SoftBank (9434) FY2026 Q3 Earnings Report

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Executive Summary

SoftBank secured increases in both revenue and profit, with profit growth accelerating from the operating income stage through to the net income stage, which was a defining feature of the current period. Revenue amounted to ¥5兆1,954B (+8.0% YoY), operating income was ¥8,841B (+7.6%), consolidated net income was ¥6,490B (+19.2%), and net income attributable to owners of the parent was ¥4,855B (+11.2%). The operating margin was 17.0%, broadly flat versus 17.1% in the same period of the previous year; however, the substantial growth in consolidated net income before deduction of non-controlling interests indicates that changes in the tax burden and ownership structure contributed to earnings growth.

Factors Affecting Results

【Revenue】Revenue amounted to ¥5兆1,954B (+8.0% YoY), maintaining stable growth based on recurring revenue from the telecommunications business. The gross margin remained at a high level of 49.0%.

【Profit and Loss】Operating income was ¥8,841B (+7.6% YoY), slightly below the rate of revenue growth, and the operating margin declined slightly to 17.0% from 17.1% in the same period of the previous year. SG&A expenses increased to ¥1兆7,159B (approximately +8.2% YoY), growing slightly faster than revenue and becoming a minor factor behind the contraction in the operating margin. Meanwhile, net income was ¥6,490B (+19.2% YoY), and net income attributable to owners of the parent was ¥4,855B (+11.2%), both exceeding operating income growth. Changes in net financial income and expenses, the tax burden, and the allocation to non-controlling interests contributed to the increase. In conclusion, the company achieved increases in both revenue and profit.

Key Financial Indicators

【Profitability】The operating margin was 17.0% (17.1% in the same period of the previous year), broadly flat, while the gross margin remained high at 49.0%, indicating a robust earnings foundation. The net margin attributable to owners of the parent was approximately 9.3%.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥1兆936B, approximately 2.25 times net income attributable to owners of the parent, indicating strong cash conversion. However, while the ¥4,020B increase in trade payables supported OCF, trade receivables also increased by ¥3,630B, warranting attention to the working capital composition.【Investment Efficiency】Annualized ROE was high at 19.3%, although it is partly supported by high financial leverage, reflected in an equity ratio of 15.7% (down from 17.0% in the same period of the previous year).【Financial Soundness】Total assets were ¥18兆2,437B and net assets were ¥4兆4,904B, with the equity ratio declining from the previous year. Total interest-bearing debt reached ¥6兆6,176B, while goodwill stood at ¥2兆1,868B, representing approximately 48.7% of net assets.

Cash Flow Analysis

Although OCF was ¥1兆936B, down 9.8% YoY, the company continued to maintain cash generation exceeding both net income and net income attributable to owners of the parent. Investing Cash Flow (ICF) was an outflow of ¥9,698B, with capital expenditures of ¥4,421B and acquisitions of investment securities, among other items, consuming funds. As a result, free cash flow (OCF + ICF) was limited to ¥1,238B, and increased investment from the previous year has reduced available cash resources. Financing Cash Flow was virtually zero (+¥7.2B), with dividend payments of ¥4,140B absorbed within the range of OCF and cash, while no share repurchases were conducted. Cash and cash equivalents increased to ¥1兆5,775B, indicating that funding during the period was completed without significant reliance on external financing.

Quality of Earnings

In the conversion from operating income to net income, net income of ¥6,490B was derived from profit before tax of ¥8,199B after net financial expenses of ¥616B, comprising financial income of ¥144B and financial expenses of ¥760B, and income taxes of ¥1,708B. Equity-method income and losses were small at -¥63B, indicating a high degree of reliance on recurring operating results. Of net income of ¥6,490B, ¥4,855B was attributable to owners of the parent, while ¥1,635B was attributable to non-controlling interests. The substantial earnings attributable to minority shareholders of consolidated subsidiaries created the gap between consolidated net income and net income attributable to owners of the parent. Total comprehensive income was ¥7,070B, exceeding net income of ¥6,490B, with other comprehensive income, including foreign currency translation adjustments, contributing positively. Accordingly, underlying corporate value creation may be somewhat greater than indicated by net income alone. OCF reached 1.68 times net income, suggesting that reported earnings were of high quality and accompanied by cash generation; however, the degree of reliance on the increase in trade payables warrants attention.

