SHIFT (3697) Q2 2025 earnings summary

Executive summary

• Achieved record-high gross profit margin of 35.5% in FY2025 Q2, with net sales for 1H FY2025 rising 17.9% year-over-year to ¥61.7B and operating profit up 72.1% to ¥8.06B, driven by operational improvements, high utilization rates, and AI initiatives.

• AI adoption accelerated, with over 500 AI engineers, 825 business processes automated, and 84% employee adoption, resulting in annual savings of JPY 200 million.

• Strategic focus on high-value consulting, security, and BPO services, with upstream project involvement, new alliances, and improved customer retention by 6.8 percentage points.

• Enhanced organizational structure with clear KPIs, trinity model for business divisions, and group reorganization to boost competitiveness.

• Progressing toward "SHIFT3000" growth strategy, targeting ¥300B in annual net sales by FY2030, leveraging digital transformation demand and robust security needs.

Financial highlights

• Q2 gross profit margin reached a record 35.5%, with operating profit margin at 14.4%; gross profit for 1H FY2025 was ¥21.2B (+28.0% YoY), and EBITDA ¥9.65B (+63.9% YoY).

• Net income attributable to owners was ¥4.49B (+50.7% YoY); basic and diluted EPS were ¥17.06 after a 15-for-1 stock split.

• Cash and deposits increased 29.3% YoY to ¥25.0B; net assets rose to ¥36.1B, with an equity ratio of 52.8%.

• Engineer unit price rose to ¥1.06M/month, driven by higher utilization and value-added services.

• SG&A expense ratio managed at around 20%, with recruitment costs down 2.5 percentage points YoY.

Outlook and guidance

• FY2025 full-year forecast: net sales of ¥130B (+17.5% YoY), operating profit of ¥13.5B (+72.1% YoY), and profit attributable to owners of parent of ¥7.9B (+54.1% YoY); confident in exceeding operating profit target despite planned hiring investments.

• As of 1H, achieved 47.5% of net sales and 56.9% of profit attributable to owners versus full-year targets.

• Long-term vision “SHIFT3000” aims for ¥300B sales and 38% GPM by FY2030, leveraging AI and M&A.