| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥20363.7B | ¥19174.8B | +6.2% |
| Operating Income / Operating Profit | ¥3413.2B | ¥3150.3B | +8.3% |
| Tax-before Profit (Ordinary Income) | ¥2942.3B | ¥2748.8B | +7.0% |
| Net Income / Net Profit | ¥2830.9B | ¥2024.0B | +39.9% |
| ROE | 7.6% | 5.9% | - |
For the fiscal year ended March 2026 (2025 Apr–2026 Mar), the company recorded revenue of ¥20363.7B (YoY +¥1188.9B, +6.2%), operating income of ¥3413.2B (YoY +¥262.9B, +8.3%), Ordinary Income (non‑IFRS equivalent) of approximately ¥3021B, and net income attributable to owners of parent of ¥1936.9B (YoY +¥402.3B, +26.2%), achieving both revenue and profit growth. Operating margin improved to 16.8% (prior year 16.4%) (+0.4pt) and net income margin improved to 9.5% (prior year 8.0%) (+1.5pt). The large increase in net income was mainly due to a remeasurement gain from business combinations of ¥614.5B and a decline in the effective tax rate to 3.8% (prior year 26.4%). By segment, Strategic Businesses (Payments & Financial) saw operating profit surge +105.4%, while Commerce decreased -16.1%. Operating Cash Flow (OCF) was ¥6628.5B (YoY +27.6%), about 3.4x net income, indicating high cash generation. Free Cash Flow was negative ¥1463.9B due to investment excess, driven by asset expansion in Banking & Card businesses.
[Revenue] Revenue settled at ¥20363.7B (YoY +6.2%). By segment, Media Business recorded ¥7293.4B (+0.6%) showing marginal growth, with external revenue ¥7249.0B (prior year ¥7241.6B) almost flat. This likely reflects stagnation in advertising market conditions. Commerce Business was ¥8548.9B (+1.0%) with external revenue ¥8548.9B (prior year ¥8462.9B), also low growth. Strategic Businesses (Payments & Financial) grew strongly to ¥4422.8B (+30.1%), with external revenue ¥4422.8B (prior year ¥3398.7B) driving companywide growth. Rapid expansion of financial volumes—Bank deposits +¥8708.7B (+47.6%), Bank loans +¥6896.2B (+74.4%), Card loans +¥2691.4B (+27.4%)—contributed to revenue increases. Other businesses were ¥9.86B (+53.7%), small but high growth. Companywide, Strategic Business expansion offset Media and Commerce weakness to sustain top‑line growth.
[Profitability] Operating income was ¥3413.2B (+8.3%), improving operating margin to 16.8% (prior year 16.4%) by +0.4pt. Cost of sales was ¥5300.9B (+0.1%) nearly flat, improving cost ratio to 26.0% of revenue (prior year 27.6%). SG&A rose to ¥12209.0B (+13.8%), outpacing revenue growth (+6.2%), raising the SG&A ratio to 60.0% (prior year 55.9%) (+4.1pt) and deteriorating cost structure. Drivers of higher SG&A likely include technology headcount, changes in allocation for data center costs, post‑M&A integration costs, and system outage response costs of ¥54.9B. Remeasurement gains from business combinations of ¥614.5B (Commerce ¥443.8B, Strategic ¥170.7B) boosted operating income; excluding these, core EBIT would be about ¥2798.7B (YoY -11.5%), indicating potential underlying decline. By segment, Media operating income ¥2108.4B (-3.7%), Commerce ¥873.9B (-16.1%), Strategic ¥684.2B (+105.4%), Other ¥61.5B (+469.8%). After segment deductions, operating income ¥3413.2B was followed by equity-method investment losses of -¥74.96B, impairment losses on equity-method investments ¥195.7B, gains on sale of equity-method investments ¥107.5B and other non‑operating items, resulting in pre‑tax profit of ¥2942.3B (+7.0%). Income taxes were ¥111.4B with an effective tax rate of 3.8% (prior year 26.4%), extremely low—likely driven by expansion of deferred tax assets (+¥752.9B). As a result, net income was ¥2830.9B (+39.9%), and net income attributable to owners of parent was ¥1936.9B (+26.2%). Net income attributable to non‑controlling interests increased significantly to ¥893.97B (+82.7%), reflecting larger allocations to non‑controlling shareholders from subsidiary earnings. Comprehensive income was ¥3127.5B (owners of parent ¥2199.5B, non‑controlling interests ¥928.0B). Of other comprehensive income ¥296.6B, translation differences from foreign operations were +¥313.5B aided by JPY depreciation, while FVTOCI debt securities showed an unrealized loss of -¥31.1B reflecting rising yields. In conclusion, results were higher revenue and profit but structurally supported by one‑off gains and low tax rate; underlying earnings power is under pressure from rising costs.
