NISSAN MOTOR (7201) FY2026 Q3 Earnings Report

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Executive Summary

The most important point for the cumulative Q3 period of the fiscal year ending March 2026 is not a combination of higher revenue and lower earnings, but rather that revenue declined and operating income turned into a loss. Revenue was ¥8,577.97B (-6.2% YoY), operating income was ¥-101.1B (a ¥741.2B deterioration from ¥640.1B in the same period of the previous year), ordinary income was ¥-1,108.3B (-70.5% YoY), and net income was ¥-2,440.3B. The primary factors were lower revenue and deteriorating profitability in the Automotive Business, while impairment losses on fixed assets of ¥805.9B, mainly in Japan, further expanded the loss.

Factors Affecting Earnings

【Revenue】Revenue was ¥8,577.97B, a decrease of -6.2% YoY. External revenue from the Automotive Business was ¥7,654.73B, down -7.1% YoY, weighing on consolidated results, while the Financial Services Business secured higher revenue of ¥923.24B, up +2.6% YoY. By region, Asia recorded the largest decline at -22.7% YoY, while North America, the largest market, also contracted by -4.1% YoY.

【Profit and Loss】Operating income was ¥-101.1B, compared with ¥640.1B in the same period of the previous year, primarily because the gross margin declined by 164bp to 12.2%. Although SG&A expenses were reduced by ¥1,451.3B, this was insufficient to offset the decline in gross profit. The Automotive Business operating margin deteriorated to -3.1% from -1.8%, while the Financial Services Business improved to 22.9% from 22.6%, supporting consolidated earnings. Ordinary income was ¥-1,108.3B due to the burden of non-operating expenses, including interest expenses of ¥834.0B. Extraordinary gains and losses, including a gain on the sale of fixed assets of ¥1,191.3B and impairment losses of ¥805.9B, expanded the net loss to ¥2,440.3B (loss attributable to owners of the parent of ¥2,502.2B). The results are classified as lower revenue and lower earnings.

Segment Analysis

The Automotive Business recorded revenue of ¥7,765.58B, including intersegment revenue, and an operating loss of ¥2,754.4B, representing a margin of -3.5%; the loss expanded from ¥1,504.1B in the same period of the previous year. The Financial Services Business recorded revenue of ¥977.30B and operating income of ¥2,240.7B, representing a margin of 22.9%, making it the only segment to post higher operating income, up +4.5% YoY. The consolidated operating margin deteriorated from 0.7% to -0.1%, with deteriorating profitability in the Automotive Business constituting a structural factor. By region, North America was the largest market, with external revenue of ¥4,761.24B, while Asia recorded revenue of ¥385.23B and the largest decline rate at -22.7% YoY.

Key Financial Indicators

【Profitability】The operating margin was -0.1%, compared with 0.7% in the same period of the previous year, while the net profit margin attributable to owners of the parent turned negative at -2.9%. The gross margin was 12.2%, down from 13.9% in the same period of the previous year, and the company remained in an operating loss position even after deducting the SG&A ratio of 12.4%. 【Cash Flow Quality】Operating Cash Flow (OCF) was positive at ¥1,323.1B, but OCF from the Automotive Business alone was negative at ¥-5,414.8B, with OCF from the Financial Services Business of ¥6,737.9B supporting the consolidated figure. The coexistence of a gain on the sale of fixed assets of ¥1,191.3B and impairment losses of ¥805.9B warrants caution when assessing the sustainability of current-period earnings. 【Investment Efficiency】ROE was -6.1% on an annualized basis, with the Automotive Business’s low profitability weighing on capital efficiency. 【Financial Soundness】The equity ratio was 27.0%, equivalent to approximately 27.5% in the same period of the previous year, while outstanding bonds increased to ¥26,710.8B, up +56.3% YoY, indicating greater reliance on external financing. Cash and deposits stood at ¥16,420.4B, securing short-term liquidity.

Cash Flow Analysis

Operating Cash Flow (OCF) was positive at ¥1,323.1B, up +184.5% YoY, but investing cash flow required an outflow of ¥-6,518.2B, resulting in negative free cash flow of ¥-5,195.2B. In the breakdown of OCF, the subtotal before changes in working capital was positive at ¥4,122.4B; however, a decrease in accounts payable of ¥-2,546.3B and interest paid of ¥-2,647.2B placed pressure on cash flow. By segment, OCF from the Automotive Business was negative at ¥-5,414.8B, while OCF from the Financial Services Business of ¥6,737.9B complemented the consolidated total, indicating weak cash-generating capacity in the manufacturing and sales operations. Financing cash flow was an inflow of ¥4,314.5B to compensate for investing cash outflows, with financing through bond issuance and other means covering the free cash flow deficit.

