ANRITSU (6754) FY2026 Q3 Earnings Report

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Executive Summary

The cumulative results for the first three quarters showed nearly flat revenue, while Operating Income and Net Income increased significantly due to improved profitability. Revenue was ¥810.7B (+0.3% YoY), Operating Income was ¥84.1B (+31.1%), Profit Before Tax was ¥94.1B (+29.9%), and Net Income attributable to owners of the parent was ¥63.2B (+28.9%). In the core Communications Measurement Business, demand for optical transceivers for data centers recovered, and improved gross margin (50.3%, +2.6pt YoY) drove the increase in profit. However, progress against the full-year plan was 56.1% for Operating Income and 57.5% for Net Income, below the standard level of 75%, making execution in Q4 the key focus.

Factors Affecting Business Performance

【Revenue】Revenue was ¥810.7B, nearly flat at +0.3% YoY. Although the core Communications Measurement Business recovered in the second half due to the fading impact of U.S. tariffs and a recovery in data center demand, full-year revenue declined by -5.4%. Meanwhile, the PQA Business posted a +12.1% increase in revenue due to domestic inbound-related demand, while the Environmental Measurement Business declined by -1.7% due to the impact of U.S. tariffs on testing equipment for EVs and batteries, resulting in divergent performance across segments.

【Profit and Loss】Operating Income was ¥84.1B (+31.1% YoY), and the Operating Income margin improved to 10.4% from 7.9% in the previous year, an improvement of +2.5pt. The primary factor was improved gross margin resulting from a lower cost-of-sales ratio (previous year 52.3% → current period 49.7%), while the SG&A ratio remained broadly flat at 32.2%. Profit Before Tax was ¥94.1B (+29.9%), with financial income of ¥11.8B exceeding financial expenses of ¥1.9B and supporting Net Income. The figure includes a gain on the sale of fixed assets of ¥3.8B, but the amount was small and the impact of extraordinary gains and losses was limited. Net Income of ¥63.2B (+28.9%) was broadly consistent with the growth in Profit Before Tax, resulting in a decision characterized by significant profit growth despite only marginal revenue growth.

Segment Analysis

The Communications Measurement Business, which has the largest revenue composition ratio (59.4%), is the core business and made the largest contribution to fluctuations in overall performance. Revenue in this business declined to ¥481.6B (-5.4% YoY), while Operating Income increased significantly to ¥65.0B (+46.6%), raising the profit margin to 13.5% from approximately 8.9% in the previous year. Improved profitability associated with the recovery in demand for optical transceivers for data centers appears to have contributed. The PQA Business secured both revenue and profit growth, with revenue of ¥222.3B (+12.1%) and Operating Income of ¥20.7B (+31.5%), although its profit margin of 9.3% was below that of the Communications Measurement Business. The Environmental Measurement Business recorded revenue of ¥56.2B (-1.7%) and an Operating Loss of ¥0.1B, falling into the red from approximately +¥4B in the previous year, due to lower demand for testing equipment for EVs and batteries. Overall profit growth was primarily attributable to improved profitability in the Communications Measurement Business.

Key Financial Indicators

Profitability: ROE 4.9%, Operating Income margin 10.4% (previous year 7.9%)
Cash flow quality: Operating Cash Flow/Net Income 1.47x (healthy at 1.0x or higher), FCF -¥31.7B
Investment efficiency: Capital expenditures ¥22.8B / depreciation and amortization ¥44.1B = 0.52x, indicating a maintenance investment level rather than a growth investment phase
Financial soundness: Equity Ratio 75.9% (previous year 77.8%), current ratio approximately 317% (current assets ¥1042.0B / current liabilities ¥328.8B)

Cash Flow Analysis

Operating Cash Flow was ¥93.2B, or 1.47x Net Income of ¥63.2B, indicating sound cash backing for earnings. However, OCF declined by -43.9% from ¥165.9B in the same period of the previous year, primarily due to a ¥29.6B increase in inventories. Investing Cash Flow was -¥124.9B, principally reflecting ¥98.5B for the acquisition of DEWETRON, while ordinary capital expenditures amounted to only ¥22.8B. Financing Cash Flow was -¥57.6B, with dividend payments of ¥51.4B and share repurchases of ¥13.4B as the main sources of outflow. FCF was -¥31.7B; although cash generation after ordinary capital expenditures (OCF - capital expenditures) was solid at ¥70.4B, M&A investment reduced overall FCF. Cash generation is assessed as standard to requiring monitoring, and the pressure on OCF from the increase in inventories should be closely watched.

