NTT (9432) FY2026 Q3 Earnings Report

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Executive Summary

The cumulative results through Q3 recorded increases in both revenue and profit, while the operating margin also improved modestly. Revenue was ¥104210B (¥100497B in the prior year, +3.7%), Operating Income was ¥14571B (¥13992B in the prior year, +4.1%), Profit Before Tax was ¥13737B (¥13417B in the prior year, +2.4%), and Net Income attributable to owners of the parent was ¥9261B (¥8507B in the prior year, +8.9%). The Operating Income margin was 14.0%, an improvement from the prior year, and the trend of increasing revenue and profit continues, with the profit growth rate exceeding the revenue growth rate.

Factors Affecting Financial Performance

【Revenue】Revenue increased 3.7% year on year to ¥104210B. Operating expenses totaled ¥89639B, an increase of only 3.6%, slightly below the revenue growth rate; consequently, the increase in costs broadly tracked the expansion in revenue. The increase in personnel expenses (¥23756B, +2.7%) was below the revenue growth rate, indicating that expense efficiency relative to revenue growth was generally maintained.

【Profit and Loss】Operating Income was ¥14571B (+4.1%), while Profit Before Tax was ¥13737B (+2.4%). The slower growth in Profit Before Tax than in Operating Income was attributable to the burden of net financial costs, comprising financial expenses of ¥1694B and financial income of ¥561B. Meanwhile, Net Income attributable to owners of the parent increased 8.9% to ¥9261B, exceeding the Operating Income growth rate. This was attributable to a relative reduction in the income tax burden (income taxes of ¥4092B, equivalent to 29.8% of Profit Before Tax). In addition to the increase in revenue and profit, the reduction in the tax burden supported growth in final profit.

Key Financial Indicators

【Profitability】The Operating Income margin was 14.0%, the Profit Before Tax margin was 13.2%, and the Net Income attributable to owners of the parent margin was 8.9%. Profitability improved moderately from the prior-year period’s Net Income attributable to owners of the parent margin (approximately 8.5%). 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥9574B, down 11.2% from ¥10786B in the prior-year period. The ratio to Net Income attributable to owners of the parent (¥9261B) was approximately 1.03x, indicating that earnings were supported by cash generation, although cash conversion efficiency was relatively low when measured against EBITDA after considering depreciation and amortization (¥13283B). 【Investment Efficiency】ROE (annualized) was 12.9%, and basic EPS increased 10.6% to ¥11.23 from ¥10.15 in the prior year. BPS was ¥116.37, down from ¥123.54 in the prior year. 【Financial Soundness】The Equity Ratio declined significantly to 20.3% from 34.0% in the prior year. Total assets expanded to ¥468348B from ¥300625B in the prior year, while net assets declined to ¥99876B from ¥113446B, indicating that the capital base has become relatively thinner as the asset scale expanded.

Cash Flow Analysis

Operating Cash Flow (OCF) declined 11.2% year on year to ¥9574B, moving in the opposite direction from the trend of increasing profit. The primary factors behind the decline were an increase in trade receivables, including ¥1703B in cash outflows due to deterioration in working capital, as well as cash outflows for income taxes (¥4807B), interest (¥1296B), and lease payments (¥2030B). Investing Cash Flow was negative ¥4741B, reflecting continued investment in tangible and intangible assets and the acquisition of investment securities. Financing Cash Flow was positive ¥13139B. Although dividends (¥4340B) and share repurchases (¥1587B) were carried out as shareholder returns, cash inflows from equity financing and transactions involving interests in subsidiaries exceeded these outflows. Free Cash Flow, calculated as the sum of Operating Cash Flow and Investing Cash Flow, was ¥4833B, a level sufficient to cover dividend payments; however, total shareholder returns, including share repurchases (¥5927B), exceeded Free Cash Flow.

