GMO internet group,Inc. FY2026 Q2 Earnings Report

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Executive Summary

The Company achieved higher revenue and earnings, driven by expansion in both the Infrastructure and Financial segments, with operating income improving at a faster pace than revenue. Revenue was ¥158.65B (+11.2% YoY), operating income was ¥34.20B (+17.1%), and profit before tax was ¥33.93B (+23.6%). Net income attributable to owners of the parent was ¥11.69B (+12.4%), while net income including non-controlling interests was ¥23.61B (+29.6%); the consolidated structure, which has a high proportion of non-controlling interests, accounts for the divergence between the two figures. The primary drivers of revenue growth were Internet Infrastructure (+12.9%) and Internet Finance (+19.5%), while profitability also improved, with a gross profit margin of 59.2% and an operating margin of 21.6%.

Factors Affecting Earnings

【Revenue】Revenue of ¥158.65B increased 11.2% YoY. The core Internet Infrastructure segment, which accounts for 60.2% of the revenue mix, grew 12.9%, while Internet Finance grew 19.5% and Internet Securities grew 11.0%, with the core businesses driving performance. Meanwhile, Online Advertising & Media was essentially flat at -0.7%, and Cryptocurrency contracted sharply by -41.7%, with non-core areas weighing on overall growth.

【Profit and Loss】Operating income of ¥34.20B increased 17.1% YoY, outpacing revenue growth and confirming positive operating leverage. The gross profit margin was 59.2% versus an SG&A ratio of 37.1%; the fact that SG&A expenses grew more slowly than gross profit contributed to the earnings increase. Against profit before tax of ¥33.93B (+23.6%), income taxes of ¥10.33B and deductions for amounts attributable to non-controlling interests resulted in net income attributable to owners of the parent of ¥11.69B (+12.4%), creating a difference between the growth rates of profit before tax and net income attributable to owners of the parent. In conclusion, both revenue and earnings increased.

Segment Analysis

Internet Infrastructure was the largest segment, with revenue of ¥95.58B (60.2% of the mix, +12.9% YoY). It was followed by Internet Finance at ¥26.14B (+19.5%), Online Advertising & Media at ¥16.71B (-0.7%), Internet Securities at ¥11.63B (+11.0%), Other at ¥6.17B (+32.7%), and Cryptocurrency at ¥2.42B (-41.7%). While the core Infrastructure and Financial segments achieved double-digit growth, Cryptocurrency posted a significant revenue decline due to market conditions and other factors, highlighting a clear shift in the business portfolio mix.

Key Financial Metrics

【Profitability】The operating margin was 21.6%, the gross profit margin was 59.2%, and the net profit margin, based on net income attributable to owners of the parent, was 7.4%, indicating improved operating efficiency while maintaining the gross profit level. 【Cash Flow Quality】After deducting income taxes of ¥10.33B from profit before tax of ¥33.93B, net income attributable to owners of the parent, excluding amounts attributable to non-controlling interests, was ¥11.69B, indicating a structure in which taxes and non-controlling interests compress the net profit margin. 【Investment Efficiency】ROE was 7.7%, while the equity ratio remained low at 7.3% against total assets of ¥2,140.25B, reflecting the characteristics of the large-scale Financial and Infrastructure businesses. 【Financial Soundness】Cash and cash equivalents were substantial at ¥546.35B, providing liquidity in excess of short-term interest-bearing debt of ¥270.37B and serving as a certain buffer against the low equity ratio.

Cash Flow Analysis

Although direct disclosure of the statement of cash flows from operating activities is limited, the level of profit after deducting income taxes from profit before tax of ¥33.93B confirms the earnings-generating capacity of the core business. On the investment front, funds were allocated to investment property of ¥38.84B and other financial assets (non-current) of ¥107.99B, with long-term investment assets increasing from the previous year. On the financing front, the Company repurchased ¥9.59B of treasury stock while maintaining cash and cash equivalents at ¥546.35B, continuing to manage funds in a manner that secures on-hand liquidity while balancing shareholder returns and investment. Accounts receivable and notes receivable were ¥162.79B, and inventories were ¥56.18B; both declined from the same period of the previous year, suggesting some improvement in working capital efficiency.

Quality of Earnings

Earnings are primarily generated by the core Internet Infrastructure and Financial businesses, while equity-method investment income of ¥1.17B was small at less than 1% of revenue, indicating a composition not dependent on temporary extraordinary gains or losses. After deducting income taxes of ¥10.33B from profit before tax of ¥33.93B, net income attributable to owners of the parent, excluding amounts attributable to non-controlling interests, was ¥11.69B. The divergence between profit before tax and net income attributable to owners of the parent is attributable to the substantial non-controlling interests of ¥151.32B. Comprehensive income was ¥29.68B, including ¥15.27B attributable to owners of the parent, exceeding net income of ¥11.69B attributable to owners of the parent, indicating that foreign currency translation adjustments and other items of other comprehensive income made a positive contribution.

Shareholder Returns

Dividends are paid quarterly, with actual dividends of ¥21.2 per share in Q1 and ¥17.8 per share in Q2. The Company has a policy of targeting a payout ratio of 33% of net income attributable to owners of the parent, but its annual dividend forecast remains undetermined because it is difficult to disclose a full-year earnings forecast. At the same time, the Company repurchased ¥9.59B of treasury stock, increasing its treasury stock balance to ¥30.79B (¥24.06B in the previous year). Shareholder returns, including dividends and treasury stock repurchases, continue to be implemented on an ongoing basis.

Risk Factors

1. Concentration risk in the business portfolio: Internet Infrastructure accounts for 60.2% of revenue, and changes in demand trends and the competitive environment in this segment could have a significant impact on consolidated performance.

2. Contraction of non-core businesses: The Cryptocurrency segment generated revenue of ¥2.42B, down -41.7% YoY, while Online Advertising & Media also stagnated at -0.7%; changes in the business mix could affect the pace of future revenue growth.

3. Financial leverage and substantial non-controlling interests: The equity ratio is low at 7.3%, and non-controlling interests of ¥151.32B account for approximately half of net assets, creating a structure in which net income attributable to owners of the parent tends to fluctuate significantly relative to profit before tax.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Return

Both the operating margin and net profit margin exceed the industry median, indicating that profitability is relatively high compared with peers.

Growth and Capital Efficiency

The revenue growth rate is below the industry median, indicating that the pace of revenue growth is relatively moderate compared with peers.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Growth in the two core segments, Internet Infrastructure and Internet Finance, drove higher revenue and earnings, with profitability improving as reflected in a gross profit margin of 59.2% and an operating margin of 21.6%.

2. There was a difference between the growth rates of profit before tax and net income attributable to owners of the parent, indicating that income tax expense and the substantial non-controlling interests affect the net profit margin and ROE.

3. The Company maintained substantial on-hand liquidity of ¥546.35B in cash and cash equivalents while continuing treasury stock repurchases of ¥9.59B and quarterly dividend payments, confirming flexibility in capital allocation.

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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 available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with professionals as necessary.

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