| Metric | Current | Prior | YoY |
|---|---|---|---|
| Revenue | ¥24965.8B | ¥22792.3B | +9.5% |
| Operating Income | ¥143.8B | ¥529.8B | -72.9% |
| Profit Before Tax | ¥-295.5B | ¥162.8B | -281.5% |
| Net Income | ¥-1232.1B | ¥-1294.8B | +4.8% |
| ROE | -9.1% | -10.5% | - |
Rakuten Group, Inc.'s fiscal year 2025 results show revenue of 24,965.8 billion yen (YoY +9.5%) with operating income of 143.8 billion yen (YoY -72.9%), representing a significant decline. The company posted a net loss of 1,232.1 billion yen, improving 4.8% from the prior year loss of 1,294.8 billion yen. Despite top-line growth, profitability deteriorated sharply with operating margin compressed to 0.6% from 2.3% in the prior year. The company generated operating cash flow of 4,240.9 billion yen, down 64.4% YoY, while free cash flow remained negative at -3,557.2 billion yen due to substantial investing activities of -7,798.1 billion yen. The financial position shows total assets of 288,044.0 billion yen against total equity of 13,542.3 billion yen, resulting in an equity ratio of 3.4% and indicating highly leveraged capital structure.
Revenue increased 9.5% YoY to 24,965.8 billion yen, driven by top-line expansion across business operations. However, this growth did not translate into proportional profit improvement. Operating income declined sharply by 72.9% to 143.8 billion yen, indicating significant margin compression. The operating margin deteriorated to 0.6% from 2.3% in the prior year, suggesting substantial cost pressures or revenue mix changes outpaced top-line growth. Non-operating factors significantly impacted bottom-line results, with finance costs of 994.0 billion yen exceeding finance income of 633.6 billion yen by 360.4 billion yen, representing a net financial burden of 1.4% of revenue. Equity method losses of 78.9 billion yen from associated companies further pressured profitability. Other expenses totaled 1,020.3 billion yen, contributing to the deterioration from operating profit to pre-tax loss. The company recorded impairment losses of 66.8 billion yen as a non-recurring factor. The gap between operating income of 143.8 billion yen and profit before tax of -295.5 billion yen, a difference of 439.3 billion yen, is explained primarily by the combination of negative net financial costs, equity method losses, and other non-operating expenses. The progression from pre-tax loss to net loss widened, with income tax benefits of 316.0 billion yen partially offsetting the pre-tax loss. This represents a revenue up/profit down pattern, where top-line growth failed to generate operating leverage due to cost structure challenges and substantial non-operating burdens.
[Profitability] ROE of -18.5% reflects the net loss position against shareholder equity, showing deterioration from -18.4% in the prior year and marking the fifth consecutive year of negative returns. Operating margin compressed significantly to 0.6% from 2.3% YoY, with net profit margin at -4.9% compared to -5.7% in the prior period. The company faces structural profitability challenges with EBIT margin of 0.6% indicating minimal operating surplus before financial costs. [Cash Quality] Cash and deposits position stands at 58,375.7 billion yen, representing 20.3% of total assets and providing liquidity buffer despite negative earnings. Operating cash flow of 4,240.9 billion yen significantly exceeds net loss, indicating cash generation capability from operations despite accounting losses. [Investment Efficiency] Total asset turnover stands at 0.087 times, reflecting the capital-intensive nature of business operations with substantial intangible assets of 10,792.0 billion yen including goodwill and investments. [Financial Health] Equity ratio of 3.4% represents highly leveraged capital structure with debt-to-equity ratio of 20.27 times, indicating significant financial leverage and limited equity cushion. Retained earnings deficit expanded to -10,361.4 billion yen from -8,247.0 billion yen, reflecting accumulated losses that continue to erode shareholder equity base.
Operating cash flow of 4,240.9 billion yen represents -2.38 times net income, indicating substantial non-cash charges including equity method losses, impairments, and other accounting adjustments that separate accounting losses from operating cash generation. The decline of 64.4% YoY in operating cash flow suggests either working capital utilization or changes in underlying cash generation from core operations. Investing cash flow of -7,798.1 billion yen reflects significant capital deployment, primarily comprising capital expenditures of 656.7 billion yen and intangible asset acquisitions of 1,403.0 billion yen, with the remainder likely related to equity method investments and other financial investments. The magnitude of investing outflows exceeds operating cash inflows by substantial margin. Financing cash flow of 141.3 billion yen shows net inflows, suggesting debt refinancing or capital raising activities to support liquidity position. Free cash flow of -3,557.2 billion yen indicates the company consumed more cash in investment activities than generated from operations, requiring external financing to maintain liquidity. The large cash position of 58,375.7 billion yen provides runway for continued investment strategy despite negative free cash flow generation.