Earnings Quality

Current-period earnings were significantly affected by temporary factors. Extraordinary income included a gain on the sale of fixed assets of ¥1,191.3B, while extraordinary losses primarily included impairment losses of ¥805.9B related to fixed assets in the Automotive Business in Japan. Accordingly, the difference between the two of ¥-973.0B contributed to expanding the loss before tax of ¥2,081.2B. Of non-operating income of ¥981.2B, interest income of ¥532.6B and foreign exchange gains of ¥196.8B were the major items and do not indicate improved profitability in the core business. Meanwhile, non-operating expenses reached ¥1,988.5B, primarily due to interest expenses of ¥834.0B, expanding the loss at the ordinary income level. The decrease in accounts receivable (-26.8% YoY) was consistent with the ¥1,804.7B collection of accounts receivable recorded in operating cash flow and had a positive effect on cash efficiency; however, because it also reflected the decline in revenue, it cannot simply be regarded as an improvement in quality. Comprehensive income was ¥-436.6B, and the difference from net income of ¥-2,440.3B was primarily attributable to foreign currency translation adjustments of +¥2,207.6B, with foreign-currency translation differences on overseas assets mitigating the apparent severity of earnings.

Earnings Forecast and Guidance

The full-year company forecast is revenue of ¥11,900B (-5.8% YoY), an operating loss of ¥-600.0B, forecast EPS of -¥186.04, and forecast dividends of ¥0. Revenue progress was 72.1%, slightly below the standard cumulative quarterly progress rate of 75%. Meanwhile, the operating loss of ¥101.1B represented only 16.8% of the full-year forecast operating loss of ¥600.0B, implying an assumption that losses will expand toward Q4. Regarding the loss attributable to owners of the parent, cumulative Q3 results were ¥2,502.2B against the full-year forecast loss of ¥6,500B, representing progress of 38.5%. The company’s plan assumes additional recognition of restructuring-related expenses and other items in the second half.

Shareholder Returns

Both the Q2 dividend and the full-year dividend forecast are ¥0 per share, and the suspension of dividends continues. Share repurchases also amounted to only ¥0.01B, resulting in virtually no cash outflow for shareholder returns. Given the loss attributable to owners of the parent of ¥2,502.2B and free cash flow of ¥-5,195.2B, the continuation of a zero-dividend policy can be viewed as consistent with the preservation of cash and capital.

Risk Factors

1. Deteriorating profitability in the Automotive Business: The Automotive Business recorded an operating loss of ¥2,754.4B and an operating margin of -3.5%, deteriorating from the equivalent -1.8% in the same period of the previous year. Depending on discounting, product mix, and fixed-cost absorption, losses could expand further.

2. Regional demand fluctuations: North America is the largest market, accounting for more than half of external revenue, while Asia has declined sharply by -22.7% YoY. Changes in demand and the competitive environment in these key regions will directly affect consolidated performance.

3. Increasing financial burden: Outstanding bonds increased by +56.3% YoY to ¥26,710.8B, while interest expenses of ¥834.0B are a burden amid operating losses. If the structure of covering free cash flow of ¥-5,195.2B through financing cash flow continues, sensitivity to changes in the financing environment will increase.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

The company’s profitability is positioned significantly below the industry median.

Growth and Capital Efficiency

Revenue growth also fell below the industry median, confirming the company’s underperformance within the manufacturing industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Consolidated earnings diverged sharply between the Automotive Business and the Financial Services Business. The Automotive Business recorded an operating margin of -3.5%, compared with 22.9% for the Financial Services Business, confirming a structure in which consolidated cash flow is highly dependent on the Financial Services Business.

2. Extraordinary gains and losses included both a gain on the sale of fixed assets of ¥1,191.3B and impairment losses of ¥805.9B. The impact of these temporary factors must therefore be considered when simply comparing the current-period earnings level with the previous year.

3. The full-year company forecast assumes that loss progress will deepen relative to revenue progress of 72.1%, making the recognition or non-recognition of additional expenses in Q4 a key factor determining full-year results.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥742–¥783 at ±1% for the cost of equity, and ¥741–¥775 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used; there is a timing difference from the full-year forecast.
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL financial results summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed financial results data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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