| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥3802.9B | ¥3087.8B | +23.2% |
| Operating Income / Operating Profit | ¥905.6B | ¥215.2B | +320.7% |
| Profit Before Tax | ¥845.2B | ¥267.7B | +215.7% |
| Net Income | ¥682.5B | ¥260.6B | +161.9% |
| ROE | 2.7% | 1.1% | - |
The FY2026 Q1 results delivered strong revenue and profit growth: Revenue ¥3802.9B (YoY +¥715.2B +23.2%), Operating Income ¥905.6B (YoY +¥684.0B +320.7%), Ordinary Income ¥836.1B (YoY +¥585.7B +256.8%, net of financial income ¥50.1B and financial expense ¥109.3B), and Net Income attributable to owners of parent for the quarter ¥681.5B (YoY +¥421.4B +161.9%). The operating margin recovered sharply to 23.8% (YoY +16.8pt), gross margin improved to 58.7% (YoY +2.7pt), and SG&A ratio declined substantially to 34.7% (YoY -8.9pt). The Industrial, Infrastructure & IoT Business led the profit expansion with Revenue ¥1989.6B (YoY +32.0%) and Operating Income ¥642.2B (YoY +99.4%), while the Automotive Business also grew with Revenue ¥1717.5B (YoY +10.6%) and Operating Income ¥617.5B (YoY +33.8%). Total comprehensive income was ¥1406.4B (prior year ▲¥1793.4B), with translation differences of +¥740.97B contributing to equity strengthening.
[Revenue] Revenue rose materially to ¥3802.9B (YoY +23.2%, +¥715.2B). By segment, Industrial, Infrastructure & IoT Business expanded sharply to ¥1989.6B (YoY +32.0%, +¥482.9B), driven primarily by increased data center demand and proactive shipments. Automotive Business recorded ¥1717.5B (YoY +10.6%, +¥163.7B), supported by continued high-value product mix and expanded sales to major OEMs including adoption of R-Car V4H in Toyota’s new RAV4. By region, China was ¥1156.2B (YoY +21.5%), Asia ex-China ¥863.4B (YoY +28.3%), and Japan ¥792.7B (YoY +24.9%) — double-digit growth across major markets. On a Non-GAAP basis disclosed in the PDF, timing-adjusted revenue was ¥3691B, +1.4% above the initial forecast, confirming broad demand recovery and market share gains.
[Profitability] Operating Income improved to ¥905.6B (YoY +320.7%, +¥684.0B), with an operating margin of 23.8% (prior year 7.0%). Gross profit was ¥2233.0B (gross margin 58.7%, YoY +2.7pt), aided by product mix improvement and manufacturing cost reductions. SG&A totaled ¥1318.3B (SG&A ratio 34.7%, down -9.1pt from 43.8%), declining ¥35.0B in absolute terms and demonstrating strong operating leverage. After other income ¥34.9B and other expenses ¥43.9B, Operating Income was ¥905.6B — over 4x the prior year ¥215.2B. Financial income was ¥50.1B (prior year ¥98.8B) against financial expense ¥109.3B (prior year ¥45.6B), producing net financial expense ▲¥59.2B and exerting downward pressure on Ordinary Income. Profit Before Tax for the quarter was ¥845.2B (prior year ¥267.7B, +215.7%). Income tax expense was ¥162.7B (effective tax rate 19.3%, up from 2.6% prior year), resulting in Net Income attributable to owners of parent of ¥681.5B (prior year ¥260.1B, +161.9%). Total comprehensive income was ¥1406.4B, with Other Comprehensive Income +¥723.9B (translation differences +¥740.97B; fair-value measurement through OCI of capital financial assets ▲¥29.5B; remeasurement of defined benefit plans ▲¥1.0B) supplementing net income. In summary, revenue and profit increased driven by high-margin mix in Industrial, Infrastructure & IoT (Operating Income margin 31.9%) and Automotive (36.0%), supported by gross margin improvement and cost compression.
