Kokusai Electric (6525) Q1 2026 earnings summary

Executive summary

• Q1 FY2026 revenue and profit declined year-over-year and sequentially, mainly due to normalization of equipment shipments to China after a prior period of concentrated deliveries, though advanced device equipment sales remain strong.

• Gross profit margin was 42.9%, down 2.1 points year-over-year but up 3.2 points sequentially.

• Order intake for the quarter was approximately JPY 53 billion, exceeding initial expectations by nearly JPY 5 billion.

• The business mix shifted toward higher-value-added products and services, with service revenue ratio increasing as equipment sales declined.

• The semiconductor device market saw robust capital investment in high-performance Logic and DRAM for generative AI, with NAND investment resuming, but demand for consumer, automotive, and industrial equipment remains sluggish.

Financial highlights

• Q1 FY2026 revenue was JPY 51.8 billion, down 20.6% year-over-year and 19.4% quarter-over-quarter; gross profit was JPY 22.2 billion, down 24.3% year-over-year.

• Adjusted operating profit dropped 44% year-over-year to JPY 10.9 billion; adjusted net income fell 47% to JPY 7.6 billion.

• Equipment sales decreased 28% year-over-year; service sales decreased 6% year-over-year, but service share increased.

• NAND sales rose 116% year-over-year, while DRAM sales fell 73% and logic/foundry sales dropped 8%.

• Free cash flow was JPY 2 billion in Q1, with operating cash flow exceeding investment cash flow.

Outlook and guidance

• No changes to full-year revenue or dividend forecasts; FY2026 revenue is projected at JPY 244.0 billion (+2.1% year-over-year), adjusted operating profit at JPY 55.2 billion (+4.4% year-over-year), and adjusted net income at JPY 40.1 billion (-5.2% year-over-year).

• Gross profit margin is expected to increase by 0.2 points for the year.

• Sales and profit are expected to be second-half weighted, with shipment forecast accuracy improving by the end of H1.

• NAND revenue forecast to grow 2.8x year-over-year, DRAM to fall 35%, logic/foundry to decline slightly, and SiC/GaN power devices to grow 50%.

• Non-China revenue to increase, especially in 2H; China revenue to decrease.