Thank you very much for taking your time to join us today for Hitachi's financial results briefing. We will now begin Hitachi Ltd.'s financial results briefing for the first quarter of the fiscal year ending March 31st, 2027. Let me first introduce today's speakers. Tomomi Kato, Senior Vice President and Executive Officer, CFO, Hitachi, Ltd. Masashi Hatakeyama, Vice President and Executive Officer, Deputy CFO. Shinichiro Tamai, General Manager, Investor Relations Division. Those are today's three presenters. Mr. Kato, the floor is yours.
I'm Kato, good afternoon. Before I begin today's presentation, I would like to express my deepest condolences to those who lost their lives in yesterday's Kumamoto earthquake of 2026 and extend my heartfelt sympathies to everyone affected by this disaster. At this time, we have confirmed no material impact on the Hitachi Group. However, we will continue to closely monitor the situation and take any necessary actions as appropriate. In addition, based on conditions and needs in the affected areas, we are considering what support Hitachi can provide to assist with the recovery efforts. Now, I would like to walk you through our consolidated financial results for the first quarter of fiscal 2026, as well as our outlook for the full-year.
Let me begin with the key highlights of today's earnings announcement. In the first quarter of fiscal year 2026, the revenue increased 20% year-on-year, reflecting business expansion as well as favorable foreign exchange effects. Both revenue and adjusted EBITA reached record highs for our first quarter. Led by the continued strong performance of Energy Power Grids business, all four sectors, DSS, Energy, Mobility, and Connective Industries, achieved double-digit revenue growth. The impact on the situation in the Middle East during the first quarter was smaller than we had initially anticipated. Quarterly profit was broadly in line with the previous year, despite the impact of the approximately JPY 50 billion special dividend associated with last year's air conditioning business reorganization.
On a comparable basis, we regard this as an increase in profit. Core free cash flow also exceeded the previous year's level, despite the absence of large advance payments, supported by improved collection of trade receivables. Our outlook for fiscal year 2026. Reflecting our stronger-than-planned first quarter performance, order trends, and revised foreign exchange assumptions, we have raised our forecast for revenue, adjusted EBITA, net income, core free cash flow, and ROIC. To support organic growth, we plan to increase capital expenditures, including investments in production capacity, and also expand corporate strategic investment aimed at accelerating AI adoption.
Developments in the Middle East remain a potential source of significant volatility depending on how the situation evolves. We'll continue to monitor them closely. The results include several special factors, including foreign exchange effect when comparing with the previous year. Let me explain the year-on-year changes in revenue and adjusted EBITA. Revenue increased by 10% year-on-year, given primarily by business expansion. After taking into account the negative impact of the Middle East situation, one-time effects from large projects, and positive foreign exchange effects, revenue increased year-on-year. Adjusted EBITA followed a similar trend. The adjusted EBITA margin improved by 110 basis points through business expansion and other factors. After reflecting higher corporate strategic investment, the impact of the Middle East situation, one-time factors, and foreign exchange effects, adjusted EBITA margin came to 11.9%. The outlook for FY 2026 follows the same trend.
Revenue is expected to increase by 9% year-on-year, primarily driven by business expansion. In addition, after taking into account the impact of the restructuring of home appliances business and ATM business and the foreign exchange effects, full-year revenue is expected to increase by 11% year-on-year. For this forecast, we have revised our foreign exchange assumptions for the second quarter onwards to JPY 160 per U.S. dollar and JPY 185 per euro . Adjusted EBITA is expected to follow the same trend as revenue. Business expansion and other factors are expected to improve the margin by 100 basis point. After reflecting corporate strategic investment and the impact of the Middle East situation, foreign exchange, and other factors, we expected the adjusted EBITA margin to reach 13%.
Next, our first quarter results and the full-year outlook by segment, as shown in here. Including special factors, DSS, our first quarter orders increased 7% year-on-year. Our revenue rose 11%, and profit also increased. In Japan, growth was driven in particular by our AI transformation business, which supports customers' AI adoption together with our modernization business, which upgrades the underlying systems. Profit increased thanks not only to higher revenue, but also to stronger project management, expansion of the Lumada business, and productivity improvements through AI. For the full-year, we have raised our forecast by JPY 30 billion for revenue and by JPY 8 billion for adjusted EBITA. In energy power grids, orders increased significantly year-on-year in the first quarter. Supported by continued strong demand for transmission equipment and including foreign exchange effect, revenue increased 37%. Higher revenue together with productivity improvements also led to higher profit.
