First-quarter results are on plan, but the focus is whether the full-year operating profit decline forecast can be confirmed

FY2027 1Q covered the period from 1 April to 30 June 2026. Revenue was ¥47,073 million, up 50.3% year on year, while operating profit was ¥5,428 million, up 102.8%. Ordinary profit was ¥5,652 million, and quarterly net income attributable to owners of the parent was ¥5,825 million, representing a 311.7% increase in bottom-line profit. Progress against the full-year revenue forecast of ¥185,000 million was 25.4%, while progress against the operating profit forecast of ¥19,500 million was 27.8%, indicating that profit is progressing slightly faster than revenue.

The full-year forecast, however, assumes higher revenue but lower profit: revenue of ¥185,000 million, up 8.0% year on year, against operating profit of ¥19,500 million, down 12.4%, and ordinary profit of ¥20,000 million, down 19.0%. Net income attributable to owners of the parent is forecast at ¥25,000 million, up 44.8%, so the direction differs between operating profit and the bottom line. It is therefore necessary to determine how the effects of consolidated M&A, seasonality, advertising expenses and gains on the sale of investment assets will change in the second half, rather than assuming that the first-quarter operating margin of 11.5% will be maintained throughout the year.

The first-quarter profit increase cannot be explained by the small amounts of extraordinary income of ¥2 million, extraordinary losses of ¥7 million and impairment losses of ¥5 million. It was primarily driven by higher business revenue and improved segment profit. The digital entertainment business recorded revenue of ¥19,532 million and segment profit of ¥10,881 million, while the sports business recorded revenue of ¥21,673 million and segment profit of ¥1,258 million. The lifestyle and investment businesses also recorded profits of ¥261 million and ¥860 million, respectively. However, the sports business revenue increase includes the start of consolidating PointsBet, while the investment business revenue increase includes gains on share sales and the recognition of fund gains and losses. Whether the same quality of earnings will continue in the first half therefore requires separate verification.

For FY2027-H1, the first point to confirm is whether revenue of ¥92,500 million and operating profit of ¥9,750 million, simple half-year levels, will be reached. It is also necessary to confirm whether operating profit will continue to progress faster than revenue, how much of the ¥25,000 million net income forecast attributable to owners of the parent is attributable to the investment business and changes in the scope of consolidation, and whether the ¥19.5 billion full-year operating profit forecast will be maintained. Since the first-quarter earnings release provided only a limited breakdown of the factors by amount, it will be important to see whether the first-half results provide more detail on the factors behind changes by segment and the second-half cost plan.