Thank you for joining us today for our presentation covering the first-half results for the fiscal year ending March 2026. Looking at the financial highlights, the COMSYS Group reached new record highs in net sales, operating profit, and net profit. Specifically, sales were up 2.3% on a year-over-year basis, while operating profit increased by 9.7%. We also achieved a number of other milestones on the ESG and shareholder returns front. Let's start with the results overview for the first half of the fiscal year ending March 2026. Here is the results overview. As you can see, we recorded year-over-year growth across the board, the sole exception being orders received, which experienced a slight decline. We will be going over the details in a moment. This page covers orders received and net sales.
We recorded JPY 321.5 billion in orders, a slight decline from JPY 325.7 billion for the comparable period last year, our best performance in company history. Essentially, orders were virtually unchanged year over year. This decline of JPY 4.2 billion reflects more challenging comparables, driven by a very large project in the social systems-related business during the same period last year. We also experienced a few order recognition delays in the social systems-related business, in which order volume declined by JPY 19.6 billion. Conversely, we secured a large project in the IT solutions business, allowing us to book the highest-ever first-half order volume in company history. Looking at NTT-commissioned projects, we recorded strong growth here on the mobile front, which drove results and has allowed us to offset the large gap created by the social systems-related business.
To recap the net result, this gap amounts to JPY 4.2 billion less in overall order volume and was due to challenging comparables resulting from a one-off factor in the form of a large project last year. As a result, while orders were down year over year, results as of the end of the first half actually significantly exceeded internal company targets. We recorded JPY 270.3 billion in net sales, which corresponds to 43.6% of the full-year target. Once again, this is the best first-half performance ever in company history. We expect orders to pick up, and net sales broke new records. Driven by this sales strength, we recorded JPY 18 billion in operating profit, a new record. Net profit came in at JPY 12.6 billion, prompting us to raise the scale of our share buyback program, which I will detail momentarily.
Allow me to give you some extra color on the profit results. We recorded JPY 18 billion in operating profit, which corresponds to a year-over-year increase of JPY 1.5 billion. Note that we experienced a tailwind totaling JPY 1.8 billion last year, resulting from a reversal of allowances for doubtful accounts and changes in accounting standards. These one-off factors boosted first-half results last fiscal year. Adjusting for this JPY 1.8 billion tailwind, our actual earnings capacity didn't just grow by JPY 1.5 billion, but rather by a full JPY 3.3 billion. It was the same with net profit, which benefited from approximately JPY 1.2 billion from one-off factors last year. Adjusted for these, net profit was actually up a full JPY 3 billion on a year-over-year basis. Operational efficiency in the NTT engineering business drove profits as we made great strides in our in-housing efforts.
Specifically, having our network construction teams execute these projects internally at COMSYS allows us to leverage our existing platform, which we have built and refined over the years. These in-housing efforts allow us to handle these orders in the most cost-efficient manner possible. Another key strategy is taking best practices within the COMSYS Group and deploying these across our subsidiaries. We are also making progress in the integration of back-office functions. The contract backlog stood at JPY 316.1 billion, which is a new record. This is an increase of over JPY 50 billion from a start-of-the-fiscal-year baseline, underscoring robust order backlog levels. A key theme for the second half is the flawless execution of projects in our order backlog, allowing us to convert these into sales and profits for the company. This slide highlights four key orders secured in the first half. I will discuss the details momentarily.
Moving on to an analysis of the business environment and our business strategy. The full-year forecasts remain unchanged across the board in terms of orders received, net sales, and operating profit. Circling back to what I said earlier, while the order volume decreased year-on-year in the first half, adjusting for one-off factors, our underlying performance improved. Crucially, projects secured in the second half of the current fiscal year may or may not be completed by March 31st, 2026, depending on the project. This informed our decision to maintain the forecasts, but concurrently, we will continue proactive efforts to work through the order backlog in the second half in an effort to unlock sales and profits. Let's now move on to an overview of the results for each business, starting with the carrier-related business.
As you know, the NTT Group is seeing tremendous demand for their 10-gigabit optical fiber internet services. Additionally, we saw very strong results from infrastructure enhancement projects for NTT Docomo. We delivered strong first-half results, and we anticipate sustaining this momentum in the second half as well. On the other hand, since CapEx by NCCs has slowed down, we do not expect significant growth from telecommunications infrastructure projects. That said, we have been able to secure peripheral projects, such as data center infrastructure projects, and are also seeing inquiries for base tower sharing infrastructure construction from non-carrier entities. As a result, for the carrier-related business as a whole, we are guiding for JPY 283 billion in net sales in fiscal year 2026. A key topic here is the degree to which we can execute construction work to enhance Docomo's infrastructure in the second half.