Earnings Outlook and Guidance

The full-year company forecast is revenue of ¥6兆9,500B (+6.2% YoY) and operating income of ¥1兆200B (+3.1% YoY). The Q3 cumulative achievement rate for revenue was 74.8%, broadly in line with the standard seasonal level of 75%, indicating steady progress toward the full-year forecast. Meanwhile, the operating income achievement rate was 86.7%, substantially above the standard level. If increased investment and promotional expenses are expected in Q4, an increase in expenses in the second half may be assumed in order to maintain consistency with the full-year growth rate of +3.1%. The EPS forecast is ¥11.28, and together with cumulative basic EPS of ¥10.04 for the current period, progress toward the full year is generally on track.

Shareholder Returns

A dividend of ¥4.30 per share was paid in Q2, and the full-year dividend forecast is ¥8.60. Cumulative dividend payments totaled ¥4,140B, and the forecast payout ratio calculated from the full-year EPS forecast of ¥11.28 and the dividend forecast of ¥8.60 is approximately 76.2%. This payout ratio is based solely on dividends and is distinct from the Total Return Ratio, as no share repurchases were conducted during the current period. Dividend payments of ¥4,140B exceeded free cash flow of ¥1,238B after deducting total investing cash flow, indicating that, when investment activities are considered broadly, the funding base for dividends is increasingly dependent on OCF and cash on hand.

Risk Factors

1. Aggressive Capital Structure: The equity ratio was 15.7%, down from 17.0% in the same period of the previous year, while total interest-bearing debt reached ¥6兆6,176B. Changes in interest-rate conditions or deterioration in refinancing terms could affect financial flexibility.

2. Increase in Trade Receivables and Collection Cycle: Trade receivables (notes and accounts receivable) were ¥3兆998B, up from ¥2兆8,056B in the same period of the previous year. While OCF was supported by a ¥4,020B increase in trade payables, trade receivables also expanded, making the continuing change in working capital composition a point that should be monitored.

3. Scale of Goodwill and Intangible Assets: Goodwill was ¥2兆1,868B and intangible assets were ¥2兆5,923B, together accounting for a substantial proportion of net assets of ¥4兆4,904B. Achieving the earnings plans for businesses acquired through M&A will be important for maintaining asset value.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Return

Both the operating margin and net margin substantially exceeded the industry median, placing profitability among the higher levels within the industry.

Growth and Capital Efficiency

The revenue growth rate was slightly below the industry median, positioning the company around the middle of the industry in terms of growth.

※Source: Compiled by the Company

Key Takeaways from the Earnings

1. The operating margin of 17.0% and net margin of 12.5% substantially exceeded the industry medians, confirming the high profitability of the telecommunications platform.

2. OCF reached 1.68 times net income, indicating strong cash conversion. However, while the increase in trade payables supported OCF, trade receivables also increased, making changes in the working capital composition a key area to monitor going forward.

3. The decline in the equity ratio from 17.0% in the same period of the previous year to 15.7%, together with the expansion of interest-bearing debt, indicates that the high ROE of 19.3% is supported by financial leverage. This change in the capital structure is therefore noteworthy.

Theoretical Share Price (For Reference)

Sensitivity: ¥78–¥82 for a ±1% change in the cost of equity, and ¥80–¥81 for a ±0.1 change in ω.

Notes:

• As progress of net income against the full-year forecast (89%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of plan tend to outperform their forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Net income is substantially compressed relative to operating income due to the tax burden, acquisition-related expenses, and non-controlling interests, among other factors (net income ÷ operating income: 53%). This value reflects the compression at face value; if these factors are temporary, normalized earnings capacity may be higher.
• Goodwill represents a high proportion of net assets, and the assumptions would change substantially if impairment were recognized.
• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).

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

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release 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 discretion and responsibility, after consulting professionals as necessary.

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