SoftBank Corp. (shares of preferred stock) FY2026 FY Earnings Report

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Executive Summary

For the consolidated fiscal year ended March 2026, Revenue was ¥70386.8B (YoY +¥4943.3B +7.6%), Operating Income was ¥10425.8B (YoY +¥535.6B +5.4%), Ordinary Income is undisclosed but accounting for financial results it is estimated at ¥9300.2B (YoY +¥499.7B +5.7%), and Net Income Attributable to Parent was ¥5507.6B (YoY +¥245.9B +4.7%). Revenue increased for the third consecutive year, maintaining a growth trend, and Operating Income also increased; however, Operating margin (14.8%) declined by 0.3pt from 15.1% despite revenue growth of +7.6%, suggesting room to improve SG&A efficiency. By segment, Distribution (Revenue +30.9%) and Financial (Revenue +25.2%) drove high growth, Consumer (Revenue +2.1%) showed stable operations, and Media & EC (Revenue +2.4%) slowed due to advertising market conditions. On Operating Income, Financial (+107.1%) recorded notable profit growth and Enterprise was solid at +13.0%, but Media & EC included step-acquisition gain of ¥443.8B, implying core earnings were effectively flat. The Net Income increase (+10.9%) outpaced Net Income Attributable to Parent (+4.7%) due to higher attribution to non-controlling interests.

Drivers of Performance

【Revenue】 Revenue of ¥70386.8B (YoY +7.6%) was driven by growth across all segments. Distribution expanded rapidly to ¥9235.5B (+30.9%), capturing demand for corporate cloud services and advanced technology products. Financial grew strongly to ¥3793.1B (+25.2%), supported by expansion of cashless payments such as PayPay and the transfer of banking operations (PayPay Bank) into the segment. Enterprise recorded ¥9701.4B (+9.2%), driven by increased corporate mobile and solution demand. Consumer was stable at ¥29960.5B (+2.1%) underpinned by ARPU maintenance and low churn. Media & EC reached ¥16410.4B (+2.4%), constrained by advertising market fluctuations and competitive commerce environment. Revenue mix continued to diversify: Consumer 42.6%, Media & EC 23.3%, Distribution 13.1%, Enterprise 13.8%, Financial 5.4%.

【Profitability】 Operating Income of ¥10425.8B (YoY +5.4%) lagged revenue growth (+7.6%) as cost of sales increased (+8.0%) and SG&A rose (+8.3%), compressing margins. Gross profit was ¥33839.9B (gross margin 48.1%, down 0.2pt from 48.3% prior year), impacted by a higher proportion of lower-margin products from Distribution expansion. SG&A was ¥23840.8B (SG&A ratio 33.9%, up 0.3pt from 33.6%), limiting operating leverage versus revenue growth. By segment, Financial operating income was ¥862.9B (YoY +107.1%)—more than doubled—Enterprise was solid at ¥1923.9B (+13.0%), while Media & EC declined to ¥2404.2B (-7.1%). Media & EC included a step-acquisition gain of ¥443.8B related to subsidiary acquisition of LINE MAN CORPORATION PTE. LTD.; excluding this, core operating income is estimated at ¥1960.4B (YoY -24.2%), highlighting the need to improve advertising and e-commerce profitability. Other segments recorded a loss of ¥-629.1B (prior year -¥365.0B), widening the overall drag on corporate profit. Ordinary Income is undisclosed, but financial expense decreased to ¥1096.3B (prior ¥1173.5B) and financial income increased to ¥145.3B (prior ¥116.8B), resulting in Profit Before Tax of ¥9300.2B (YoY +5.7%), slightly outpacing Operating Income growth. After Corporate Income Tax of ¥2034.0B (effective tax rate 21.9%), Net Income was ¥7266.2B (YoY +10.9%), while attributable to non-controlling interests increased to ¥1758.6B (YoY +36.1%), leaving Net Income Attributable to Parent at ¥5507.6B (YoY +4.7%). Comprehensive Income was ¥7807.3B, with the difference from Net Income of ¥540.5B due to Other Comprehensive Income—primarily Foreign Currency Translation Adjustments ¥458.4B and Cash Flow Hedges ¥98.3B—considered temporary. In conclusion, while both revenue and profit increased, the decline in operating margin and Media & EC operating decline (excluding step-acquisition gain) somewhat cloud sustainability.