We will be advancing efforts to unlock efficiencies by integrating and standardizing back-office functions and through the use of RPA solutions. Concurrently, we are in negotiations with building owners to secure base station installation sites on their properties. These negotiations are the pivotal starting point. To address this, we have expanded our negotiation team by 50% year-over-year. With this expanded capacity, we will ensure we meet Docomo's expectations throughout the second half. This slide highlights the successful efforts of our teams to secure projects in other domains. We are leveraging our telecom carrier-related teams to secure projects in the domains of social and IT infrastructure. We are also pursuing orders for projects beyond foundational networking infrastructure for our telecom carrier clients. The idea is to further grow the platform COMSYS has built over the years and to fully monetize this asset, thus allowing us to improve margins.
By incorporating these projects in social and IT infrastructure, we believe we can grow orders to JPY 43 billion, which accounts for all construction projects leveraging our telecom carrier-related structure. We have compiled a list of projects in these new domains, shown here on the right. First, we have projects related to data centers. This refers to, for example, networking projects in Inzai, Chiba. We have established a new local base of operations in Inzai to give us more speed and flexibility in the execution of these projects. Second, we have power distribution projects. Here, we are seeing a growing number of infrastructure projects from energy companies, so we will be further developing our skillset in the high-voltage domain and carrying out strategic CapEx in SPVs used for this purpose. COMSYS has a training center in the Tokai area.
A few years back, we made the decision to upgrade this facility, originally designed for telecommunications, so that it can handle electrical construction work. This retooling now allows us to conduct intensive training programs for power distribution work. Third, we have base station sharing projects. As noted earlier, we are seeing a significant increase in inquiries. We are building trust with sharing operators by proposing efficiency frameworks leveraging the mobile construction expertise we have cultivated over the years. Moving forward, we will continue these initiatives while also strengthening our ability to adapt to change. Simultaneously, we will also enhance our execution capabilities and our ability to deploy this infrastructure. Next is the IT solutions business. Here, the solutions category delivered tremendous results, and our plan is to continue focusing on the steady execution of large-scale projects. A key development is our shift in the way our services are perceived.
Historically, COMSYS has operated in a subcontractor capacity. However, because of our strong performance, we are increasingly being selected as the prime contractor for these projects. This means we are now being entrusted with the execution of large-scale projects directly rather than in a subcontractor capacity. We will continue further enhancing our capabilities in this area while simultaneously focusing on unlocking further added value through strategic resource allocation. Specifically, we are transferring physical tasks, such as cabling, to our engineering teams in the carrier-related business. This allows our IT solutions team to focus on more high-level upstream processes in a way that enhances our value proposition. On the software front, we expect to continue seeing digital transformation efforts by clients in the private sector and large-scale government system modernization efforts. These are a source of continued long-term demand, which we will work to secure going forward.
Lastly, as the ones who actually build these systems, we are best suited to operate them and carry out maintenance. This allows us to integrate operation and maintenance functions with construction services, thus successfully expanding our recurring business. Allow me to discuss two key topics. The first key topic is the reorganization of the COMSYS Group's internal software development functions. Up until now, our software development efforts had been carried out by the following three companies: COMSYS JOHO SYSTEM Corporation Group, TSUKEN ADVANCED SYSTEMS CORPORATION, and VACSLAB Co., Ltd. Starting on July 1, 2025, all software development operations have been integrated into COMSYS JOHO SYSTEM. This will allow us to further enhance software development functions and unlock synergies through strategic integration. Going forward, COMSYS JOHO SYSTEM will manage and optimize all operations.
Currently, the COMSYS JOHO SYSTEM Corporation Group employs 1,450 people and generates approximately JPY 35 billion in revenue every year. Scale is critical in the software industry. Only large, top-ranking companies are perceived as quality enterprises with software offering the right quality assurances. Against this backdrop, this integration is a good opportunity for us to grow. We have long maintained that the integration of hardware and software will increasingly become a valuable tool in solving social challenges and creating a more vibrant world. We are proud to announce a project that validates and embodies this vision, secured in partnership with Sony Network Communications Inc. Our selection for this landmark project, the first-ever local wireless 5G infrastructure project on the Shuto Expressway, builds on the trust earned through our construction work for the Sony Group's NURO Service.
