Summary
FY2026 Q1 revenue came in at JPY 123.2B with operating income of JPY 26.9B, exceeding initial guidance, prompting upward revisions for both 1H and full-year forecasts. The primary driver was improved ASP/product mix in the Electronics segment: quarterly price-downs embedded in the prior plan were contained better than expected, while pricing on new part numbers also came in above assumptions. Stable production at Cell 8 and higher utilization at Cell 5 contributed on the volume side. Full-year operating income was raised to JPY 127.0B (+41% vs. previous disclosure), with OPM of 23.1%.
Key Points (Earnings Takeaways and Growth Actions)
- Management Strategy and Market Assessment
- Industry-wide demand for package substrates is recognized as exceeding supply capacity for the foreseeable future
- ASP decline pressure expected to remain muted beyond next fiscal year, with current pricing levels likely to be sustained
- Proliferation of agentic AI is diversifying demand away from GPU-centric toward switch ICs and general-purpose server CPUs
- Current Business Progress and Drivers
- ASP/product mix improvement boosted operating income by JPY 26.5B, with the vast majority attributable to pricing
- Quarterly price-downs embedded in the plan were mitigated through negotiations, and new part number pricing came in above expectations
- Glass cloth supplier base expanded to four companies, reducing material procurement risk vs. the start of the fiscal year
- Ceramics saw a temporary uptick in DPF orders, but the broader automotive outlook remains far from optimistic
- Strategic Initiatives and Inflection Points
- Decision to fast-track new capex for Cell 7 and Cell 9 (Kawama and adjacent Ono site) within this fiscal year
- EMIB-T development on track: low-volume production at Cell 5 in 2H FY2027, ramping to full-scale production at the Kawama plant in FY2028
- Glass core development and component-embedded core pursued on separate, parallel roadmaps
Outlook and Strategy
- Full-year guidance raised to revenue JPY 550.0B (+10%), operating income JPY 127.0B (+41%), and net income JPY 84.0B (+45%), underpinned by sustained high utilization in the Electronics segment
- Ceramics expected to see lower revenue and profit in 2H, while other segments are planned for top- and bottom-line growth
- Capacity expansion decisions centered on Cell 7 and Cell 9, targeting approval within this fiscal year; building acquisitions also under consideration
- Policy of securing advance payments from customers for next-round investments remains firmly in place
- Substrates for new customers targeted at ~20% of total revenue by FY2030, though expansion pace constrained by capacity limitations
- Full-scale EMIB-T production expected in FY2028, with a phased transition from pilot low-volume production at Cell 5 to mass production at the Kawama plant
Positive Factors
- Demand-driven pricing power evident across all customers and products, with no single-customer concentration
- Electronics segment OPM reaching 29.3% (full-year outlook), a +6.6pt improvement from the 22.7% disclosed on May 11
- Qualified glass cloth suppliers expanding from two to four, with confirmed capacity additions from Japanese suppliers next fiscal year
- Beyond Cell 8 production stabilization, higher Intel-related utilization at Cell 5 is driving more effective use of existing capacity
- Maintaining a leading position among three contenders in EMIB-T, with yields reaching shippable levels
- Glass core co-development with TSMC progressing, securing next-generation technology optionality
Concerns and Risks
- As industry players accelerate investment, competition for equipment and materials may intensify going forward
- Engineering resources represent a bottleneck for new plant construction; managing new investments in parallel with Cell 6 and Cell 8 ramp-ups poses significant execution challenges
- Ceramics segment faces ongoing structural demand decline in automotive, with lower revenue and profit expected in 2H
- EMIB-T: structural complexity from enhanced core power delivery leaves room for further yield improvement
- Downside risk if FX moves toward a stronger yen versus full-year assumptions (USD/JPY 152, EUR/JPY 181)
- FY2025 net income of JPY 63.7B included JPY 34.5B in after-tax gains from cross-shareholding sales; care is needed when comparing core earnings on a YoY basis
Performance Highlights
FY2026 Q1 (Apr–Jun) delivered revenue of JPY 123.2B, operating income of JPY 26.9B (OPM 21.8%), and net income of JPY 17.9B (net margin 14.5%). The Electronics segment outperformed plan, driven by GPU/high-end CPU demand and stable Cell 8 operations, prompting an upward revision of 1H guidance to revenue JPY 253.5B (+10%) and operating income JPY 54.5B (+43%). Full-year forecasts were also raised to revenue JPY 550.0B, operating income JPY 127.0B, and net income JPY 84.0B.
- Segment Performance (Full-Year Revised Disclosure)
- Segment Performance (Q1 Actual)
| Segment | Revenue | vs. Prior Disclosure | Operating Income | vs. Prior Disclosure |
|---|---|---|---|---|
| Electronics | JPY 375.0B | +14% | JPY 110.0B | +47% |
| Ceramics | JPY 84.0B | +5% | JPY 6.5B | +8% |
| Others | JPY 91.0B | +1% | JPY 10.5B | +17% |
| Total | JPY 550.0B | +10% | JPY 127.0B | +41% |
- Consolidated OPM (Full-Year Outlook): 23.1% (prior disclosure 18.0%, prior year 14.9%)
- Electronics Segment OPM (Full-Year Outlook): 29.3% (prior disclosure 22.7%)
- Consolidated Net Margin (Full-Year Outlook): 15.3% (prior disclosure 11.6%)
- Full-Year FX Assumptions: USD/JPY 152, EUR/JPY 181
- Electronics Segment ASP/Product Mix Improvement Effect: +JPY 26.5B (waterfall vs. May 11 disclosure)
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