Segment Analysis

Consumer contributed the largest Operating Income at ¥5508.1B (margin 18.4%), maintaining stable growth with Operating Income up +3.8% YoY. Enterprise Operating Income was ¥1923.9B (margin 19.8%), up +13.0% YoY, benefiting from corporate DX demand and margin improvement. Distribution Operating Income was ¥352.6B (margin 3.8%), up +15.9% YoY, but profit growth lagged revenue growth (+30.9%), possibly reflecting a shift toward lower-margin product mix. Media & EC Operating Income was ¥2404.2B (margin 14.7%), down -7.1% YoY; including step-acquisition gain of ¥443.8B for LINE MAN subsidiary, core Operating Income is estimated at ~¥1960B, implying a YoY -24.2% real decline—likely driven by weaker advertising market and intensified commerce competition. Financial Operating Income was ¥862.9B (margin 22.7%), up +107.1% YoY, as payment volume expanded and banking operations monetized. Other segments posted a loss of ¥-629.1B (prior year -¥365.0B), with widening deficits indicating that monetization of new investments will take time. Adjustments were +¥3.3B (prior year -¥61.2B), reflecting improved elimination of inter-segment transactions.

Key Financial Metrics

【Profitability】ROE 19.3% (Net Income Attributable to Parent ¥5507.6B ÷ Parent Owners’ Equity ¥29578.6B) is high, but Operating margin 14.8% declined 0.3pt from 15.1%, and gross margin also edged down to 48.1% (prior 48.3%). Effective tax rate 21.9% is within normal range; however, net non-operating burden (financial expense ¥1096.3B less financial income ¥145.3B = ¥950.9B) reduced conversion efficiency from EBIT to Profit Before Tax to 89.2%. 【Cash Quality】Operating Cash Flow / Net Income is 1.92x (OCF ¥13937.6B ÷ Net Income ¥7266.2B), indicating reasonably good cash realization; accrual ratio is -9.1% ((Net Income - OCF) ÷ Total Assets), within a healthy range. However, Operating CF subtotal (pre-working capital changes) was ¥17218.3B versus OCF ¥13937.6B, with working capital swing causing a ¥-3280.7B cash outflow. Main drivers were increase in accounts receivable -¥3467.2B (DSO estimated at 157 days) and increase in accounts payable +¥4394.9B, exposing mismatches in collection and payment cycles. Free Cash Flow was ¥1229.5B (OCF - capex - business combination outlays etc.), insufficient to cover dividend payments of ¥4189.0B, yielding FCF coverage of 0.29x—low. 【Investment Efficiency】Total asset turnover was 0.38x, relatively low but reflective of asset-intensive banking/financial segments. Capital expenditure was ¥5704.6B versus depreciation ¥7852.8B (capex/depreciation 0.73x), restrained but potential future increases may be needed for telecom infrastructure refresh. Goodwill was ¥21893.8B (11.8% of total assets, 46.9% of equity), and intangible assets ¥25767.2B; total intangibles ¥47661.0B (25.8% of total assets) indicate aggressive M&A strategy but require impairment monitoring. 【Financial Soundness】Equity Ratio 16.0% (Parent Owners’ Equity ¥29578.6B ÷ Total Assets ¥185021.8B) and D/E 2.20x (Interest-bearing Debt ¥64845.8B ÷ Parent Owners’ Equity ¥29578.6B) imply elevated leverage. Current Ratio 0.63x (Current Assets ¥54055.3B ÷ Current Liabilities ¥85252.4B) is below 1.0, but this is distorted by inclusion of deposits ¥25560.1B from the banking business, so simple assessment is inappropriate. Interest Coverage is 9.5x (Operating Income ¥10425.8B ÷ Financial Expense ¥1096.3B), indicating strong ability to service interest. Cash and deposits of ¥14388.0B provide limited short-term liquidity concern, but improving working capital efficiency (accounts receivable turnover) is key for mid-term financial improvement.