This upgrade to the Shuto Expressway's infrastructure will make use of Sony's advanced dynamic spectrum access, DSA for short, technology. Due to our previous construction and engineering work, we were approached by the Sony Group as joint partners in the execution of this infrastructure project. Local 5G has been a highly anticipated technology for a number of years now. While its successful implementation faces steep engineering hurdles, COMSYS executes dozens of these projects annually, underscoring our ability to overcome these technical barriers. The level of technical expertise was a key factor in our selection for this project. The road sector stands at the forefront of the convergence between software and hardware, a shift that is driving seismic changes across the entire mobility landscape. We are thrilled to be positioned at the heart of this transformation and to contribute directly to this evolution. Let's move on to the social systems-related business.
This business has grown considerably, and we now have set our sights on a net sales target of JPY 207 billion for the full fiscal year ending March 2026. Previously, we bundled infrastructure with others. However, the others category was actually the largest of the two, so the old classification was a little bit convoluted. We have now separated these segments, grouping our teams and businesses related to civil engineering projects into the infrastructure category and aggregated revenues from businesses like Fujiki Tekko Co., Ltd. in the area of steelworks and Tokyo Gas Lifeval Kando Co., Ltd. into the others category. This new segment of infrastructure has delivered very strong results, as has the segment of electricity and telecom. Specifically, infrastructure is seeing robust demand for the undergrounding of power lines for data center interconnect projects and gas-related engineering projects.
Concurrently, the electricity and telecom segment is expanding significantly, driven by a variety of projects, most notably in the data center sector. Stakeholders often ask for further details regarding the kind of work we do for data centers. This diagram illustrates the scope of our work in these projects. Specifically, this consists of the core technologies and hardware that underlie these structures.
Prominent general contractors generally handle the construction of the building's shell, with our subsidiary, Fujiki Tekko Co., Ltd., supplying high-grade steel frames for use in these buildings. Beyond that, we carry out a variety of other construction work involving electrical infrastructure and infrastructure related to air conditioning, servers, and routers, among others. The COMSYS Group also does work related to the undergrounding of cabling infrastructure and other civil engineering work. As it pertains to orders from hyperscalers, we often execute these projects through joint ventures with prominent general contractors.
Other times, we are subcontracted by these general contractors to build and install the necessary infrastructure. Going forward, we want to skillfully execute these projects and further expand the scale of our operations. This process is quite similar to what you see in a telecommunications building. Equipment, air conditioning, cooling and ventilation systems, power supplies, servers, and routers. It is exactly the same type of equipment used by telecom carriers. So this is an area where we can leverage our extensive knowledge and expertise regarding each of these technological components. This expertise now allows us to secure projects in the domain of data centers. Another common question is about the order and revenue scale of these data center projects. As you can see from the diagram, as of the end of the first half, we had recorded JPY 22.1 billion in orders received and JPY 16.4 billion in sales.
Including projects we are fairly certain we will be able to secure, we expect a cumulative total of approximately JPY 50 billion in orders received in the fiscal year ending March 2026, and approximately JPY 32 billion in sales. We want to sustain and further accelerate this momentum into next year as well. Allow me to direct your attention to the table on the right-hand side of the page. The section here refers to an initiative by TOSYS Corporation, one of our group companies operating out of the Nagano and Niigata areas. TOSYS Corporation plans to open a containerized data center in Nagano City in February 2026. Industry experts believe we are likely to see data centers emerge in rural areas, so this data center in Nagano serves as a way of getting ahead of this trend. We have established a Generative AI Center.
AI has dominated the social discourse over the past couple of years. Against this backdrop, we seek to use AI in our corporate operations and eventually leverage the expertise acquired through this process in a client-facing context. This is a joint initiative between Nippon COMSYS, which is a core component of our larger operating group, and Hokuriku Denwa Kouji Co., Ltd., another one of our group companies specializing in niche development projects and phone line installation projects in the Hokuriku area. We use Exabase to develop RAG, Retrieval-Augmented Generation, systems.
