TOSE CO., LTD.

Business Details

An independent-developer-only segment that undertakes contracted planning, development, and operation of game software for home consoles/PCs, smartphones, and arcades. Its main customers are major domestic and overseas game manufacturers, and it provides an integrated service from planning proposals through development and operation. The segment operates a development structure that includes consolidated subsidiaries in Japan, China, and the Philippines, and accounts for approximately 94% of consolidated Group revenue, making it the core business. Revenue Share (success-based compensation tied to the sales performance of developed titles) is also one of its revenue sources.

Recent Overview

Suspension of a major overseas project led to idle capacity in Q3; operating profit fell 41.9% year on year

At the end of February 2026, a large-scale development project with a major overseas game company was suspended (resumption timing undetermined) due to a change in the counterparty's policy, resulting in idle capacity for part of the development staff from March onward. This caused revenue for the third quarter (three-month period) to decline compared with the first and second quarters. In addition, Revenue Share declined year on year in both the home console and smartphone businesses, lowering the gross profit margin. Cumulative operating profit through the third quarter was ¥263 million (down 41.9% year on year). On the other hand, active development progress through the cumulative second quarter contributed to cumulative revenue of ¥4,539 million (up 4.2% year on year), maintaining a level above the same period of the prior year. The company is working to maximize resource utilization through early receipt and launch of new projects and by shifting to greater use of internal resources, and has left its full-year earnings forecast unchanged.

Key Products

Growth Drivers

• Expanding demand for compatible software development amid the growing adoption of the Nintendo Switch 2
• Several major development projects progressing smoothly as planned in their final phases
• Maximizing development resource utilization through early receipt of orders and smooth launch of new projects
• Improved cost efficiency by shifting work previously planned for external outsourcing to internal resources
• Normalization of profitability following the disappearance of the impact of two development troubles that occurred in the prior fiscal year
• Substantial increase in the order backlog (¥3,406 million at the end of FY2025 (ending August 2025), up 386.7% year on year)

Risks

• A large-scale development project with a major overseas game company remains suspended at the counterparty's request (resumption timing undetermined), posing an ongoing risk of idle capacity
• FY2026 (ending August 2026) is expected to see a decline in operating profit due to reduced Revenue Share (full-year operating profit forecast of ¥405 million, down 41.3% year on year)
• Several major projects entering their final phases, gradually reducing capacity utilization, creating timing risk in transitioning to next-stage projects
• A trend of shrinking revenue due to intensifying competition in the smartphone game market and the termination of service for operated titles
• Loss of order opportunities due to a shortage of talent with project management skills
• Concern over the impact of soaring semiconductor memory prices on the production and sale of home game consoles