High-margin IT security drives sharp first-half profit growth

For the interim period of the fiscal year ending December 2026, company-wide revenue was ¥10,022 million, up 15.1% year on year, and operating profit was ¥1,777 million, up 124.0%. The IT security business was particularly strong, generating revenue of ¥9,437 million and segment profit of ¥2,335 million. Revenue growth of 15.3% was accompanied by profit growth of 85.8%, substantially outpacing revenue growth. The company-wide operating margin also improved by 8.6 percentage points, from 9.1% in the same period of the previous year to 17.7%, indicating that profit growth is being driven not only by scale but also by product mix and gross margin.

The improvement in profitability was supported by growth in proprietary products and services. Product revenue was ¥3,531 million, up 28.8% year on year, while cloud services revenue was ¥1,474 million, up 15.0%. The company-wide gross margin rose 5.7 percentage points, from 44.4% in the same period of the previous year to 50.1%, distinguishing this growth phase from earlier periods that relied on low-margin sales of third-party products. In the third quarter, the key questions will be whether product revenue continues to grow and whether cloud services growth supports margins.

The company explained that the current profit growth was also supported by upgrade demand associated with the end of life of an older version of “NetAttest EPS.” It has not disclosed how much of the upgrade demand shifted to new deployments or recurring billing, the breakdown between existing and new projects, or post-upgrade gross margins. The interim presentation identified ¥1,311 million of revenue growth, ¥157 million of higher cost of sales and ¥155 million of higher R&D expenses, among other factors, but did not isolate the contribution from EOL-related upgrade demand.

The full-year forecasts are revenue of ¥22,300 million, operating profit of ¥3,900 million, ordinary profit of ¥3,950 million and profit attributable to owners of the parent of ¥2,670 million. Interim progress was 44.9% for revenue and 45.6% for operating profit. Although these figures are below a simple 50% annual benchmark, the company considers progress to be ahead of plan. The key checks for the third quarter will be whether the company can absorb the reversal of upgrade demand while keeping margins above 15%, and whether the full-year forecasts are revised again.