For example, we have used RAG to reduce inquiries about our internal systems by 20%. This center also assists clients in determining the technical feasibility of using AI in accomplishing a number of tasks and developing workflows suited to these needs. We also view this as an opportunity to encourage employees to use AI on a daily basis for work functions.
Specifically, out of approximately 1,000 enterprise licenses, 76%, most at Nippon COMSYS, already use AI for everyday work functions. This is much higher than the market average, the usage rate hovering at around 40%-50% at other companies. There is plenty of room for optimizations, so we want to encourage employees to leverage AI to unlock efficiency and ultimately transform this expertise into products and services we can offer. We are currently leveraging multimodal AI models to transcribe audio data and extract information from handwritten documents. Through these efforts, we seek to unlock operational improvements. This section highlights a few examples of recognition by third parties as it pertains to our sustainability initiatives. Let us now move on to shareholder returns. We have authorized JPY 2 billion in additional share buybacks.
Our initial program was set at JPY 8 billion, of which approximately 81% had been repurchased by the end of October. As noted earlier, while first-half orders dipped slightly year-over-year, performance is tracking well ahead of our internal plans. Specifically, while large-scale social system projects were delayed into the second half, and revenue from these projects may not be fully recognized within this fiscal year, we now have a clear outlook through to the first half of the next fiscal year. This confidence is what prompted us to expand the scale of our buyback program. Within the scope, we will be canceling 15 million shares of treasury stock on March 31st, 2026. Post-cancellation, we will hold approximately 2.95 million shares, representing roughly 2.5% of outstanding shares.
This isn't the first time we canceled treasury stock, but this decision to cancel more than 10% of the total number of shares outstanding is a first and marks a departure from previous efforts, which were decidedly of an incremental nature. As we do not anticipate immediate strategic utilization of these shares for M&A, as we did in the past, we have decided to allocate a portion to employees and cancel the remainder. In terms of returning value to employees, starting this April, we raised the employer match within our stock-based compensation program from 5%- 20% at select subsidiaries, primarily Nippon COMSYS. Our goal is to align employee interests with the stock market and our corporate growth. As a result, enrollment rates and the average employee plan contribution have roughly doubled.
Building on this success, we plan to introduce an ESOP trust to grant a portion of our treasury stock to employees. We are currently finalizing the details, which we will promptly share with stakeholders as soon as the terms and specifics have been set. Page 23 shows our shareholder returns policy. Page 24 shows the trend in dividend payments over time. This concludes my presentation. Thank you for your time.
We would now like to begin the Q&A session. Mr. Hamakawa with Nomura Securities will be posing the first question.
My name is Hamakawa, and I'm with Nomura Securities. Thank you for your presentation. I have two questions for you, the first of which is regarding the increase in the underlying profit totaling JPY 3.3 billion in the first half. Could you provide the breakdown of the profit contribution by segment? Second, since the full-year forecast remains unchanged, I assume this implies a profit decline in the second half. NTT Docomo plans to triple the deployment rate of new 5G base stations, so I would like to know if these plans have been fully factored into the forecast. In other words, is there any upside potential to the second half or full-year plan? Please walk us through your thought process behind keeping the forecast numbers unchanged.
Thank you for your question. Our segments correspond to each of our regional subsidiaries, so I assume you are asking for a breakdown by business. The primary driver of the first-half profit increase was mobile telecommunications. While we track profitability internally, I am not at liberty to disclose these internal metrics, so highlighting strength from mobile telecommunication is the full extent of what I can disclose here.
I can also say that we expect to continue seeing very strong results from the NTT business in the second half. To your point, just last week, the NTT Group announced its commitment to tripling the deployment rate of new 5G base stations in the second half, and they have stated that they expect this dynamic to continue into next fiscal year and beyond. In light of this, in the second half, we aim to improve our execution capability to capture this demand and hopefully exceed our plan. That said, we have not revised the specific figures at this time. The reason is that base station construction is a very slow process with many moving parts: getting building owners to green-light the project, designing the project, and then procuring and installing the equipment.
Currently, we have a significant backlog of projects held up in this initial negotiation phase with building owners. It is not at all clear how many of these can be completed and recognized as revenue over the course of the March 2026 fiscal year. Additionally, we continue seeing growing demand from NTT East and West for our optical fiber engineering installations. We can leverage our expertise and track record in this area, meaning these are high-margin projects. The moving season tends to peak around April and May, so there is usually a slump in activity in the summer months. This wasn't the case in 2025, as this project category delivered very strong results in the summer as well, and we expect it to contribute to our bottom line on a full-year basis as well.
