| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥6435.8B | ¥5627.0B | +14.4% |
| Operating Income | ¥303.9B | ¥-154.4B | +296.8% |
| Profit Before Tax | ¥173.8B | ¥-458.4B | +137.9% |
| Net Income | ¥-17.6B | ¥-618.8B | +97.2% |
| ROE | -0.1% | -4.6% | - |
In Q1 of the fiscal year ending March 2026, Rakuten Group reported Revenue of ¥6,435.8B (YoY +¥808.8B +14.4%), Operating Income of ¥303.9B (YoY +¥458.3B +296.8%), Ordinary Income of ¥120.8B, and a Quarterly Net Loss Attributable to Owners of Parent of ¥186.5B (YoY reduction in loss of ¥548.2B, improvement of +74.6%). Operating profit recovered sharply from a loss of ¥154.4B in the prior year to a profit of ¥303.9B, lifting the operating margin to 4.7% (improvement of 7.4pt from -2.7% a year earlier). Although Profit Before Tax was a positive ¥173.8B, the recognition of corporate income tax expense of ¥191.3B resulted in a quarterly Net Loss of ¥17.6B and a loss attributable to owners of the parent of ¥186.5B. The effective tax rate was an abnormally high 110.1%, meaning net losses persist despite profit generation. By segment, FinTech Revenue was ¥2,753.2B (+23.1%), Internet Services ¥3,176.4B (+4.0%), and Mobile ¥1,311.6B (+18.5%), all recording revenue increases.
[Revenue] Consolidated Revenue was ¥6,435.8B (YoY +14.4%), achieving double-digit growth. By segment revenue composition (before elimination of intersegment transactions): Internet Services ¥3,176.4B (+4.0%, 43.9% of total), FinTech ¥2,753.2B (+23.1%, 38.0%), Mobile ¥1,311.6B (+18.5%, 18.1%). FinTech’s rapid growth was driven by increased credit card–related services and higher volumes in banking and securities services; loans in the card business increased by ¥1,529.5B YoY and loans in the banking business increased by ¥3,817.6B, expanding the asset side. Internet Services saw steady performance in e-commerce, travel booking sites, and advertising sales. Mobile benefited from growth in MNO subscribers and uplift effects within the Rakuten ecosystem.
[Profitability] Operating Income of ¥303.9B improved ¥458.3B from the prior-year loss of ¥154.4B, returning to profitability. Operating expenses were ¥6,079.3B, yielding an operating expense ratio of 94.5% (improvement of 6.2pt from 100.7% a year earlier), indicating operating leverage where revenue growth outpaced expense growth. Segment profitability (Non‑GAAP operating income after reflecting Mobile ecosystem contributions) was: Internet Services ¥211.7B, FinTech ¥585.3B, Mobile ¥-380.3B. The Mobile loss narrowed by ¥133.2B from ¥-513.5B a year earlier, reflecting progress in network efficiency and ARPU improvement. Starting from Non‑GAAP operating income of ¥362.9B, adjustments for stock‑based compensation ¥44.7B, amortization of intangible assets ¥4.1B, and non‑recurring items ¥10.2B lead to IFRS Operating Income of ¥303.9B. Financial income was ¥117.1B versus financial expenses of ¥238.0B, resulting in net financial expense of ¥120.9B, indicating heavy interest burden on interest‑bearing liabilities. Equity‑method losses amounted to ¥9.4B, resulting in Profit Before Tax of ¥173.8B. Corporate income tax expense was ¥191.3B (effective tax rate 110.1%), exceeding pre‑tax profit and producing a quarterly Net Loss of ¥17.6B. After deducting profit attributable to non‑controlling interests of ¥168.9B, Quarterly Net Loss Attributable to Owners of Parent was ¥186.5B. Other Comprehensive Income supported equity, with Total Comprehensive Income at a surplus of ¥395.8B and Other Comprehensive Income of ¥413.4B (foreign operations translation differences ¥71.5B, valuation differences on capital instruments ¥339.3B, etc.). In conclusion, while the company achieved revenue growth and returned to operating profitability, high financial expenses and abnormal tax burden resulted in continued net losses.