Ordinary income calculation shows operating income of 143.8 billion yen reduced by net non-operating costs of approximately 439.3 billion yen to reach profit before tax of -295.5 billion yen. Non-operating expenses are substantial, comprising net finance costs of 360.4 billion yen, equity method losses of 78.9 billion yen, and other expenses exceeding income. Non-operating items represent -1.8% of revenue as a net burden, consisting primarily of finance costs at 994.0 billion yen partially offset by finance income of 633.6 billion yen. The significant divergence between operating cash flow and net income, with operating cash flow exceeding net loss by over 6,000 billion yen in absolute terms, indicates heavy influence of non-cash charges including impairments of 66.8 billion yen, equity method adjustments, and deferred tax effects. Operating cash flow generation despite accounting losses suggests core business operations maintain cash conversion capability, though the quality is impacted by high financial leverage costs and associated company performance. The recurring nature of high finance costs and equity method volatility indicates structural factors affecting earnings quality beyond temporary items.
Financial leverage risk remains paramount with equity ratio of 3.4% and debt-to-equity ratio of 20.27 times, leaving minimal equity buffer against adverse shocks. The highly leveraged structure amplifies sensitivity to interest rate changes and refinancing risks, with current finance costs of 994.0 billion yen representing 4.0% of revenue and consuming operating profits entirely. Any deterioration in credit markets or inability to refinance maturing obligations could create liquidity stress despite current cash position. Profitability sustainability concerns arise from operating margin compression to 0.6%, indicating insufficient operating leverage to cover fixed costs and financial obligations. The fifth consecutive year of negative ROE ranging from -15.7% to -41.7% demonstrates persistent inability to generate returns on equity capital, with cumulative retained earnings deficit of 10,361.4 billion yen representing structural capital impairment. Recovery depends on achieving material margin expansion, which remains uncertain given competitive dynamics and cost structure. Equity method investment and impairment risk is evident from current period equity method losses of 78.9 billion yen and impairment charges of 66.8 billion yen against substantial intangible assets of 10,792.0 billion yen. Associated company performance directly impacts earnings through equity method accounting, while goodwill and intangible assets face ongoing impairment risk if business performance fails to meet carrying value assumptions. Further impairments would deepen equity erosion and potentially trigger covenant concerns.
[Industry Position] (Reference - Proprietary Analysis) Rakuten Group's profitability metrics show significant underperformance relative to historical trends and structural challenges. ROE of -18.5% compares to company's five-year average ranging from -15.7% to -41.7%, with current year near the better end but still deeply negative. Operating margin of 0.6% represents sharp deterioration from 2.3% in prior year and remains substantially below breakeven economics, with company's five-year margin history ranging from -18.9% to 2.3%. Revenue growth of 9.5% maintains consistency with prior periods, showing 9.5% to 15.5% range over five years, indicating top-line momentum persists despite profitability challenges. Net profit margin of -4.9% improved from -5.7% prior year but remains negative for fifth consecutive year, with five-year range of -4.9% to -19.5% highlighting persistent bottom-line pressure. The combination of sustained revenue growth with structurally negative profitability and minimal operating margins distinguishes the company's profile, suggesting business model transition phase requiring monitoring of margin inflection points. Industry positioning analysis is limited by lack of direct peer benchmarks in the provided data, though the capital structure with 3.4% equity ratio and operating margin below 1% would generally fall in the lower quartile for established technology and services conglomerates.
Revenue growth momentum of 9.5% demonstrates the company's ability to expand top-line despite challenging profitability environment, with five-year compound growth pattern showing resilience in market positioning. However, the persistent disconnect between revenue growth and profit generation, evidenced by operating margin compression to 0.6% while revenue increased, indicates structural cost challenges or investment phase dynamics that require resolution for sustainable value creation. The substantial cash position of 58,375.7 billion yen provides strategic flexibility and time horizon for business model optimization, though negative free cash flow of 3,557.2 billion yen indicates ongoing capital consumption that cannot be sustained indefinitely without profitability improvement. Financial structure characterized by 3.4% equity ratio and 20.27 times debt-to-equity creates both risk and potential leverage, where margin improvement would generate amplified returns but continued losses accelerate equity erosion and refinancing pressure.
This report was automatically generated by AI analyzing XBRL earnings data as an earnings analysis tool. This is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled from publicly available earnings data. Please make investment decisions at your own responsibility and consult professionals as needed.