Divestiture of All Zero Field Shares to Transform into a Pure-Play AI Solutions Provider; 3Q Cumulative Operating Income of JPY 143M Reaches Record High

Summary

For 3Q of FY2026/8, consolidated revenue came in at JPY 4,205M (99.7% vs. prior year), with operating income of JPY 143M (vs. an operating loss of JPY 412M in the prior year), marking a fundamental shift to profitability. The AI Solutions business posted record-high revenue and operating income on a 3Q cumulative basis, driving overall group performance. Meanwhile, the Board resolved to divest all shares of subsidiary Zero Field, which operates the GPU Server business, and full-year guidance has been temporarily withdrawn.

Key Points (Earnings Highlights and Growth Actions)

• Corporate Strategy and Market Assessment
  • Management frames the transition from a revenue growth phase to a profit generation phase as a "second founding"
  • While acknowledging the GPU Server business's potential, management concluded that funding the massive capex required for scale internally is not the optimal approach
  • Robust demand for AI-driven development and AI agent development has created a saturated project pipeline, with talent supply identified as the key bottleneck
• Current Business Progress and Drivers
  • AI Integration + AI Products revenue was 116.0% of the prior-year level (+16.0% YoY); monthly revenue per employee increased from JPY 1,373K to JPY 1,569K
  • BP gross margin improved from 14.7% to 16.2%, driven by value chain optimization and expansion of prime contracts
  • Engineering segment headcount declines from the prior year are stabilizing, with YoY revenue ratios recovering sequentially from 80% → 83.6% → 88.3% quarter by quarter
  • GPU Server business gross margin improved from 49.9% to 59.5% (+9.6pt), with 3Q standalone posting JPY 23M in operating profit
• Strategic Initiatives and Inflection Points
  • Board resolved to divest all Zero Field shares; reclassification as a discontinued operation is expected
  • Filed a damages claim of approximately JPY 460M against the former largest shareholder (alleging misrepresentation during due diligence)
  • Began seconding and embedding Triple Eye's members at BEX to strengthen Tokai region sales and accelerate manufacturing AI product development
  • Launched a credit-bearing AI curriculum through a comprehensive partnership with Chiba University (cumulative enrollment of 630 students)

Outlook and Strategy

• Full-year guidance has been withdrawn pending progress on the divestiture process; management emphasized this is not driven by any deterioration in underlying business performance, as the AI Solutions business continues to track well
• As a reference assuming reclassification of the GPU Server business as a discontinued operation, management presented pro forma continuing operations figures of JPY 4,876M in consolidated revenue and JPY 180M in operating income
• Full-year revenue outlook for AI Integration and AI Products was revised upward from JPY 3,224M to JPY 3,309M (on a reference basis)
• Co-creation with BEX in automotive design DX is positioned as the next growth engine, with plans to expand into blueprint search and auto-generation from August 2026 onward
• M&A strategy will continue targeting adjacent AI business domains at EBITDA multiples of 4–5x
• The CEO has stated a clear mission to convert technological capabilities into reliable earnings, declaring full commitment to the AI Solutions business

Positive Factors

• AI Solutions 3Q cumulative operating income of JPY 171M represents +329.3% YoY growth, a new record high
• The AI Lab-originated model of PoC → full development → next-phase sequential orders is now well established, creating a repeatable revenue structure
• Alroku for LINE WORKS: ID count grew approximately 172% YoY and MRR approximately 123% YoY (disclosed verbally during the earnings call)
• Progress in embedding facial recognition into major SaaS channels, including Money Forward Cloud Attendance Plus and collaboration with LIMNO
• 39 new graduate hires (a group record), over 150 AT20 exam passers, and academia-industry partnerships with Chiba University and HAL Tokyo to build a robust talent pipeline
• Post-Zero Field divestiture, the company retains a sufficient cash position to fund growth investments including M&A

Concerns and Risks

• Completion timing and transaction value for the Zero Field divestiture remain undetermined; full-year guidance has been withdrawn
• The outcome of the approximately JPY 460M damages lawsuit against the former largest shareholder is uncertain, with counterargument risk from the defendant
• Engineering revenue remains at 88.3% of the prior year, with a gradual headcount recovery pace
• Crypto market volatility impacted 2Q cumulative losses; GPU Server business recorded a cumulative operating loss of JPY 28M through 3Q
• Engineer supply constraints relative to saturated AI development demand represent a ceiling on top-line growth
• Impairment risk on goodwill and other fixed assets could materialize depending on the progress of the divestiture process

Performance Highlights

3Q cumulative consolidated revenue was JPY 4,205M (99.7% vs. prior year), essentially flat, while operating income swung to JPY 143M from a loss of JPY 412M in the prior year. The AI Solutions business posted all-time highs in both revenue and profit, complemented by a narrowing of losses in the GPU Server business.

Segment Performance

• Monthly Revenue per Employee (AI Integration): JPY 1,569K (3Q prior year: JPY 1,373K, +14.3%)
• BP Gross Margin: 16.2% (3Q prior year: 14.7%, +1.5pt)
• GPU Server Business Gross Margin: 59.5% (3Q prior year: 49.9%, +9.6pt)
• Headcount: 465 consolidated, 251 standalone
• Gross Profit per Employee (FY2025/8 actual): JPY 3,857K (prior year: JPY 3,041K)
• Cash and Deposits (end of 3Q): JPY 1,494M
• Net Assets (end of 3Q): JPY 1,414M

Q&A List

• Q: What is the outlook for the transaction price, buyer, and timeline?
  A: At this stage, we have only reached a board-level decision on the divestiture policy. Due to NDA obligations with potential counterparties, we are unable to disclose specifics regarding the buyer, pricing, or detailed timeline. That said, we have already entered into concrete sale processes and negotiations, and we will promptly provide full details via timely disclosure once terms are finalized and an agreement is reached.
• Q: Why was full-year guidance withdrawn, and when might it be reinstated?
  A: The withdrawal is not driven by any deterioration in current business performance; rather, it reflects accounting procedures associated with the subsidiary divestiture. At a stage where neither the completion timing nor the sale price has been determined, it is not feasible to present a reasonable view of the consolidated P&L impact. We will reinstate guidance promptly once negotiations conclude and we are able to calculate reasonable forecast figures.
• Q: Are there business KPIs you can share to track the growth trajectory of your proprietary products — for example, growth rates in customer adoption or recurring revenue?
  A: Alroku is growing very strongly, and we intend to share updates on an ongoing basis. As of September, 3Q Alroku ID count is growing at roughly 172% YoY, with MRR running at approximately 123% growth. That said, we recognize these levels are still insufficient for a SaaS business. We are pushing forward with major platform integrations, strengthening customer success, and refining the product, with the aim of achieving even higher growth in 4Q.
• Q: Why divest Zero Field now, at the very moment when AI and data center demand is booming? Isn't this leaving money on the table?
  A: We fully acknowledge that the AI data center and AI server markets have extremely high potential. However, scaling this infrastructure business and building competitive advantage would require even more massive and sustained capital investment. At our current stage, simultaneously growing our core business while making half-measures in infrastructure capex is not the optimal allocation of capital, in our judgment. We believe that handing the baton to a partner who can help Zero Field realize its full potential is the best outcome for both parties. This divestiture decision was made from a focus and prioritization standpoint.