Internet Services (Segment Revenue ¥3,176.4B +4.0%, Segment Profit ¥211.7B) maintained operating profitability driven by stable growth in e‑commerce, travel, and advertising. Before deducting Mobile ecosystem contribution of ¥39.3B, segment profit was ¥251.0B, an improvement of ¥86.2B from ¥164.8B a year earlier. FinTech (Segment Revenue ¥2,753.2B +23.1%, Segment Profit ¥585.3B) posted substantial profit growth due to higher card transaction volumes and increased fee income from banking and securities. Before deducting Mobile ecosystem contribution of ¥62.4B, segment profit was ¥647.7B, an improvement of ¥166.8B from ¥480.9B, making it a major profit source for the Group. Mobile (Segment Revenue ¥1,311.6B +18.5%, Segment Profit ¥-380.3B) achieved double‑digit revenue growth but remains loss‑making. After receiving Mobile ecosystem contribution of ¥101.7B, the segment loss was ¥-380.3B, a ¥133.2B improvement from ¥-513.5B a year earlier. Growth in subscriber numbers, ARPU increases, and network investment efficiencies continue to drive the narrowing of losses.
[Profitability] Operating margin was 4.7% (improvement of 7.4pt from -2.7% a year earlier), and Net Income margin was -0.3% (improvement of 10.7pt from -11.0% a year earlier). Although operating profitability was achieved, final earnings remained in loss. ROE was -0.1% (annualized), a substantial improvement versus the prior‑year period. [Cash Quality] Operating Cash Flow was ¥-4,870.6B and Free Cash Flow was ¥-7,106.8B, both large negatives. Major drivers included increases in bank loans -¥3,825.2B, increases in securities business financial assets -¥7,442.8B, and increases in financial liabilities +¥7,134.4B, reflecting balance sheet movements typical of a financial conglomerate. [Investment Efficiency] Total asset turnover was approximately 0.088x on an annualized basis (quarterly revenue ÷ period‑end total assets ×4), low and reflective of the scale of financial business assets. Investment in equity‑method affiliates was ¥263.9B and equity‑method loss was ¥9.4B. [Financial Soundness] Equity Ratio was 3.1% (down 0.3pt from 3.4% a year earlier) and the D/E ratio was extremely high at 21.96x. Interest‑bearing liabilities (total of bonds and borrowings, and borrowings in the securities, card, and banking businesses) reached approximately ¥5.65T, and financial expenses were ¥238.0B, resulting in an interest coverage of approximately 1.28x, a fragile level. Retained earnings showed a cumulative deficit of ¥-10,556.3B, with other capital instruments of ¥3,973.5B functioning as a capital buffer.
Operating Cash Flow was ¥-4,870.6B (improvement of ¥2,506.6B from ¥-7,377.2B a year earlier). Against Profit Before Tax of ¥173.8B and adding depreciation and amortization of ¥705.6B, working capital movements included increases in loans from the banking business -¥3,825.2B, increases in card business loans -¥1,529.5B, decreases in bank deposits -¥1,613.2B, increases in financial assets in the securities business -¥7,442.8B, and increases in financial liabilities in the securities business +¥7,134.4B, resulting in large cash outflows. Corporate income taxes paid amounted to ¥234.5B. Investing Cash Flow was ¥-2,236.2B, primarily due to acquisition of securities in the banking business -¥5,753.1B and sales/redemptions +¥4,091.2B, acquisition of securities in the insurance business -¥282.5B and sales/redemptions +¥286.8B, purchases of tangible fixed assets -¥269.2B, and acquisition of intangible assets -¥442.3B. Free Cash Flow was ¥-7,106.8B (improvement of ¥553.5B from ¥-7,660.3B a year earlier) and remained largely negative. Financing Cash Flow was ¥-847.4B, with net increases in commercial paper +¥398.0B, increases in short‑term borrowings in the card business +¥271.4B, long‑term borrowings in the banking business +¥2,228.0B and long‑term borrowings repayments -¥2,166.0B, lease liabilities repayments -¥181.7B, and interest paid -¥187.5B. Cash and cash equivalents decreased by ¥795.3B from ¥5,837.57B at the beginning of the period to ¥5,042.7B at the end of the period. Due to asset‑liability movements unique to a financial conglomerate, Operating CF volatility is high; sustainable Free Cash Flow positivity requires Mobile turning profitable and improved asset efficiency in financial businesses.
Of Operating Income ¥303.9B, Non‑GAAP adjustments include stock‑based compensation ¥44.7B, amortization of intangible assets ¥4.1B, and non‑recurring items ¥10.2B. Non‑recurring items include an impairment of fixed assets of ¥10.2B associated with the withdrawal from certain European marketplace operations, included in other expenses. Financial income was ¥117.1B versus financial expenses of ¥238.0B, producing net financial expense of ¥120.9B and indicating persistent interest burden on interest‑bearing liabilities. Equity‑method losses were ¥9.4B, yielding Profit Before Tax of ¥173.8B. Corporate income tax expense was ¥191.3B (effective tax rate 110.1%), abnormally high and potentially influenced by write‑downs of deferred tax assets and regional tax regimes. This high tax burden resulted in a quarterly Net Loss of ¥17.6B and a loss attributable to owners of the parent of ¥186.5B. Total Comprehensive Income was a surplus of ¥395.8B, with Other Comprehensive Income of ¥413.4B (valuation differences on capital instruments ¥339.3B, foreign operations translation differences ¥71.5B, etc.) making a significant contribution and underpinning equity. The divergence between Operating CF and Net Income is attributable to asset‑liability movements in financial businesses; the substantive quality of earnings should be evaluated on an operating income basis.