Media Business (Revenue ¥7293.4B +0.6%, Operating Income ¥2108.4B -3.7%, Margin 28.9%) maintains high margins but shows signs of maturity with flat revenue and slight profit decline. Sluggish advertising revenue and cost increases from allocation changes likely pressured profitability. Commerce Business (Revenue ¥8548.9B +1.0%, Operating Income ¥873.9B -16.1%, Margin 10.2%) experienced marginal revenue growth but a large profit decline. Including a remeasurement gain of ¥443.8B from business combinations, excluding this the adjusted operating income would be approximately ¥430.1B (prior year ¥1041.9B, -58.7%), indicating substantial underlying decline. System outage response costs of ¥54.9B also depressed profits. Competitive pressure, higher promotion expenses, and allocation changes are background factors. Strategic Business (Revenue ¥4422.8B +30.1%, Operating Income ¥684.2B +105.4%, Margin 15.5%) posted strong growth driven by expansion in payments & finance volumes and a remeasurement gain of ¥170.7B; excluding that, adjusted operating income would be about ¥513.5B (prior year ¥333.1B, +54.2%) showing healthy growth. Expansion of card and banking loans/deposits lifted volume revenue. Other (Revenue ¥9.86B +53.7%, Operating Income ¥61.5B +469.8%, Margin 62.4%) achieved high growth and profitability, driven by cloud‑related services. Intersegment revenue eliminations were ¥1.209B.
[Profitability] ROE was 6.5% (prior year 5.1%) improving +1.4pt but remains 3.6pt below the industry median of 10.1%, indicating relatively low capital efficiency despite leverage use. Operating margin of 16.8% (prior year 16.4%) outperformed the industry median 8.1% by +8.7pt, driven by high margins in the Media Business. Net income margin of 13.9% (prior year 8.0%) exceeded the industry median 5.8% by +8.1pt, reflecting benefit from low tax rate. Return on assets using operating income (ROA operating income) was 3.0%, constrained by low asset turnover of 0.182.
[Cash Quality] Operating Cash Flow ¥6628.5B was 2.34x net income ¥2830.9B, suggesting conservative profit recognition with an accrual ratio of -4.2%. OCF/EBITDA (Operating CF ÷ (Operating Income + Depreciation & Amortization ¥1764.5B) = OCF ÷ ¥5177.7B) was 1.28x, indicating strong cash coverage of accounting profit. Cash conversion cycle improved due to large increase in accounts payable (+¥3214.4B) and reduction in trade receivables (cash inflow of ¥1735.5B), enhancing working capital efficiency.
[Investment Efficiency] Total asset turnover was low at 0.182x, pressured by balance sheet expansion in banking & card businesses (loans & securities +¥1.36T). Capex efficiency (asset turnover relative to depreciation ¥1764.5B) faces downward pressure from financial business growth.
[Financial Soundness] Equity ratio was 26.8% (prior year 32.7%) down -5.9pt, reflecting higher leverage. D/E ratio was 2.02x (interest‑bearing debt ¥19619.98B ÷ equity ¥29988.05B), reaching a cautionary zone (>2x). Debt/EBITDA was 3.79x (interest‑bearing debt ÷ EBITDA ¥5177.7B), well above investment‑grade threshold (<2.5x). Interest coverage (EBIT ¥3413.2B ÷ interest expense ¥217.97B) was about 15.7x, sufficient for near‑term interest obligations. Goodwill of ¥21916.9B represents 59.0% of net assets ¥37135.1B, heightening future impairment risk and compressing capital cushions. Current ratio is supported by ample cash and marketable securities in the banking business, securing liquidity.