In summary, while we see potential upside in the carrier-related business for the second half, these timing uncertainties and demand variables related to fiber optic preclude us from reflecting this potential strength into the forecasts. I apologize for the lack of specifics, but in broad strokes, this is our current outlook.
Thank you. Mr. Nakagawa with Mizuho Securities will be posing the next question.
My name is Nakagawa, and I am with Mizuho Securities. I found the diagram on page 17 to be very informative as a comprehensive illustration of the types of infrastructure projects COMSYS does for its data center clients. You mentioned several areas here. Could you share with us what areas you are focusing on in terms of business expansion and which areas you believe you have a strong competitive advantage in? My second question pertains to NCCs.
It would appear the outlook for NCCs is somewhat muted compared to that for projects contracted by NTT. Additionally, you mentioned data center projects from NCCs, so I would like to hear your demand outlook from clients outside the area of data center infrastructure.
Thank you for your question. On the topic of data center initiatives, every single item listed on this slide is an area where we have accumulated extensive expertise through our work with telecom carriers. We don't prioritize any one area because we have full confidence in our expertise and competitive advantage across the various areas. Zeroing in on a single niche is a losing strategy, so instead, we seek to establish ourselves as a comprehensive subcontractor. As such, the winning move is to close any performance gaps and continue cultivating our image as a company the hyperscalers and prominent general contractors can rely on to take care of their infrastructure needs. We believe we can further improve our capabilities, allowing us to secure more orders.
Our strategy has been to focus on data center projects in the Tokyo metropolitan area, with Nippon COMSYS at the forefront. However, in light of the Watt-Bit integration initiative and a trend toward regional decentralization efforts, we are currently bringing staff from our regional group companies to the Tokyo metropolitan area for on-the-job training to make sure they are ready to handle this expected surge in demand for regional data centers. Circling back to what I said earlier, part of our regional decentralization efforts involve the kind of containerized data centers TOSYS is offering.
We are currently in the process of launching these operations at existing local group companies to manufacture and operate these containers, and intend to continue these efforts going forward. In summary, rather than zero in on a niche competitive advantage, we want to improve our overall resource baseline. Regarding the NCCs, your assessment is correct. Data from the Ministry of Internal Affairs and Communications shows that SoftBank and au are significantly ahead of the Docomo Group in 5G base station density. Consequently, we don't expect a surge in CapEx from the NCCs in the near term, only after Docomo narrows the gap. That said, we are seeing green shoots in some areas here. Specifically, in accordance with their agreement with au, roaming services by KDDI will be phased out as Rakuten Mobile builds out their own network in certain areas next year. This presents an opportunity for COMSYS.
Looking further ahead, both Docomo and the NCCs will at some point shift to Sub-6 GHz and EHF operations. In short, we continue in this holding pattern with some headwinds for our company, but one which we expect will be broken by the widespread rollout of EHF infrastructure. Since these signals have a shorter range and poor penetration, the industry will require significantly denser base station networks, both indoors and on streets and roads. We are therefore maintaining our operational readiness for this future demand, all the while executing projects in other areas. Finally, as indoor signal penetration becomes increasingly more challenging, the role of infrastructure sharing will grow, and with it, the importance of sharing operators.
We are increasing the number of touchpoints with these operators and even seconding our staff to real estate developers involved in urban planning projects and joint use building projects, allowing us to obtain valuable information in the area of telecom infrastructure. In summary, while we face a lull in the short term, we continue steady execution efforts and are positioning ourselves for the significant wave of demand on the horizon.
Thank you. Mr. Teraoka with Daiwa Securities will be posing the next question.
My name is Teraoka, and I'm with Daiwa Securities. I have two questions. First, I do believe we have good visibility in terms of the outlook for mobile infrastructure construction projects through next fiscal year, thanks to demand for capacity improvement work. However, what is your view for the March 2028 fiscal year and beyond? Do you anticipate a seamless transition to Sub-6 GHz and mmWave projects, or do you foresee a peak out in demand? My second question pertains to data center projects. JPY 50 billion in orders received this fiscal year is a very significant jump. Could you elaborate on your execution structure? You mentioned significant overlap between work at these data centers and at telecommunications buildings. In light of this, do you envision leveraging COMSYS' NTT network infrastructure engineering staff? Please also share with us the company's plan to sustain growth beyond this JPY 50 billion threshold.
