Revenue growth is not flowing through to profit, making cost absorption the focus for H1

Revenue for the first quarter of the fiscal year ending March 2027 was ¥796 million, up 9.2% from ¥729 million in the same period a year earlier. However, operating income (loss) deteriorated from a loss of ¥21 million to a loss of ¥53 million, while the quarterly net loss widened from ¥12 million to ¥59 million. The company does not disclose its operating margin directly, but based on the reported figures it was approximately -6.7%, down approximately 3.8 percentage points from approximately -2.9% in the same period a year earlier.

The company attributed the increase in revenue to solid orders for existing core products, centered on Check Point products. At the same time, it cited higher procurement costs due to the weaker yen, various costs associated with higher prices, investment in securing and developing highly skilled personnel, and stronger promotion of new and focus products as drivers of higher expenses. Selling, general and administrative expenses were ¥324 million, up 2.8% year on year, but the burden from the weaker yen, investment in personnel, and promotional activities was not disclosed separately. Depreciation was ¥16.280 million.

Compared with the same period a year earlier, the increase in revenue has not translated directly into an improvement in operating profit. In addition, revenue and profit by segment were not provided for the first quarter, and within the single Network Security Business segment it is not possible to separate the growth of Check Point products from the profitability of other products. Using cumulative 2Q revenue of ¥1,839 million and operating profit of ¥104 million for the fiscal year ended March 2026 as the H1 benchmark, it is necessary to determine whether the wider loss is a temporary start-up cost or reflects a deterioration in the earnings structure.

At the next results announcement, the first checks will be whether cumulative 2Q revenue exceeds the ¥1,839 million recorded in the same period a year earlier and whether operating income (loss) returns to positive territory. In addition, it will be important to see whether the H1 operating margin exceeds 1Q's -6.7%, and whether cumulative selling, general and administrative expenses and the impact of procurement costs, investment in personnel, and promotional expenses are disclosed. Without these figures, it will be difficult to assess the repeatability of revenue growth and the likelihood of turning profitable for the full year based on revenue alone.