Summary
In 3Q, revenue was temporarily depressed due to shipment timing, while management explained that the planned pickup in 4Q revenue remains on track. The verbal briefing focused on the simultaneous expansion of advanced logic and DRAM investment driven by AI server demand, the strength of customers’ requests to pull in delivery schedules, and the point that supply constraints could increasingly be driven by customers’ cleanroom and ancillary facility capacity. While guiding China WFE to be broadly flat due to a shift in investment drivers from memory to logic, management emphasized that higher investment outside China will be the key driver of overall growth. On shareholder returns, the company expects a record-high level and repeatedly reiterated its commitment to ROE of 30%+.
Key Points (Earnings Takeaways And Growth Actions)
- Management Strategy And Market View
- View is that advanced semiconductor capex will expand over the medium to long term, underpinned by AI application demand
- CY2026 WFE is expected to grow 15%+, with current inquiries suggesting potential for 20%+ (constraint factors: customer-side cleanrooms, readiness of ancillary facilities, and customer-side component procurement)
- DRAM investment is surging not only in HBM but also in commodity DRAM; management noted strong requests to pull in tool deliveries against a backdrop of tight supply-demand
- NAND is seen as moving into a phase of new investment after eSSD demand and rising utilization
- China WFE is expected to be broadly stable at the top line as investment drivers rotate from memory to logic; the company’s China revenue is also expected to trend at a similar level
- Current Business Progress And Drivers
- 3Q revenue was temporarily low due to shipment timing, with an expected increase in 4Q reiterated
- Management attributed the 3Q gross margin decline mainly to the lower revenue base and product mix, plus higher fixed costs from growth investment, and denied any notable one-off factors such as inventory write-downs
- SPE new equipment declined in 3Q, but DRAM-related tools were solid at +12% QoQ; application mix was non-memory 56%, NAND 8%, DRAM 36%
- Field Solutions saw strong spare parts demand on rising utilization, with retrofit/modification projects remaining at a high level
- Regional mix shifted with a higher Korea share and lower China share (explained as quarterly volatility)
- Strategic Priority Initiatives And Key Changes
- On the supply side, management clarified its stance that in-house production capacity is sufficient and parts procurement is progressing, enabling the company to meet its supply commitments
- Updated FY2026 2H SPE new equipment revenue outlook to JPY 900B, and specified that 4Q is expected to be +30%+ vs 3Q
- Emphasized pursuing both (1) expansion of value-added tools in advanced nodes (POR wins and evaluation progress) and (2) Field Solutions growth driven by rising utilization
- Announced a stronger shareholder return stance by simultaneously raising the dividend and launching share buybacks, putting capital efficiency (ROE) front and center
- Regarding mid-term plan targets (Revenue JPY 3T, OP margin 35%), management suggested revenue and ROE are within reach, while margins will be closed through new product ramp and a higher mix of value-added tools
Outlook And Strategy
- Full-year guidance has already been revised upward, and 4Q is positioned as on-plan for a revenue recovery driven by higher shipments
- FY2026 2H SPE new equipment revenue assumed at JPY 900B; 4Q new equipment revenue is expected to be +30%+ vs 3Q
- Conditions for WFE upside are progress in customer-side cleanroom availability and ancillary facility readiness, as well as normalization of customer-side supply chains
- By application, DRAM is expected to grow ~20%, logic is also expected to grow 15–20%, and NAND is expected to be flat to slightly up with a back-half skew
- China is assumed to be broadly flat due to a rotation in investment drivers, with growth led by regions outside China
- Gross margin is expected to have room to improve from 4Q onward on the recovery in revenue levels, penetration of value-added tools, and Field Solutions growth
- Capital policy will continue a balanced approach, prioritizing growth investment while maintaining an equity ratio of ~70% and targeting ROE of 30%+
. . .
Positive Factors
- Strong customer requests to pull in delivery schedules indicate near-term demand strength is already becoming visible
- DRAM investment is expanding beyond HBM into commodity DRAM, with tightness sufficient to trigger requests for accelerated tool capex
- Logic is advancing to 2nm and 1.4nm, and accelerating demand for advanced packaging and test is expanding the tool opportunity set
- Field Solutions is benefiting from rising utilization, with spare parts and retrofit/modification projects sustaining high levels
- Management commentary that in-house production capacity is sufficient and parts procurement is progressing, enabling the company to meet its supply commitments
- FY2026 SPE new equipment was updated to JPY 900B for 2H, with explicit guidance for acceleration in 4Q new equipment revenue
- Shareholder returns will be enhanced via a simultaneous dividend increase and share buyback, with total shareholder returns expected to be a record high
Concerns And Risks
- In an upside-demand scenario, constraints may shift to customer-side cleanrooms and ancillary facility readiness
- Need to monitor whether cost increases from pulled-in deliveries and inflation can be absorbed while still delivering gross margin improvement
- In 3Q, the lower revenue level lifted the fixed-cost ratio and pressured margins, leaving quarterly volatility as an ongoing feature
- China is expected to be flat at the overall market level, but order/revenue visibility could vary depending on the phase of application rotation
- NAND is assumed to be flat to slightly up; if the timing of investment resumption slips, the ramp in tool demand could be delayed
- Rising fixed costs from R&D and production capacity expansion could weigh on near-term margins
- Sustaining an aggressive shareholder return policy presupposes reliable cash generation; balancing the approach in a changing external environment is a key focus
Key Financial Highlights
In 3Q, revenue and profit declined QoQ due to shipment timing, with gross margin and operating margin also falling. That said, management emphasized the 4Q revenue recovery and the path to achieving the full-year plan, while pointing to expanding growth opportunities from next year onward amid AI-driven growth in advanced-node investment.
- Consolidated Results Summary
- Performance By Segment
| Item | FYTD | Prior-Year FYTD | YoY | This Quarter | Prior-Year Quarter | YoY |
|---|---|---|---|---|---|---|
| Revenue | JPY 1,731,715M | JPY 1,776,166M | -2.5% | JPY 552,000M | JPY 654,500M | -15.7% |
| Operating Income | JPY 419,293M | JPY 513,521M | -18.3% | JPY 116,100M | JPY 199,600M | -41.8% |
| Net Income | JPY 360,164M | JPY 401,167M | -10.2% | JPY 118,500M | JPY 157,200M | -24.6% |
- Gross Profit Margin: 42.7% (-4.9pts YoY)
- Operating Income Margin: 21.0% (-9.5pts YoY)
- SPE New Equipment Mix By Application: Non-Memory 56%, Non-Volatile Memory 8%, DRAM 36%
- Revenue Mix By Region: Korea 27.1% (+6.0pts QoQ), China 31.8% (-8.5pts QoQ)
- Free Cash Flow: JPY 84,300M
- Cash Balance: JPY 418,400M (-JPY 36,700M QoQ)
- Equity Ratio: 75.3% (FY-End 70.1%)
- Quarterly EPS: JPY 785.90 (Prior-Year JPY 870.41)
- Full-Year Dividend Forecast: JPY 601 (Interim JPY 264 + Year-End JPY 337)
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