Operating CF was ¥6628.5B (YoY +27.6%). Starting from pre‑tax profit ¥2942.3B, addbacks included depreciation & amortization ¥1764.5B, increase in allowance for doubtful accounts ¥48.7B, and non‑cash items from equity‑method investment results and impairments, plus significant positive working capital effects. Working capital changes produced large cash inflows: decrease in trade receivables (△ denotes increase) ¥1735.5B and increase in trade payables ¥3214.4B, totaling about ¥4950B of cash inflow, boosting OCF. Offsetting this, increases in Card loans -¥2712.6B and Bank loans -¥3629.4B pressured working capital negatively, while bank deposit increases +¥4885.9B offset. Expansion of financial business assets/liabilities complicates OCF structure. Interest & dividend receipts ¥60.7B, interest payments -¥217.97B, corporate tax payments -¥1039.2B and refunds ¥35.5B led to the final OCF figure. Investing CF was -¥8092.5B, a large outflow driven mainly by acquisition of marketable securities for the banking business -¥8335.9B. Proceeds from sale/redemption of securities +¥2514.4B, sale of investments +¥668.2B, and withdrawal of time deposits +¥403.4B partially recovered funds. Other investing CF -¥3342.6B likely includes M&A and subsidiary share acquisitions. As a result, Free Cash Flow (OCF + Investing CF) was -¥1463.9B, indicating investment excess. Financing CF was +¥1533.1B, with funding including short‑term borrowings +¥1915.0B, long‑term borrowings +¥1791.9B, bond issuance +¥1000.0B, net commercial paper -¥350.0B (issuance ¥6855.0B - redemption ¥7205.0B). Uses included long‑term debt repayments -¥1129.7B, bond redemptions -¥700.0B, dividend payments -¥498.6B, distributions to non‑controlling interests -¥178.8B, treasury stock purchases -¥1486.7B, and lease liability repayments -¥409.2B. Capital injections from non‑controlling interests +¥1833.4B materially strengthened capital. After FX effects +¥171.7B, cash and cash equivalents increased by ¥240.9B to an ending balance of ¥10680.3B. The picture is strong OCF, aggressive investing CF, and reliance on financing CF—a clear growth‑investment priority.
Earnings quality is characterized by a mix of recurring operating revenue and one‑off gains. Recurring revenue stems from media advertising, commerce fees, and payments/financial revenue, which are highly repeatable. However, this period included a remeasurement gain from business combinations of ¥614.5B recognized in operating income (Commerce ¥443.8B, Strategic ¥170.7B), a non‑recurring item that will not recur next year. System outage response costs ¥54.9B are also one‑time. Equity‑method investment loss of -¥74.96B reflects affiliated companies’ deteriorated performance. Impairment losses on equity‑method investments ¥195.7B represent one‑off asset write‑downs; gains on sale of equity‑method investments ¥107.5B are also non‑recurring. Non‑operating income ¥78.9B and non‑operating expenses ¥386.7B include financial results and FX gains/losses and are non‑operating in nature. The effective tax rate of 3.8% is extremely low, likely driven by expanded deferred tax assets (prior year ¥44.2B → this period ¥119.5B, +¥752.9B) and business combination/tax effect accounting; this low tax rate appears transitory and normalization next year could reduce net income margin. Operating CF ¥6628.5B is 2.34x net income ¥2830.9B and 1.28x EBITDA ¥5177.7B, indicating high cash conversion and good accrual quality. Working capital improvements (trade receivables/payables changes) boosted OCF, but whether this is seasonal or structural requires verification given transaction scale and payment cycles. Overall, the recurring revenue base is stable, but sustainability of earnings depends on core operating profit trends given reliance on one‑time gains and low tax rate.
Full‑year guidance disclosed revenue of ¥22400.0B, with actual results of ¥20363.7B representing 90.9% progress (shortfall of -9.1%). During the period, changes in segment allocation criteria, organizational restructuring, and recording of one‑off gains may have altered the structural assumptions versus initial guidance. Dividend guidance was ¥0.00 announced, but an actual year‑end dividend of ¥7.3 was paid, implying that the guidance either did not disclose the year‑end dividend (or was not revised). Next year, the key will be the level of core operating profit after the fall‑out of one‑off gains; revenue growth pace and SG&A control are critical to meeting forecasts.