The Group operates in three segments: Automotive Business, Industrial, Infrastructure & IoT Business, and Others. The core business is Industrial, Infrastructure & IoT, which accounted for Revenue ¥1989.6B (52.3% of total) and Operating Income ¥642.2B (50.6% of segment profit, Operating Income margin 32.3%). This segment grew YoY +32.0% and Operating Income nearly doubled (+99.4%), driving overall profit expansion. Expansion in AI demand for data centers, inventory build, and pre-shipments boosted both revenue and profit, improving the operating margin by +9.0pt YoY. Automotive Business delivered Revenue ¥1717.5B (45.2% of total) and Operating Income ¥617.5B (48.6% of segment profit, Operating Income margin 36.0%), with Revenue +10.6% YoY and Operating Income +33.8% YoY, driven by high-value SoC, analog & power semiconductor mix, and increased sales to major OEMs; the operating margin improved +1.6pt YoY. The Others segment (contract development/contract manufacturing, etc.) had Revenue ¥91.8B (2.4% of total) and Operating Income ¥47.1B (Operating Income margin 51.3%), with a YoY increase of +239.5% reflecting temporary factors related to Altium integration and strategic shifts. Segment margin differentials are notable: Automotive 36.0% and Industrial, Infrastructure & IoT 32.3% support consolidated Operating Income margin 23.8% (IFRS-adjusted), while Others’ high 51.3% reflects Altium integration effects. The substantial profit growth in Industrial, Infrastructure & IoT was the main driver of consolidated performance, with Automotive providing support via sustained high-margin mix.
Profitability: ROE 2.7% (quarterly basis, improved YoY), Operating Margin 23.8% (up +16.8pt from 7.0% prior year), Net Income Margin 17.9% (up +9.5pt from 8.4%), Gross Margin 58.7% (up +2.7pt from 56.0%). Cash Quality: Operating Cash Flow / Net Income 1.24x (OCF ¥847.6B / Net Income ¥681.5B), maintaining healthy >1.0x coverage. FCF approx. ¥520B (OCF ¥847.6B - Capex ¥227.6B - Intangible asset acquisitions ¥102.1B + Proceeds from sale of PPE ¥2.3B), remaining positive. Investment Efficiency: Capex / Depreciation 2.03x (Capex ¥227.6B / Depreciation ¥112.1B), indicating a growth investment phase. Financial Soundness: Equity Ratio 60.1% (up +1.6pt from 58.5% prior year), Current Ratio 123.1% (Current Assets ¥7,407B / Current Liabilities ¥6,016B), indicating acceptable short-term liquidity. Leverage Metrics: Debt/EBITDA 9.21x (Interest‑bearing debt ¥1,182.7B ÷ quarterly EBITDA ¥1,017.8B ×4) at a high level; Interest Coverage 8.29x (EBIT ¥905.6B / Financial Expense ¥109.3B) indicates interest burden is manageable. Working Capital Efficiency: DSO 190 days (Accounts receivable ¥1,980.5B ÷ daily sales ¥10.43B), DIO 465 days (Inventory ¥1,999.9B ÷ daily cost of sales ¥4.30B), DPO 505 days (Accounts payable ¥2,171.9B ÷ daily cost of sales ¥4.30B), CCC 150 days — prolonged durations are notable. Goodwill & Intangible Risk: Goodwill / Net Assets 89.8% (Goodwill ¥2,286.2B / Equity attributable to owners of parent ¥2,540.8B), Goodwill / EBITDA 22.5x (Goodwill ¥2,286.2B ÷ quarterly EBITDA ¥1,017.8B ×4) — high levels imply high impairment sensitivity.
Operating Cash Flow was ¥847.6B, 1.24x Net Income ¥681.5B, indicating solid cash backing of profits (>1.0x). However, increases in accounts receivable ▲¥267.5B and inventory ▲¥121.6B pressured OCF, confirming working capital build. Subtotal before tax adjustments was ¥1,117.3B, including depreciation & amortization ¥474.3B (depreciation & amortization ¥474.3B), stock-based compensation ¥81.4B, impairment losses ¥23.7B, and foreign exchange losses ¥35.1B. Income tax payments ▲¥299.5B also materially weighed on OCF. Investing Cash Flow was ▲¥377.7B, driven by PPE acquisitions ▲¥227.6B and intangible asset acquisitions ▲¥102.1B. Proceeds from sale of fixed assets ¥2.3B and subsidy receipts ¥0.2B contributed slightly, while conditional consideration payments for subsidiary share acquisitions ▲¥13.3B and equity investments in associates ▲¥3.0B were outflows. Financing Cash Flow was ▲¥847.7B, with dividend payments ▲¥508.1B, long-term borrowings repayments ▲¥270.5B, lease liability repayments ▲¥27.0B, and interest payments ▲¥44.4B as principal items. FCF was approx. ¥520B (OCF ¥847.6B - PPE acquisitions ¥227.6B - intangible acquisitions ¥102.1B + PPE sale ¥2.3B), remaining positive and roughly covering dividend payments ¥508.1B with dividend coverage about 1.0x. Cash and cash equivalents decreased by ▲¥282.7B from opening ¥2,958.97B to closing ¥2,676.3B, mainly due to dividend outflows, working capital increases, and debt repayments. Cash generation is within a standard range, but prolonged working capital (CCC 150 days) and inventory build that delays cash conversion are monitoring points.