Earnings Quality

Profit Before Tax of ¥94.1B exceeded Operating Income of ¥84.1B by 11.9%, with the primary cause of the gap being financial income (net approximately ¥9.9B). Financial income of ¥11.8B mainly comprised interest and dividend income and is recurring in nature. The difference between Net Income of ¥63.2B and Profit Before Tax was corporate income taxes and other taxes of ¥30.9B (effective tax rate 32.8%), with no unusual tax factors identified. Although the results include a gain on the sale of fixed assets of ¥3.8B, the amount was small at approximately 4.1% of Profit Before Tax, limiting its impact as a one-time factor. Operating Cash Flow of ¥93.2B exceeded Net Income, indicating limited accrual-related concerns.

Earnings Forecast and Guidance

Progress against the full-year forecast (Revenue ¥1,230.0B, Operating Income ¥150.0B, Net Income ¥110.0B) was 65.9% for Revenue, 56.1% for Operating Income, and 57.5% for Net Income, all below the standard progress level of 75%. There were no revisions to the earnings or dividend forecasts during the quarter. Achieving the full-year plan will require approximately ¥65.9B of Operating Income in Q4 alone, corresponding to an Operating Income margin of approximately 15.7% (above the cumulative margin of 10.4%). The expansion of production for optical transceivers for data centers and the capture of demand for general-purpose measuring instruments and the automotive market will determine progress in the second half.

Shareholder Returns

The dividend was ¥20.00 per share for the interim period, with a full-year forecast of ¥40.00 (no increase from the previous year’s level has been identified; the forecast assumes the same amount as the previous year’s actual dividend). The forecast full-year Payout Ratio is approximately 46.6%, calculated based on forecast full-year Net Income of ¥110.0B and the forecast total dividend amount (DPS of ¥40 × average number of shares outstanding during the period). In addition, the Company conducted share repurchases of ¥13.4B during the period. Combined with dividends of ¥51.4B, the total return amount of ¥64.8B represents a Total Return Ratio of 102.5% against cumulative Net Income of ¥63.2B. Cash and cash equivalents of ¥430.2B and an Equity Ratio of 75.9% provide a financial foundation sufficient to support continued shareholder returns for the foreseeable future.

Catalysts

【Short Term】Expansion of production for 800GE optical transceivers and the ramp-up of 1.6TE products in Q4, as well as the capture of demand for optical submarine cable installation, will be key to achieving the full-year plan. A briefing for institutional investors and analysts is scheduled for January 29, 2026.

【Long Term】The expansion into the automotive, aerospace, and renewable energy fields following the acquisition of DEWETRON, completed in October 2025, and improved recognition of power solutions for the automotive market through participation in CES 2026 are attracting attention as medium- to long-term growth drivers.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Profitability exceeds the industry median and is positioned in the upper portion of the IQR.

Growth and Capital Efficiency

The Revenue growth rate is below the industry median and is positioned toward the lower end of the IQR.

※Source: Compiled by the Company

Risk Factors

1. Declining working capital efficiency: Inventories of ¥272.5B and accounts receivable of ¥301.6B are substantial and are putting pressure on OCF. On an annualized basis, inventory and receivable turnover days are above the industry average, making trends in advance inventory held in anticipation of orders for data center-related products a key focus going forward.

2. Uncertainty regarding achievement of the full-year plan: Progress toward Operating Income and Net Income is 56.1% and 57.5%, respectively, below the standard progress level, and a profit margin of approximately 15.7%, exceeding the previous-year level, will be required in Q4. U.S. tariff policy and trends in China’s 5G investment could affect performance in the second half.

3. Deterioration in profitability of the Environmental Measurement Business: The segment posted an Operating Loss of -¥0.1B, falling into the red from the previous year. The primary cause was a slowdown in demand for testing equipment for EVs and batteries, and recovery through the domestic rollout of DEWETRON products and other measures is a future challenge.

Key Points from the Earnings Results

1. Despite nearly flat revenue, the Operating Income margin improved by +2.5pt YoY. The data indicate that improved profitability in the core Communications Measurement Business, driven by a recovery in data center demand, was the primary cause of profit growth.

2. Progress toward the full-year forecast was below standard for both Operating Income and Net Income, indicating a plan structure weighted toward the second half. Execution in Q4 is noteworthy as a structural factor that will determine full-year results.

3. Intangible assets increased significantly YoY following the ¥98.5B acquisition of DEWETRON. The extent of the acquisition’s contribution to post-acquisition revenue and profit will be a key item to monitor in future earnings disclosures.

Theoretical Share Price (For Reference)

Sensitivity: ¥972–¥1,028 at Cost of Equity ±1%, and ¥1,000–¥1,000 at ω ±0.1.

Notes:

• Net assets as of the quarter-end are used (there is a timing gap relative to the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly disclosed data; this does not constitute 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 through an integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. 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 professionals as necessary.

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