Thank you for your question. Allow me to expand on our outlook for mobile infrastructure construction. As we discussed earlier, NTT Docomo plans to triple the deployment rate of new 5G base stations in fiscal year 2026. I do not believe demand will cease at that point. While the current focus is on immediate capacity measures, the overall industry, including NCCs, will likely work toward expanding Wi-Fi 6 and mmWave availability. Currently, NCCs' efforts on the Sub-6 GHz and mmWave front involve optimizing network settings inside their base stations in order to achieve more advanced performance.
Once this RF optimization phase is complete, we expect a shift to the next phase of physical infrastructure upgrades. Naturally, NTT Docomo will move to catch up, so this cycle of technological evolution and competition is likely to continue indefinitely. Furthermore, the NTT Group's brand identity is rooted in network quality. Therefore, I view this current investment push not as a temporary one-year spike, but as a catalyst for a sustained long-term commitment to robust network construction.
As this dynamic plays out over the coming years, we expect the rollout of mmWave and Beyond 5G, although this is highly dependent on the form mobile apps and mobile devices will take in the future. That said, it is highly unlikely that these technologies will plateau at 2025 levels. This is an area we are quite bullish on. A prime example of this new use case of tackling social challenges is the aforementioned Shuto Expressway project. This will be the first-ever local 5G infrastructure and construction project on the Shuto Expressway, and we believe we will start seeing more and more initiatives leveraging 5G to solve social issues. We believe the integration of telecommunications and IoT to solve social challenges is an area poised for significant expansion, and we intend to secure opportunities of this nature.
Earlier, I highlighted the similarities between building data center infrastructure and telecommunications facilities. A key difference, however, is the scale, which is vastly different. Work at these telecommunications exchange facilities typically involves installing the same set of smaller power equipment pieces across many locations. Our profitability there stems from high-volume execution and proficiency gained through repetition. By contrast, data center projects involve installing massive infrastructure in a single concentrated effort. This difference in scale, therefore, requires a fundamental shift in mindset. However, we are finding that these data center projects play to our strengths, since the sales generated per engineer and the overall project scale are significantly larger. Consequently, we are aggressively reallocating resources from our carrier-related business engineering teams to our data center infrastructure division. This strategy allows us to maximize sales and profit per employee.
Previously, Nippon COMSYS has traditionally handled the majority of large-scale projects in the Tokyo metropolitan area, which is the core market in Japan. However, as data center demand spreads out to regions like Hokkaido, Tohoku, Tokai, and Kyushu, we must be ready. In anticipation of this shift, we are currently bringing a significant number of engineers from our regional group companies to Tokyo, integrating them into active data center project sites for on-the-job training, thus rapidly enhancing our execution capabilities nationwide. Many of our partner companies are currently at capacity or lack the experience to handle projects of this scale or involving cutting-edge technologies. We are now stepping in to guide these partners by leveraging our expertise as a prime contractor to organize workflows or engage specialized firms for specific tasks.
In short, we have been able to expand our execution capacity by leveraging our strengths to expand our partner network. Looking ahead, as the use of AI becomes widespread, we expect this will drive further demand for data center infrastructure. Due to power supply constraints in the Tokyo metropolitan area, we anticipate a shift toward regional decentralization. Through workforce rotation and partner development, we are laying out the groundwork to capture this inevitable demand across all locations and formats.
Thank you. Mr. Yagi with Morgan Stanley MUFG Securities will be posing the next question.
Thank you for your presentation. My name is Yagi, and I’m with Morgan Stanley MUFG Securities. I have two questions, the first of which is a bit of a follow-up to the topic of data center projects. Earlier, you expanded upon your strategy for the provision of infrastructure services to data centers. Beyond the approximately JPY 32 billion sales forecast for the current fiscal year, do you think there’s a potential ceiling for this business going forward?
Do you have a specific capacity limit in mind or a future revenue target? Also, to the extent that you can, could you comment on the profitability of these data center projects? Second, gross profit margin improved to 13.7% in the first half, year over year, driven by the carrier-related business. Can we expect further improvements in the second half and next fiscal year? If so, will segments beyond the carrier-related business contribute to this margin expansion?
