Confirming the shift to volume production and earnings recovery in H1 after a revenue growth-driven operating loss in Q1

FY2027-Q1 revenue was ¥39,039 million, up 13.0% from ¥34,553 million in the same period of the prior year. However, operating income swung from a ¥1,440 million profit to an operating loss of ¥662 million. Ordinary loss was ¥782 million, while net loss attributable to owners of the parent was ¥580 million. The operating margin declined by approximately 5.9 percentage points, from approximately 4.2% in the prior-year quarter to approximately negative 1.7%.

The company attributed the increase in revenue to NRE revenue related to prototyping accompanying the launch of new volume-production products for North American data centers, as well as the weaker yen. It said that the shift in automotive volume-production shipments from Q1 to Q2, continued investment in product development and advanced development, and foreign exchange losses weighed on earnings. Accordingly, the next results announcement should confirm not merely a recovery in revenue, but whether the delayed automotive products were actually shipped and whether their gross profit exceeded the investment burden.

On margins, the cost of sales ratio rose from 44.9% to 55.3% as volume production of relatively low-margin new products began in FY2026, causing gross profit to decline 13.6%. Operating margin consequently fell from 13.3% to 6.2%. Product revenue increased to ¥161,792 million in FY2026, while NRE revenue remained at ¥38,325 million, indicating that expanding volume production does not necessarily translate immediately into high margins.

The full-year forecasts are revenue of ¥215,000 million, operating income of ¥14,000 million, ordinary income of ¥14,000 million and net income attributable to owners of the parent of ¥10,000 million. No revisions had been made as of FY2027-Q1. Q1 revenue represented only 18.2% of the full-year forecast. Using a simple 50% first-half benchmark, ¥107,500 million is one reference point for FY2027-H1. Based on Q1 results, revenue of ¥68,461 million would be required in Q2 alone, making the timing and scale of automotive volume-production shipments critical to achieving the full-year plan.

The company reports a single segment and therefore does not disclose operating income or gross margins for automotive, data center/network, smart device and industrial applications separately. At the next results announcement, important supplementary information would include the contribution from automotive volume-production shipments, the gross-margin difference between NRE and product revenue, changes in advanced development expenses, and H1 operating-income progress against the full-year forecast.