6pt. If the decline in the margin of this high-margin recurring-revenue business continues, the impact on consolidated profitability could be significant.

3. Dependence on goodwill and intangible assets: Goodwill was ¥14.10B, representing 38.8% of net assets, while goodwill and intangible assets combined reached ¥20.86B. If the profitability of acquired businesses falls below plan, impairment risk could materialize.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Return

The company continues to maintain profitability substantially above the industry median and ranks among the top performers in the IT and telecommunications industry.

Growth and Capital Efficiency

The revenue growth rate substantially exceeded the industry median, demonstrating an outstanding growth rate within the industry.

Source: Compiled by the Company

Key Points from the Earnings Results

1. Revenue increased across all three segments, with the AI Powered Worker Business serving as the driver of company-wide growth. However, its profit margin is lower than that of the other two businesses, making the improvement of the linkage between revenue growth and profit growth a key focus going forward.

2. The year-on-year comparison of Operating Income was affected by the lapse of temporary other income of ¥1.42B recorded in the previous year. The company’s underlying strength should therefore be evaluated based on business profit (+46.3% YoY).

3. While the financial foundation remains stable, with an Equity Ratio of 65.7% and net cash of ¥10.22B, goodwill represents 38.8% of net assets. Trends in the profitability of M&A-related assets will therefore influence the quality of the balance sheet.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,091–¥1,156 at ±1% in the cost of equity, and ¥1,121–¥1,123 at ±0.1 in ω.

Notes:

• Because Net Income progress against the full-year forecast (92%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of plan tend to exceed their forecasts; in businesses with strong seasonality, the adjustment may be excessive).
• Because 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 substantially if impairment were recognized.
• Net assets as of the end of the quarter are used; there is a timing difference relative to the full-year forecast.

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest-rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data and is not a forecast of the market share price or a recommendation of any specific investment action, nor does it 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 summary 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 with professionals as necessary.

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