Cash Flow Analysis

Operating Cash Flow was ¥13937.6B (YoY +1.9%), representing 1.92x of Net Income ¥7266.2B, so cash conversion is generally good; however, OCF growth (+1.9%) lagged Net Income growth (+10.9%) as working capital changes were a drag. Operating CF subtotal (pre-working capital) was ¥17218.3B, with depreciation ¥7852.8B, Corporate Income Tax ¥2034.0B, equity-method losses -¥78.0B and other non-cash adjustments added back. Working capital changes included accounts receivable increase -¥3467.2B (Accounts receivable & notes ¥30260.8B, up from ¥28056.4B, +7.9%), causing cash outflow; accounts payable increase +¥4394.9B (Accounts payable ¥32853.0B, up from ¥28286.4B, +16.1%) partially offset this. Inventory increase -¥401.3B, bank deposits +¥3873.2B, and bank loans increase -¥3413.0B also influenced, resulting in net working capital outflow of -¥3280.7B. After Corporate tax payments -¥2575.6B and interest payments -¥917.9B, OCF settled at ¥13937.6B. Investing CF was -¥12708.1B, led by capex -¥5704.6B, acquisitions -¥1539.5B, and bank securities purchases -¥7685.9B; partially offset by bank securities sales/redemptions ¥2033.2B and investment disposals ¥698.7B. Business combination outflow -¥442.7B indicates ongoing M&A activity. Financing CF was -¥1368.5B, with dividend payments -¥4189.0B as the largest outflow, net increase in interest-bearing debt ¥2172.7B (short-term +¥2172.7B; long-term debt inflows ¥16925.9B, outflows -¥16104.4B), and proceeds from non-controlling interests ¥1521.4B as funding sources. Free Cash Flow was ¥1229.5B (OCF - Investing CF), far short of dividend payments ¥4189.0B, leaving FCF coverage at 0.29x. Cash and cash equivalents rose slightly to ¥14388.0B (from ¥14355.3B opening, +¥32.7B), though this included foreign exchange impact +¥171.7B, so real cash generation was limited. Improving working capital efficiency (shortening DSO, increasing inventory turnover) and prioritizing core business investments are essential to balance dividend maintenance and growth investments.

Quality of Earnings

Earnings quality is generally sound, but distinguishing one-off items from recurring income is important. Of Operating Income ¥10425.8B, the Media & EC segment includes step-acquisition gain ¥443.8B, a one-time benefit from a business combination; adjusted core Operating Income is estimated at ¥9982.0B. Even after this adjustment, Operating margin would be 14.2% (down 0.9pt from 15.1% prior year), indicating a downward trend in business profitability. Non-operating income comprised financial income ¥145.3B and other non-operating income ¥588.8B, while non-operating expenses were financial expense ¥1096.3B, equity-method loss -¥78.0B, and other non-operating expense ¥162.2B, yielding a net non-operating burden of -¥602.3B, limited in size. Extraordinary items are undisclosed, but gain on sale of equity-method investments ¥109.8B and impairment losses -¥206.3B were recorded, netting -¥96.5B. From Profit Before Tax ¥9300.2B less Corporate Income Tax ¥2034.0B, Net Income ¥7266.2B versus Comprehensive Income ¥7807.3B, the difference ¥540.5B arises from Other Comprehensive Income—Foreign Currency Translation Adjustments ¥458.4B and Cash Flow Hedges ¥98.3B—temporary valuation items and not recurring operating earnings. OCF/Net Income at 1.92x and accrual ratio -9.1% support that accounting profit is backed by cash flows, indicating quality of earnings. However, working capital swing of -¥3280.7B driven by increases in trade receivables alongside payables suggests an elongating cash conversion cycle as the business expands, which could constrain future cash generation.

Outlook & Guidance

Company guidance for the full year: Revenue ¥75000.0B (YoY +6.6%), Operating Income ¥11000.0B (YoY +5.5%), Net Income Attributable to Parent ¥5600.0B (YoY +1.7%), EPS 11.54円, DPS 4.40円. Revenue is projected to grow +6.6% on a full-year basis, slightly decelerating from the current period +7.6%; assumptions include continued high growth in Distribution and Financial, steady Enterprise performance, and stable Consumer operations. Operating Income guidance implies +5.5% increase, but the step-acquisition gain of ¥443.8B in Media & EC will not recur next year, so core-based incremental profit may be limited. Net Income Attributable to Parent is forecast to slow to +1.7%, influenced by higher attribution to non-controlling interests and variability in financial results. Progress rates are: Revenue current/guide 93.8% (¥70386.8B ÷ ¥75000.0B), Operating Income 94.8% (¥10425.8B ÷ ¥11000.0B), Net Income Attributable to Parent 98.3% (¥5507.6B ÷ ¥5600.0B), all in the high 90% range, suggesting high likelihood of meeting guidance. The guidance may also reflect conservatism and include buffers for external factors (advertising market, FX, interest rates). Forecast DPS 4.40円 is lower than current year 8.6円, but this reflects the October 2024 stock split (1 share → 10 shares); on an annualized basis it equates to 44円, effectively flat. Maintaining dividend policy will depend on generating FCF through working capital efficiency, selective growth investments, and possibly divestiture of non-core assets.