Quality of Earnings

The increase in profit for the period reflected not only growth in core Operating Income (+4.1%) but also a larger increase in Net Income attributable to owners of the parent (+8.9%) due to the reduced income tax burden. The increase in profit was therefore not dependent on one-off extraordinary gains or losses. Financial income of ¥561B and financial expenses of ¥1694B resulted in a net financial expense burden of ¥1133B, contributing to Profit Before Tax growth (+2.4%) falling below Operating Income growth (+4.1%). Total comprehensive income was ¥14917B, including ¥14488B attributable to owners of the parent. The difference from Net Income attributable to owners of the parent of ¥9261B was primarily attributable to other comprehensive income, including foreign currency translation differences and changes in the fair value of financial assets, resulting in a certain divergence between net income and comprehensive income. The share of profit of investments accounted for using the equity method was ¥298B, making only a limited contribution to Net Income attributable to owners of the parent; the core source of profit was the operating earnings of the consolidated businesses.

Earnings Forecasts and Guidance

The full-year company forecast is revenue of ¥141640B (+3.4% year on year), Operating Income of ¥16600B (+0.6%), EPS of ¥11.70, and dividends of ¥5.30. The Q3 cumulative progress rates were 73.6% for revenue and 87.8% for Operating Income, with Operating Income progress exceeding the standard 75% level. Since the full-year forecast Operating Income growth rate (+0.6%) is modestly below the cumulative actual growth rate (+4.1%), the company may be assuming an increase in expenses or the occurrence of one-off factors in Q4.

Shareholder Returns

With respect to dividends, a quarterly dividend of ¥2.65 was indicated for the current period, compared with interim dividends of approximately ¥2.60 per share in the prior-year period; the full-year company forecast for annual dividends is ¥5.30. Cumulative dividend payments totaled ¥4340B, representing an estimated Payout Ratio of 46.9% against Net Income attributable to owners of the parent of ¥9261B. Share repurchases of ¥1587B were conducted, bringing total shareholder returns, including dividends and share repurchases, to ¥5927B and the Total Return Ratio to approximately 64.0% of Net Income attributable to owners of the parent. Free Cash Flow of ¥4833B exceeded dividend payments, but total shareholder returns, including share repurchases, exceeded Free Cash Flow; a portion of the capital returns was therefore covered by financing activities and other sources of funding.

Risk Factors

1. Increase in trade receivables and lengthening collection periods: Accounts receivable and notes receivable increased to ¥56778B from ¥48808B in the prior year, becoming a major factor weighing on Operating Cash Flow. Improvements in collection efficiency will influence future cash flow trends.

2. Increased financial leverage and changes in the capital base: The Equity Ratio declined to 20.3% from 34.0% in the prior year, while net assets decreased to ¥99876B from ¥113446B. The relative thinning of the capital base in relation to the rapid expansion in total assets requires ongoing monitoring.

3. Declining cash conversion efficiency: Operating Cash Flow decreased 11.2% year on year. In addition to the substantial depreciation and amortization expense (¥13283B), payments of income taxes, interest, and lease fees, as well as the increase in working capital, constrained Operating Cash Flow.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the Operating Income margin and Net Income margin exceeded the industry median, indicating that profitability was relatively high within the industry.

Growth and Capital Efficiency

The revenue growth rate was below the industry median, indicating a relatively moderate level of growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Results

1. In addition to increases in revenue and profit, the growth in Net Income attributable to owners of the parent (+8.9%) exceeded the growth in Operating Income (+4.1%). The reduction in the tax burden, which lifted final profit, was a key feature of the current period.

2. The capital structure changed significantly, with the Equity Ratio declining from 34.0% in the prior year to 20.3% and total assets expanding substantially to ¥468348B. Changes in the balance between assets and capital will remain an ongoing point of focus in future results.

3. Operating Cash Flow decreased 11.2% year on year, primarily due to the increase in trade receivables. Working capital trends during a period of revenue growth merit attention as an indicator of the speed at which profit growth is converted into cash flow.

Theoretical Share Price (Reference Value)

Sensitivity: ¥121–¥128 at Cost of Equity ±1%; ¥124–¥124 at ω ±0.1.

Notes:

• Since the progress rate of Net Income against the full-year forecast (96%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of forecast progress tend to outperform their forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Net assets as of the quarter-end have been used (there is a timing difference from 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 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 earnings 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 earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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