Thank you for your question. We believe there is significant room for growth in the March 2027 fiscal year and beyond in terms of data center-related projects. That said, I don’t have any specific numerical targets I can share today, as we are currently in the process of assessing market trends and client needs. On the other hand, this market presents a target-rich environment, and we are further enhancing our execution capabilities to capture more growth. On the profitability front, since these are contracted projects, I’m afraid I cannot give you a one-size-fits-all margin percentage for these projects.
However, what I can say is that the large scale of these projects allows us room for operational efficiency. Even if we only break even in the initial construction phase, we secure profitable follow-up work, such as cabling and maintenance, through our specialized teams. For example, our dedicated cabling team in Inzai is performing very well by offering high-quality cabling work to our clients.
In summary, viewing the project lifecycle as a whole, including follow-up projects in areas like cabling and maintenance, has allowed us to secure robust profits. As you noted, our core carrier-related business is highly profitable due to our accumulated expertise over the years. In particular, as mobile infrastructure project volumes grow, this makes it easier for us to secure higher margins. Another factor is operating leverage from increased order and sales volume covering fixed costs, leading to margin improvements.
Concurrently, we are improving margins in the social systems-related and IT solutions segments. We are being more selective with orders to ensure profitability and have implemented strict contract risk management guardrails to prevent the kind of large-scale losses we experienced a few years back. In other words, this is a two-pronged strategy designed to minimize the risk of large losses and raise profit margins. Furthermore, our steady efficiency improvements, driven by the Generative AI Center, RPA deployment to assist with on-site processes and workflows, and the integration of companies and projects into larger units, are gradually starting to bear fruit. We expect these factors to contribute to gradual margin improvement in the second half as well.
Thank you for your answer.
Mr. Kawashima with SMBC Nikko Securities will be posing the next question.
My name is Kawashima, and I am with SMBC Nikko Securities. My question pertains to NTT East and West's plan to sunset its landline telephone service's copper infrastructure by 2035, as announced in a press release about a month or so ago. What impact do you foresee from this transition? Do you anticipate surge demand resulting from the decommissioning of this legacy copper infrastructure? Will this migration to optical fiber affect overall construction volumes? Furthermore, given the long-term timeline through 2035, how is the COMSYS Group preparing its construction workforce for this specific shift?
Many customers still use these analog copper lines, so the migration process to optical fiber offers multiple revenue opportunities for us. First, we expect to be entrusted with the task of visiting customers, explaining that legacy copper lines will be sunset by 2035, and getting them to make the switch to optical fiber. This will be followed by the actual infrastructure construction process. Once a specific area is fully migrated, we will then proceed to the removal of legacy copper cables. Furthermore, these telephone switching centers have MDF, main distribution frames, inside, and organizing and removing this equipment is a major undertaking in and of itself. Crucially, clearing this space allows telecom carriers to repurpose these facilities for data center utilization, creating further downstream opportunities for us.
The critical challenge is maintaining a sufficient number of engineers with the skill set required to handle this legacy copper infrastructure. The widespread adoption of optical fiber in the early 2000s and 2010s has, for the most part, obsoleted copper infrastructure projects, leading to a decline in engineers with the requisite skill set. 2035 is an extremely challenging deadline from a human resources perspective. It is quite unreasonable to try to train new staff from scratch for a technology that is being phased out. Therefore, our strategy is to mobilize our existing veteran workforce to manage this migration and removal as a priority. Still, it will be a race against time. Lastly, this transition to optical fiber involves a variety of challenges of a social nature, such as guiding elderly users through the process or even figuring out if the phone hardware itself is compatible with the new system.
Furthermore, there are areas where optical fiber service is not available and which will require alternatives like fixed wireless access solutions. There are many ways the COMSYS Group can make a valuable contribution at an operational level, especially through the processes I just described. We expect other challenges to emerge, but one of our competitive advantages lies in working alongside carriers and local communities to overcome these hurdles. In summary, we will be leveraging the expertise and adaptability of COMSYS employees across Japan to overcome these challenges as they present themselves, thus making a contribution to the company's top and bottom lines. We view this transition as a sustained revenue driver over the next decade. Hopefully, I have been able to convey a basic outline of our strategic approach in this area. Thank you.
It would appear there are no further questions. Allow us to close today's financial results presentation for COMSYS Holdings for the first half of the fiscal year ending March 2026. Thank you for taking the time out of your busy schedules to view today's presentation.