Ordinary Income ¥836.1B vs. Net Income attributable to owners of parent for the quarter ¥681.5B — the gap ▲¥154.6B (▲18.5%) is attributable to the difference between Profit Before Tax ¥845.2B and Ordinary Income ¥836.1B (equity-method gain/loss ▲¥1.3B) and income tax expense ¥162.7B (effective tax rate 19.3%), indicating limited one-off factors. Financial expense ¥109.3B exceeded financial income ¥50.1B, producing net financial expense ▲¥59.2B that pressured Ordinary Income; this is a recurring factor reflecting higher interest burden on borrowings of ¥1,182.6B (interest expense / interest-bearing debt = 0.93%) and some FX losses. Other expenses ¥43.9B (down materially from ¥165.7B prior year) included one-off M&A-related costs and impairment losses ¥23.7B, but reduced from prior year impairment of ¥72.1B, indicating diminished one-off impact. Non-operating income does not exceed 5% of revenue, so earnings quality is backed by core operations. OCF ¥847.6B exceeds Net Income ¥681.5B (OCF / Net Income 1.24x), and accruals are within a normal range. Total comprehensive income ¥1406.4B (Other Comprehensive Income +¥723.9B) was largely driven by translation differences +¥740.97B; the fact that OCI exceeded net income reflects a temporary FX factor but contributes to equity strengthening. Overall, earnings quality is supported by expanded recurring operating profit and solid cash backing, with limited one-off impacts.
The Company does not disclose a full-year forecast in the quarterly securities report (has_forecast: false). Q1 revenue ¥3802.9B corresponds to ¥3691B on a Non-GAAP, timing-adjusted basis per the PDF presentation, exceeding the initial forecast by +1.4%; Non-GAAP operating margin 33.7% also beat expectations. The Q2 midpoint guidance is Revenue ¥3880B (range ±¥75B) and Operating Margin 29.0%, expecting lower profits compared with Q1, while the H1 cumulative plan is Revenue ¥7603B (YoY +20.0%). Progress against full-year guidance cannot be calculated due to non-disclosure, but progress against the H1 plan is Revenue 48.6% (¥3691B / ¥7603B, timing-adjusted), close to standard progress (50%). Q2 operating margin guidance of 29.0% is forecast to decline -4.7pt from Q1 33.7%, primarily due to a decrease in gross margin to 57.0% (from Q1 59.2%), although planned YoY gross margin improvement remains +0.2pt. Order backlog data is not disclosed, but PDF materials suggest some visibility into sales from inventory DOI/WOI build and pre-shipments to meet demand for Q2 and beyond. FX assumptions are USD/JPY = 156 and EUR/JPY = 180; FX sensitivity is Revenue ¥1.8B / ¥0.2B? (Note: source states USD 1 yen => Revenue ¥18B & Operating Income ¥8B; EUR 1 yen => Revenue ¥2B & Operating Income ¥1B) — specifically, USD 1 JPY move impacts Revenue ¥18B and Operating Income ¥8B; EUR 1 JPY move impacts Revenue ¥2B and Operating Income ¥1B.
No dividend per share was paid in Q1 (no quarterly dividend system). Financing Cash Flow includes dividend payments ▲¥508.1B, which relate to payments of the prior fiscal year-end dividend. Dividend payout ratio cannot be computed for the single quarter; annual dividend policy is undisclosed. For share buybacks, proceeds from acquisition and disposal of treasury stock of ¥11.4B were recorded, and on a net basis treasury stock decreased by ▲¥68,870 million (prior year ▲¥70,012 million), reflecting disposals of treasury stock due to stock option exercises. Total Return Ratio (dividends + buybacks) is not included in this quarterly report, but FCF approx. ¥520B is nearly equivalent to dividend payments ¥508.1B, yielding cash-based dividend coverage of about 1.0x. Considering cash & equivalents ¥2,676.3B and OCF ¥847.6B, financial soundness and dividend sustainability are supported; however, given high leverage Debt/EBITDA 9.21x and working capital build, prioritizing leverage reduction while continuing growth investment is preferable to aggressive shareholder return expansion. With Equity Ratio 60.1% and accumulated retained earnings ¥1,230.5B, medium-to-long-term dividend sustainability is assessed as high, but semiconductor cycle volatility suggests maintaining stable dividends while keeping flexibility for opportunistic increases is key to capital allocation.
