Will margin pressure amid revenue growth continue into FY2027 H1?

Operating revenue in Q1 of the fiscal year ending March 2027 was ¥1.35254 trillion, up ¥127.2 billion from ¥1.22533 trillion in the same period a year earlier. However, operating income fell ¥102.6 billion to ¥1.063473 trillion from ¥1.166141 trillion. Revenue growth did not translate directly into higher profit, and the operating margin fell 1.6 percentage points year on year to 7.9%.

On a like-for-like Q1 standalone basis, operating revenue increased from approximately ¥12.25 trillion to approximately ¥13.53 trillion, while operating income declined from approximately ¥1.17 trillion to approximately ¥1.06 trillion. In the same period a year earlier, Japan reported operating income of ¥64.34 billion and North America reported an operating loss of ¥63.6 billion. This period, the figures were ¥53.86 billion for Japan and ¥125.3 billion for North America. Regional improvement has therefore not been sufficient to halt the decline in the consolidated operating margin.

The full-year operating margin for the fiscal year ended March 2026 was 7.4%. Although the Q1 margin of 7.9% exceeded the full-year result, it declined year on year, with the effects of tariffs, material prices, other expenses and cost improvements still present. The full-year operating income forecast for the fiscal year ending March 2027 had been raised to ¥3.4 trillion as of Q1, but the materials did not disclose progress against the full-year forecast or the amount of profit required on a cumulative Q2 basis.

At the next earnings release, we will examine whether cumulative operating income for Q2 exceeds the ¥2.0056 trillion recorded in the same period a year earlier and whether the operating margin improves from Q1's 7.9%. We also need to determine, for both the standalone quarter and the cumulative period, whether the increase in operating revenue came from unit sales, price revisions or model mix, and which tariff, material-cost or fixed-cost items remain responsible for the decline in operating income.