Can the first-half decline in revenue and earnings be offset by large projects and profit recognition in the second half?

FY2026-H1 revenue was ¥23,488 million, down 1.0% year on year, and operating income was ¥1,161 million, down 14.0%. With full-year forecasts of ¥52,000 million in revenue and ¥3,600 million in operating income, the simple remaining balance requires ¥28,512 million in revenue and ¥2,439 million in operating income in the second half. The amounts required in the second half are approximately 1.21 times first-half revenue and approximately 2.10 times first-half operating income, making back-half-weighted project recognition and margin improvement prerequisites.

The comparable cumulative FY2025-Q3 results were revenue of ¥36,262 million and operating income of ¥2,975 million. In FY2026-Q3, the transfer of the IP triple-play service business in the Americas will affect year-on-year comparisons. It will therefore be important to see whether the company explains growth in the existing business excluding the transfer impact, rather than only the change in consolidated revenue. We will assess how much projects in Japan's public, education and healthcare sectors, government and defence-related projects in the Americas, and projects scheduled for recognition in the second half in EMEA contribute to cumulative 3Q revenue.

In terms of earnings, first-half operating income was ¥1,161 million against the full-year forecast of ¥3,600 million, leaving ¥2,439 million to be recognised in the second half. Gross profit margin improved in the first half, but operating income declined as higher personnel costs and the increased cost burden associated with yen depreciation weighed on results. In the next earnings release, the key point will be whether changes in the gross profit margin, SG&A expenses, personnel costs and R&D expenses making up second-half operating income are presented at least on a year-on-year or quarter-on-quarter basis.

In FY2026-H1, the full-year forecasts were revised to ¥52,000 million in revenue and ¥3,600 million in operating income, up from the operating income forecast of ¥3,300 million at the FY2025 full-year results announcement. As the forecasts include an expected gain on disposal of a business, Q3 should be assessed by separating operating income progress from recognition of extraordinary income, to determine whether operating performance is approaching the full-year forecast or whether only net income is being lifted by non-recurring factors.