It is still too early to conclude that 1Q profit momentum will overturn the full-year earnings decline plan

FY2026 results were revenue of ¥185.33 billion and operating profit of ¥36.096 billion, compared with company forecasts for FY2027 of ¥189.0 billion in revenue and ¥28.7 billion in operating profit. Revenue is expected to increase by ¥5.467 billion, or 2.0%, while operating profit is planned to decline by ¥7.396 billion, or 20.5%. The calculated operating margin is also expected to fall by approximately 4.3 percentage points, from about 19.5% in FY2026 to about 15.2% in the FY2027 forecast. This is therefore more than a simple combination of higher revenue and lower profit, as the underlying margin assumptions have changed substantially.

In contrast, 1Q, covering April to June 2026, produced revenue of ¥42.075 billion and operating profit of ¥8.490 billion. Revenue increased 0.6% year on year and operating profit rose 9.9%, while operating margin improved to approximately 20.2% from about 18.5% a year earlier. On a simple calculation, progress against the full-year forecast was 22.3% for revenue and 29.6% for operating profit, meaning operating profit is ahead of the 25% elapsed-period benchmark. However, the earnings presentation materials do not show progress rates against the full-year forecast or the company’s own assessment of performance versus plan.

When evaluating H1, it is important to note that the company has not disclosed a half-year plan. Revenue of ¥94.5 billion and operating profit of ¥14.35 billion, calculated by simply halving the full-year forecasts, are arithmetic benchmarks for comparison only and do not represent company plans that reflect the seasonality of film releases or box-office revenue. Based on 1Q results, the remaining nine months would need to generate revenue of ¥146.925 billion and operating profit of ¥20.210 billion to achieve the full-year targets. Accordingly, in H1 it will be necessary to assess not only performance against the simple half-year benchmarks but also whether the required second-half profit build-up is realistic.

The key question is whether the 1Q increase in operating profit reflects temporary contributions from individual titles in the visual content business or sustainable earnings power capable of absorbing higher SG&A expenses. At the H1 results, we will assess whether the full-year forecast is maintained or revised, together with the visual content business’s profit, the profitability of the entertainment business, the increase in SG&A expenses, and the assumptions for second-half title and content revenue. Even if the full-year operating profit plan of ¥28.7 billion is maintained, it will be important for the company to explain numerically which expense items or segments will weigh on profit in the second half.