[Short-term]
[Long-term]
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 23.8% | 6.8% (2.9%–9.0%) | +17.0pt |
| Net Income Margin | 17.9% | 5.9% (3.3%–7.7%) | +12.0pt |
Operating and net margins substantially exceed industry medians, placing the company among the top profitability cohort within the manufacturing sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 23.2% | 13.2% (2.5%–28.5%) | +10.0pt |
Revenue growth also exceeds the median by +10.0pt, positioning the company in a high-growth zone within manufacturing.
※ Source: Company compilation
Semiconductor cycle volatility and demand variability: Fluctuations in auto production plans (sharp declines in ADAS / in-vehicle information demand) or inventory adjustment cycles in industrial & IoT could materially swing revenue and profits. Given Industrial, Infrastructure & IoT accounts for 52.3% of revenue, a slowdown in data center/AI demand or excessive inventory buildup could sharply reduce operating margins. The prior YoY +32.0% growth in Industrial, Infrastructure & IoT revenue partly reflects demand pull-forward; if high DIO of 465 days turns into obsolete inventory, valuation losses and price pressure are concerns.
Goodwill & intangible impairment risk: Goodwill ¥2,286.2B (89.8% of net assets) and Goodwill/EBITDA 22.5x present significant risk of large impairments if synergies from M&A (e.g., Altium) are delayed or market conditions deteriorate. Prior-year impairment loss of ¥72.1B underscores this risk — in a semiconductor downturn, impairments could reoccur at several-hundred-billion-yen scale, materially damaging Net Income and equity. Goodwill-related amortization (approx. Non-GAAP vs. IFRS adjustments ~¥349B) also pressures earnings without cash generation, as ongoing PPA amortization reduces reported profitability.
High leverage and deteriorating working capital efficiency: Debt/EBITDA 9.21x is high and could materially reduce financial flexibility in a rising-rate environment or if OCF declines. Interest burden ratio 0.933 (Financial Expense ¥109.3B / interest-bearing debt ¥1,182.6B) is currently manageable but could rise with policy rate hikes or worsening borrowing terms. Working capital metrics (DSO 190 days, DIO 465 days, CCC 150 days) are prolonged; receivables +¥28.9B and inventory +¥14.1B builds have pressured OCF. If demand weakens and inventory turns slowly, cash generation could collapse and precipitate liquidity stress. Current ratio 123.1% is acceptable but continued working capital build could erode buffers and increase repayment pressure on short-term debt ¥245.5B.
High-margin mix in Industrial, Infrastructure & IoT (Operating Income margin 31.9%, YoY +9.0pt) and Automotive (36.0%, YoY +1.6pt) underpinned consolidated Operating Margin 23.8% (YoY +16.8pt), with gross margin improvement and SG&A compression driving profit growth. Q1 Non-GAAP Operating Margin 33.7% exceeded initial guidance, and gross margin 59.2% benefited from mix improvement, manufacturing cost cuts, and yen weakness. In the near term, continued data center AI demand and high-value automotive product mix support persistence of high operating margins.
Working capital build (Accounts receivable +¥28.9B, Inventory +¥14.1B) alongside a healthy OCF/Net Income 1.24x suggests the company can balance growth investment and cash generation. FCF approx. ¥520B covers dividend payments ¥508B, and Capex/Depreciation 2.03x indicates active investment while maintaining cash generation. However, prolonged CCC 150 days and DIO 465 days introduce inventory stagnation risk; if demand falls, OCF could decline sharply and pressure liquidity. Achieving leverage reduction (Debt/EBITDA 9.2x → mid-term target) is a prerequisite for expanding capital allocation flexibility.
High Goodwill/Net Assets 89.8% and Goodwill/EBITDA 22.5x indicate acute impairment sensitivity tied to the realization of M&A synergies and semiconductor cycle downside. Altium ARR YoY +8% growth and Renesas 365 general availability are early integration signs, but value realization will take time and impairment risk remains. While Equity Ratio 60.1% and retained earnings ¥1,230.5B demonstrate financial strength, high leverage and goodwill burdens mean stable growth and improved capital efficiency will be decisive for medium-to-long-term valuation.
This report was auto-generated by AI integrating XBRL securities report data and PDF presentation materials to produce an earnings analysis. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are compiled by the company from public financial statements and are for reference only. Investment decisions are your responsibility; consult a professional advisor as necessary.