Year‑end dividend ¥7.3 (interim ¥0), total dividends paid ¥498.6B, implying a payout ratio of about 25.8% against net income attributable to owners of parent ¥1936.9B. Dividend policy targets roughly a one‑quarter level of earnings, a sustainable range. Share repurchases amounted to ¥1486.7B (cash flow statement basis), closely matching the treasury stock acquisition on the balance sheet ¥1485.95B. Dividends ¥498.6B + share repurchases ¥1486.7B = total returns of about ¥1985.3B, with total return ratio about 102.5% relative to net income ¥1936.9B, exceeding earnings. Treasury stock cancelation amounted to ¥2060.2B (BS note), indicating cancellation of prior treasury shares and new repurchases during the period. With Free Cash Flow negative ¥1463.9B, the >100% total return was financed through financing activities—borrowings, bond issuance, and capital injections from non‑controlling interests (+¥1833.4B). Going forward, balancing capital efficiency and financial soundness is key: dividends have room to be maintained, but continuation of large buybacks depends on leverage levels and capital requirements for financial businesses. The shareholder‑friendly stance is clear but its sustainability depends on stabilizing OCF and returning Free Cash Flow to positive.
Leverage increase and financial vulnerability: D/E ratio 2.02x and Debt/EBITDA 3.79x are high; in a rising rate environment interest burden would increase. If a large portion of the ¥19619.98B interest‑bearing debt is short‑term or variable‑rate, interest sensitivity rises. Equity ratio of 26.8% down from 32.7% (-5.9pt) reduces financial flexibility. Continued financial business expansion and sustained total returns could further raise leverage.
Goodwill concentration and impairment risk: Goodwill ¥21916.9B equals 59.0% of net assets ¥37135.1B, reflecting past large M&A accumulation. Goodwill/EBITDA ratio is about 4.23x, implying more than four years to recover at current EBITDA levels. If Media or Commerce profitability deteriorates, goodwill impairment could be triggered, heavily eroding capital. Deferred tax assets ¥1195.3B also depend on future earnings; impairments there would materially reduce equity.
ALM and credit cost risks from financial business expansion: Bank deposits +¥8708.7B, loans +¥6896.2B, securities +¥6419.6B reflect rapid balance sheet growth. Risks include deposit outflows, unrealized losses on securities in rising rate environments, and upward surprises in credit costs on loans. Increase in allowance for doubtful accounts was modest (prior year ¥149.2B → this period ¥48.7B), but credit cost rates could rise with macro or rate changes. Impairment of equity‑method investments ¥195.7B could recur, and performance of affiliates may materially affect results.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 6.5% | 10.1% (2.2%–17.8%) | -3.6pt |
| Operating Margin | 16.8% | 8.1% (3.6%–16.0%) | +8.7pt |
| Net Margin | 13.9% | 5.8% (1.2%–11.6%) | +8.1pt |
While ROE lags the industry median, operating and net margins substantially outperform, reflecting high‑margin Media business and benefit from low tax rate.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 6.2% | 10.1% (1.7%–20.2%) | -3.9pt |
Growth lags the industry median, weighed down by low‑growth Media and Commerce, though Strategic Business supports the company.
※ Source: Company compilation
Media Business’s high margin (28.9%) underpins company earnings, but revenue +0.6% and profit -3.7% indicate maturity. Recovery in ad market and initiatives to maximize inventory monetization are key near‑term items. Commerce may face significant profit decline excluding one‑off gains; margin recovery and restoring promotion efficiency are urgent. Strategic Business (Payments & Financial) grew revenue +30.1% and operating income +105.4%, becoming a primary growth driver. Continued expansion in banking & card volumes could stably build interest and fee income. Conversely, SG&A growth +13.8% far outpaced revenue growth +6.2%, warranting attention; regaining economies of scale is critical.
Operating CF of ¥6628.5B is robust—2.34x net income and OCF/EBITDA 1.28x—indicating strong cash backing of accounting profits. Working capital improvements (trade receivables decrease and payables increase) contributed, and determining whether this is seasonal or structural is important. Free Cash Flow at -¥1463.9B reflects investment excess, primarily in financial business securities and loans. The growth‑investment priority is clear, but with total return >100% the funding is dependent on financing activities. Future ALM and credit cost trends will determine capital efficiency. High leverage (D/E 2.02x, Debt/EBITDA 3.79x) raises financial flexibility risks in rising rates or downturns. Goodwill ¥21916.9B (59% of net assets) is highly sensitive to impairments; maintaining segment earnings power is essential to protect capital.
This report is an AI‑generated earnings analysis based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm from public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.