Summary
In 1Q, the AI DC business contributed JPY 5,225M of consolidated revenue of JPY 6,174M. That confirms the segment is becoming the group's growth engine. Recurring profit, however, came in at just JPY 32M, only 2.1% of the full-year plan of JPY 1,494M (our estimate). A key drag was a JPY 132M valuation loss on crypto assets booked under non-operating expenses.
For 1H, the priority is to confirm a recovery in AI DC revenue and the sustainability of the segment's margin.
Several post-2Q subsequent events (after September 30, 2026) are giving concrete shape to the AI infrastructure business. In October, the company announced it would make WOODMAN a wholly owned subsidiary. It also began taking orders for GPU servers equipped with NVIDIA HGX B300. It further joined a distributed AI data center initiative spanning 300 sites nationwide with total power receiving capacity of 600MW.
On October 30, also after 2Q-end, the company decided to sell its entire holding of 151.21 BTC. It will redeploy the approximately JPY 1,831M in proceeds into AI DC-related investments. It also reallocated JPY 600M of stock acquisition rights proceeds from digital asset purchases to AI DC-related investments, lifting that investment allocation from JPY 2,000M to JPY 2,600M.
None of these events will be reflected in 2Q results. They are, however, important for assessing AI DC growth, capital allocation, and non-operating P&L from 2H onward.
Key Points for Next Quarter
| Key Points & Focus | Implications |
|---|---|
Revenue GrowthAI DC business 2Q standalone revenue and segment margin QoQ | In 1Q, revenue was JPY 5,225M and segment profit JPY 253M, a 4.9% margin (our estimate). A rebound from seasonal weakness and a sustained benefit from a higher direct-sales mix will determine the likelihood of hitting the JPY 25,552M full-year revenue plan. |
Plan Progress1H cumulative Operating Income and Recurring Profit vs. full-year plan | 1Q progress was 13.0% for Operating Income and 2.1% for Recurring Profit (our estimate). The remaining three quarters need to deliver JPY 993M of Operating Income and JPY 1,462M of Recurring Profit. |
Non-Operating P&LCrypto asset valuation gains/losses and FX gains/losses | The JPY 132M crypto valuation loss weighed on 1Q Recurring Profit. The company plan assumes Recurring Profit exceeds Operating Income by JPY 352M (our estimate), so the direction of non-operating items is key to delivering the plan. |
Segment ProfitabilityOn-Chain Finance segment P&L and AI UI profitability | In 1Q, On-Chain Finance posted a segment loss of JPY 112M on revenue of JPY 80M, while AI UI posted segment profit of JPY 7M. Improvement in both businesses will determine the upside to consolidated Operating Income. |
Orders & Balance SheetAdvances received, advance payments, and investment securities | At 1Q-end, advances received stood at JPY 3,234M and advance payments at JPY 3,407M. These sizable balances may serve as a leading indicator of AI DC revenue recognition pace. Investment securities fell JPY 884M from the start of the fiscal year, and we want to see disclosure of the drivers. |
Key Issues from Previous Results (FY3/2027 1Q Results)
FY3/2027 1Q results came in at revenue of JPY 6,174M, Operating Income of JPY 149M, Recurring Profit of JPY 32M, and Quarterly Net Income Attributable to Owners of Parent Company of JPY 17M. The company maintained the full-year plan announced on May 15, 2026 (revenue of JPY 25,552M, Operating Income of JPY 1,142M). AI DC has become the core earnings pillar, but crypto valuation losses dragged on Recurring Profit. The key issue for 1H is how the company balances building core operating profit against volatility in non-operating items.
1. AI DC Business: Revenue Recovery and Sustained Profitability
- Previous Quarter:1Q revenue of JPY 5,225M accounted for 84.6% of consolidated revenue, with segment profit of JPY 253M (share is our estimate).
- What to Check This Quarter:The company attributed a slight QoQ revenue decline to seasonality, and we will look for a rebound in 2Q. We also want to see whether margin gains from a higher direct-sales mix hold as the business scales.
- Key Metrics:AI DC 2Q standalone revenue and segment margin (1Q: 4.9%, our estimate).
2. Profit Progress Against the Full-Year Plan
- Previous Quarter:1Q progress was 24.2% for revenue, 13.0% for Operating Income, and 2.1% for Recurring Profit (our estimate).
- What to Check This Quarter:1Q OPM was 2.4% against a full-year plan of 4.5% (our estimate). We will look to management commentary to confirm whether the plan is 2H-weighted.
- Key Metrics:1H cumulative Guidance Achievement Rate for Operating Income and Recurring Profit, and consolidated Gross Profit Margin (1Q: 29.7%).
