Cloud adoption is advancing, but both growth and average selling price will be assessed in the third quarter.

The cloud adoption rate in the first quarter of the fiscal year ending December 2026 was 37.4%, with 13,608 cloud-software customers, 22,090 licenses, MRR of ¥576 million, and ARR of ¥6.907 billion. On a cumulative basis through the second quarter, the cloud adoption rate rose to 40.0%, the number of cloud-software customers to 14,283, licenses to 23,264, MRR to ¥587 million, and ARR to ¥7.046 billion. The rapid expansion of the cloud user base is the most readily observable leading indicator for assessing revenue in the next quarter.

The progress of cloud adoption is also evident in the breakdown of revenue. Cloud-services revenue for the cumulative second quarter was ¥6,923 million, up 29.7% year on year, while package-system revenue was ¥2,541 million, down 15.3%, and other revenue was ¥1,317 million, down 11.1%. In the first quarter alone, cloud-services revenue was ¥3,398 million, up 36.5% year on year, while package-system revenue was ¥1,350 million, down 16.1%. The third quarter will show whether the pattern of cloud-revenue growth absorbing the decline in package revenue is continuing.

However, higher volumes have not translated directly into improved pricing. ARPL declined by ¥818, or approximately 3.1%, from ¥26,058 in the first quarter to ¥25,240 on a cumulative basis through the second quarter. With user retention stable at 99.8%, the focus is on determining whether changes in the customer mix or license mix, rather than worsening churn, are behind the decline in average pricing. In the third quarter, it will be necessary to assess not only the increase in licenses but also whether ARR and MRR growth is keeping pace with volume growth.

The earnings summary discloses the business as a single IT-services segment and does not provide numerical disclosures for profit by service category, regional revenue, bookings, or order backlog. Accordingly, the third-quarter assessment needs to consider cloud-services revenue and its year-on-year growth, the extent of the decline in package-system revenue, the cloud adoption rate, ARR, and ARPL together. Even if the cloud adoption rate exceeds 40.0%, if ARR and ARPL do not grow, the possibility remains that customer migration is progressing without sufficient quality of monetization.