Continued losses in the Mobile business: The Mobile segment reported a quarterly loss of ¥-380.3B and remains significantly loss‑making, although improved by ¥133.2B from ¥-513.5B a year earlier. Continued contraction of losses depends on maintaining the pace of subscriber growth and network efficiency gains; intensified price competition with peers, ARPU declines, or delays in base station investments could push back the timing of profitability. On an annualized basis across four quarters, this equates to approximately ¥1,521B of loss burden, materially constraining the Group’s overall profit‑generating capacity.
Abnormally high tax burden and delay to net profit positivity: Corporate income tax expense of ¥191.3B (effective tax rate 110.1%) exceeded Profit Before Tax of ¥173.8B and is the main cause of the Net Loss of ¥17.6B. While this may reflect reassessments of deferred tax assets or regional tax factors, if the high tax burden persists, final profit turnaround will be significantly delayed despite operating profitability. Unless tax effects normalize (returning to an effective tax rate in the 30–40% range), improving ROE and eliminating the cumulative retained earnings deficit will be difficult.
High leverage and interest burden pressure: Equity Ratio of 3.1% and D/E ratio of 21.96x indicate extremely high leverage, with financial expenses of ¥238.0B (annualized approximately ¥950B) eroding a large portion of EBIT. An interest coverage ratio of about 1.28x is fragile; in a rising interest rate environment, interest payment capacity could be further strained. Expansion of liabilities—securities business financial liabilities +¥7134.9B and bonds and borrowings +¥1,568.5B—creates a trend of increasing leverage. If market funding costs rise or ratings deterioration worsens borrowing terms, thin capital buffers could rapidly reduce financial flexibility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.7% | 6.2% (4.2%–17.2%) | -1.5pt |
| Net Income Margin | -0.3% | 2.8% (0.6%–11.9%) | -3.1pt |
Operating margin is 1.5pt below the industry median, and Net Income margin is negative, 3.1pt below the median. Profitability ranks in the lower half of the industry; despite achieving operating profitability, high interest and tax burdens prevent final earnings from reaching industry norms.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 14.4% | 20.9% (12.5%–25.8%) | -6.5pt |
Revenue growth is 6.5pt below the industry median, placing the company around the mid‑to‑lower range within the sector. Despite high growth in FinTech and Mobile, consolidated growth does not reach top‑tier industry levels.
※ Source: Company compilation
Achievement of operating profitability and continuation of profit improvement trend: Operating Income turned positive to ¥303.9B (prior year ¥-154.4B), and operating margin improved to 4.7% (up 7.4pt from -2.7%), suggesting structural improvement in earnings power. Strong profit contribution from the FinTech segment (¥585.3B) and steady narrowing of Mobile losses (¥-513.5B → ¥-380.3B) have put consolidated operating profit on an improving trend. Sustained quarterly improvements in Mobile losses (over ¥100B per quarter) and continued FinTech growth (expansion of credit card volumes and bank lending) are key to pushing operating margin above 5% and establishing a durable profit model.
Normalization of interest and tax burdens is prerequisite for Net Income profitability: Financial expenses of ¥238.0B (annualized ~¥950B) consume the majority of EBIT ¥303.9B, leaving an interest coverage of about 1.28x and a fragile position. In addition, corporate income tax expense of ¥191.3B (effective tax rate 110.1%) exceeded Profit Before Tax of ¥173.8B, resulting in a Net Loss of ¥17.6B. Reducing interest burden through liability mix optimization (lengthening short‑term market debt, considering capital‑type financing) and normalizing tax burden (returning to an effective tax rate of 30–40%) are essential; if achieved, these could create room for annual net profit generation in the hundreds of billions of yen. Addressing these two structural issues is a prerequisite for eliminating the cumulative retained earnings deficit of ¥-10,556.3B and improving capital efficiency.
This report is an earnings analysis document automatically generated by AI 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 our firm based on public financial statements. Investment decisions are your own responsibility; please consult professionals as appropriate before acting.