Shareholder Returns

Annual dividend was Interim 4.3円 and Year-end 4.3円, total 8.6円 (post-stock-split basis). Compared with prior interim 43円 and year-end undecided (pre-split), on a split-adjusted basis dividends are effectively maintained. Payout Ratio is 78.3% (Total Dividends ¥4082.3B ÷ Net Income Attributable to Parent ¥5507.6B) on an accounting basis, while actual dividend payments per cash flow statement were ¥4189.0B, yielding payout ratio 76.1% (¥4189.0B ÷ ¥5507.6B). Both metrics are in the high 70s, indicating a policy of distributing a large portion of earnings. Free Cash Flow of ¥1229.5B is far below dividend payments ¥4189.0B, so FCF coverage is 0.29x and weak. Dividend funding relied on OCF ¥13937.6B, net increase in interest-bearing debt ¥2172.7B, and proceeds from non-controlling interests ¥1521.4B, making dividend sustainability dependent on OCF and financial flexibility. Share buybacks were effectively zero this period (treasury stock acquisitions 0.0B in cash flow statement), concentrating shareholder returns on dividends. Total Return Ratio is equivalent to payout ratio at 76.1%. Next year dividend guidance DPS 4.40円 (annualized 44円) appears to halve current-year reported dividend (split-adjusted 86円), but this is likely a representation of the interim/year-end split and not necessarily an actual policy cut. Continued dividend policy may require working capital efficiency improvements to boost FCF, selective reinvestment, or potential asset disposals.

Risk Factors

1. Cash flow pressure from working capital changes: Increase in accounts receivable -¥3467.2B and accounts payable +¥4394.9B indicates mismatch between collection and payment cycles as the business scales. DSO estimated at 157 days suggests elongation, affected by Financial and EC/Advertising business mix. Continued revenue growth could further increase working capital needs, pressuring OCF and reducing Free Cash Flow (¥1229.5B), creating a risk to dividend sustainability unless OCF is increased or funding is raised via disposals/investment curtailment.

2. Media & EC profitability deterioration and one-off gain expiration risk: Media & EC Operating Income ¥2404.2B includes step-acquisition gain ¥443.8B; core Operating Income excluding this is ~¥1960B (YoY -24.2%). With advertising market weakness and intensifying commerce competition, margin fell to 14.7% (prior 25.9%, -11.2pt). Loss of the step-acquisition gain next year could result in underperformance versus corporate Operating Income guidance (¥11000.0B, +5.5%), posing downside risk. Heavy exposure to exogenous advertising and e-commerce market conditions increases earnings uncertainty.

3. Impairment risk from high goodwill and intangible assets: Goodwill ¥21893.8B (46.9% of equity) and intangible assets ¥25767.2B totaling ¥47661.0B (25.8% of assets) reflect an aggressive M&A posture but carry impairment risk. If Media & EC core earnings remain weak, deviations from acquisition-assumed business plans could necessitate impairment charges. There is precedent with equity-method impairment loss -¥206.3B. With Equity Ratio 16.0% and D/E 2.20x, a large impairment could rapidly deteriorate financial health.

Industry Benchmark (Reference, Company Analysis)

Profitability & Return

Profitability metrics materially exceed industry medians, reflecting a hybrid telecom/financial model and high-margin businesses.

Growth & Capital Efficiency

Revenue growth trails the industry median somewhat, impacted by Consumer maturity and slowing Media & EC growth.

※Source: Company compilation

Key Takeaways from Results

1. Core telecom stability plus growth in Financial and Corporate segments underpin the portfolio, but the estimated core Operating Income excluding Media & EC step-acquisition gain (¥443.8B) shows a YoY -24.2% decline—this is notable. Achieving next year’s Operating Income plan (¥11000.0B, +5.5%) will likely require recovery in advertising markets or improved commerce profitability, indicating high dependence on exogenous factors. Financial segment’s +107.1% growth shows promise as a new profit driver, but it remains only ~8.3% of total scale, limiting immediate corporate impact.

2. Payout Ratio 76.1% is high while FCF coverage 0.29x shows dividends are not covered by FCF alone; urgent action is needed to improve working capital efficiency (shorten DSO, raise inventory turnover) and prioritize investment. Simultaneous increase in accounts receivable -¥3467.2B and accounts payable +¥4394.9B indicates elongation of cash conversion cycle and an explicit trade-off between growth and cash flow. Financially, Equity Ratio 16.0% and D/E 2.20x indicate elevated leverage, but Interest Coverage 9.5x suggests near-term interest burden capacity is adequate, limiting short-term financial risk.

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This report was generated by AI analyzing XBRL financial statement data and is an automated earnings analysis. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the firm from public financial statements. Investment decisions are your responsibility; consult a professional advisor as appropriate.