3. Crypto Asset Valuation Impact and Non-Operating P&L
- Previous Quarter:1Q included a JPY 132M crypto valuation loss in non-operating expenses. An FX gain of JPY 18M was not enough to offset it, leaving Recurring Profit below Operating Income.
- What to Check This Quarter:Beyond the 169.5 BTC holding, the additional HYPE purchase announced on 8/31 has widened the scope of marked-to-market assets. We will check whether 2Q-end valuations lift or weigh on Recurring Profit.
- Key Metrics:Breakdown of non-operating items (crypto valuation gains/losses, FX gains/losses) and balances of proprietary, deposited, and lent crypto assets. At the net income level, we will also review extraordinary items and income taxes.
4. Improving P&L at On-Chain Finance and AI UI
- Previous Quarter:On-Chain Finance posted revenue of JPY 80M and a segment loss of JPY 112M. AI UI posted revenue of JPY 868M (-0.8% YoY) and segment profit of JPY 7M.
- What to Check This Quarter:For On-Chain Finance, we want a breakdown of income generated by JPY 3,765M in lent crypto assets and of the loss drivers. For AI UI, we will track growth in the consumer media business (+325.0% YoY) and the trend in the HR business.
- Key Metrics:2Q standalone revenue and segment P&L QoQ for both segments, plus AI UI sales by business (HR business 1Q: JPY 683M).
5. Advances Received, Advance Payments, and Capital Policy
- Previous Quarter:At 1Q-end, advance payments were JPY 3,407M, up JPY 722M from the start of the fiscal year. Advances received were JPY 3,234M, and investment securities were JPY 471M (down JPY 884M from the start of the fiscal year).
- What to Check This Quarter:We will monitor how quickly advances received convert into revenue and look for disclosure on the decline in investment securities. The WOODMAN share exchange requires approval at an extraordinary general meeting of shareholders, so its consolidation impact is a 3Q-onward item.
- Key Metrics:Advances received and advance payments vs. the start of the fiscal year, shares outstanding at period-end (1Q-end: 43,068,920 shares), and Equity Ratio (1Q-end: 35.7%).
Key Timely Disclosures During the Period
- 2026/10/15Share exchange agreement to make WOODMAN a wholly owned subsidiary, and change in major shareholder and largest major shareholder - The deal supports an integrated offering spanning AI server sales, modular AI data center construction, and cooling. WOODMAN will be consolidated after the share exchange takes effect, so there is no impact on 2Q P&L. The earnings contribution and dilution from the higher share count are items to watch from 3Q onward.
- 2026/09/28Expanded partnership with Digital Dynamic and full launch of AI compute provision business toward a neocloud business - The disclosure signals a shift from GPU server sales toward a recurring-revenue model that provides compute as a service. Rollout begins in phases from autumn 2026, so the contribution to 2Q P&L will be limited. Revenue recognition is a checkpoint from 3Q onward.
- 2026/08/31Additional acquisition of new digital asset Hyperliquid (HYPE) under the "Neo Crypto Bank Initiative" - Because the purchase occurred during 2Q, the asset is included in 2Q-end crypto valuation gains/losses. The disclosure bears directly on the volatility of Recurring Profit.
Previous Quarter Results (FY3/2027 1Q Actual)
The company's legacy business is AI UI, which includes a job search engine and the "HR Ads Platform." The AI DC business, launched in FY3/2026, now accounts for over 80% of revenue. Together with the On-Chain Finance business, which holds and lends BTC and other crypto assets, the company operates three segments. It is restructuring its business portfolio through the sale of "Rakuraku Renrakumo+" and "Pokekaru," and pursuing management reform centered on AI/DX. For FY3/2027, it plans revenue of JPY 25,552M (+80.45% YoY) and Operating Income of JPY 1,142M (+441.2% YoY). Because the company moved to consolidated reporting from 3Q of the previous fiscal year, the earnings release does not provide YoY comparisons.
| Item | Amount | YoY | vs. Company Plan | Notes |
|---|---|---|---|---|
| Revenue | JPY 6,174M | - | 24.2% of full-year plan | AI DC business (JPY 5,225M) is the main driver; AI UI business -0.8% YoY |
| Operating Income | JPY 149M | - | 13.0% of full-year plan | AI DC segment profit of JPY 253M absorbed the On-Chain Finance segment loss of JPY 112M |
| Recurring Profit | JPY 32M | - | 2.1% of full-year plan | Crypto asset valuation loss of JPY 132M booked |
| Quarterly Net Income Attributable to Owners of Parent Company | JPY 17M | - | 1.3% of full-year plan | Gain on business transfer of JPY 10M booked as extraordinary income |
| EPS | JPY 0.41 | - | 1.3% of full-year plan | Company EPS forecast: JPY 30.96 |
Progress Toward Full-Year Plan (Recurring Profit Basis): 2.1% (Same Period Last Year: -)
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