For the full-year, we have increased our revenue forecast by JPY 360 billion and adjusted EBITA forecast by JPY 76 billion. Adjusted EBITA margin is expected to improve by 130 basis points to 14.2%. Mobility. First quarter orders increased 25% year-on-year, driven by large signaling and control projects together with foreign exchange effects. Revenue and profit also increased, supported by strong performance in Lumada businesses such as railway signaling systems together with favorable foreign exchange. For the full-year, we have raised our revenue forecast by JPY 100 billion and adjusted EBITA by JPY 9 billion. The adjusted EBITA margin is expected to improve by 120 basis points year-on-year, reflecting growth in Lumada business such as railway signaling. In connective industries, first quarter orders increased 25% year-on-year, led by the measurement and analysis equipment.
Revenue increased 13% year-on-year, including foreign exchange, driven by the expansion of service business in building systems and growth in semiconductor manufacturing equipment, as well as semiconductor measurement and inspection equipment. For the full-year, we have raised our revenue forecast by JPY 100 billion and adjusted EBITA by JPY 14 billion. Consolidated basis. First quarter revenue increased 20% year-on-year. However, as I mentioned before, differences in the scale of special factors, including foreign exchange effects, mean that full-year growth is expected to be 11%. Next slide, I will explain the results excluding these special factors. I'll explain the first quarter results and the full-year outlook by segment, excluding special factors. Excluding special factors such as foreign exchange and business reorganization, Hitachi's consolidated revenue grew 10% in the first quarter. We expect this growth momentum to continue, resulting in 9% growth for the full-year.
Adjusted EBITA margin is also expected to improve by 100 basis points year-on-year. In DSS, we expect to maintain the first quarter growth rate through the year, resulting in full-year growth of 6% in FY 2026. As in the first quarter, AI transformation and modernization are expected to remain the primary growth drivers. We also expect the profit margin to improve. In energy, the revenue growth rate may appear to moderate from the second quarter onwards. However, in absolute terms, revenue growth is expected to exceed year-on-year increase recorded in the first quarter. Supported mainly by planned capital investment in the power grids business, expanded production capacity through workforce growth and productivity improvement, we expect revenue to increase 21% year-on-year for full-year, excluding special factors, with the corresponding improvements in the profit margin.
In mobility, we expect to maintain the first quarter revenue growth rate throughout the year. We also expect the profit margin to improve through a better business mix in railway signaling and rolling stock business with cost reductions. In Connective Industries, we expect to sustain the first quarter revenue growth rate through the remainder of the year, resulting in full-year growth of 6% year-on-year. The key growth drivers include expanding demand for semiconductor manufacturing equipment and clinical analyzers, measurement analysis systems equipment, and as continued building service business growth. Also, expansion, including Lumada business, is expected to improve profit margin.
From here, I will explain the progress of the DSS growth strategy. First, I would like to talk about the domestic IT services business. In first quarter, revenues increased by 8% year-on-year, so has profit. Growth was centered around the AI transformation and modernization by industry, the financial sector, led by insurance and the social sector, including government agencies in local governments and transportation. Each grew by double-digit or more, driving us the overall domestic IT services business. For this fiscal year, we are aiming to increase orders by 7% year-on-year. To accelerate the growth of this AI transformation business, we newly developed and announced last week the agentic AI integration platform. This platform, combining Hitachi's domain and knowledge with our partners' Frontier AI, enable us to achieve both high quality and a rapid development speed. We will apply it to large project for system integration starting in September.
Next is overseas IT services business, specifically GlobalLogic and Hitachi Digital Services. These two have been operated as one entity from this fiscal year. The total of the synergy and standalone revenues increased by 28% year-over-year in Q1. Synergy revenues expanded significantly compared to last year, primarily in energy and mobility. Despite a challenging market environment surrounding the digital engineering business, standalone revenues exceeded the previous year's levels. For further growth in synergy, we opened an experience center in India in Q1, where customers experience benefits of HMAX solution for building systems. We are also strengthening our physical AI capabilities with other companies through alliance. Moreover, cross-selling a project that offer end-to-end services from digital engineering as the operation expanded in high tech and manufacturing sectors, contributing to the revenue increase in Q1.
As announced today, we welcome Anand Vijay, who will lead overseas IT service business to accelerate business transformation. Next is the impact of the Middle East. In Q1, a large project in the Middle East was affected, along with some raw material shortages and a cost increase. However, the impact was rather limited than initially anticipated. We have factored in the risk of impact from Q2 onward in the current forecast, but there will be so much uncertainty and subject to change. We will continue to monitor it closely. From here, I will explain the highlights of the Q1 FY 2026. Revenues and profit increased across all four sectors as of core free cash flow. We spend more on organic growth, primarily CapEx for facility investment, with focus on energy. For inorganic growth, mobility completed the acquisition of Clever Devices, IT service company for public transportation in North America.
Moving forward, we will expand our business into the multimodal domain beyond the railway sector. With regards to shareholders' return, we bought back JPY 150 billion of our shares in Q1, reaching 27% of the plan for this fiscal year. Here, I will explain the quarterly profit and cash flow on a year-on-year basis. Quarterly profit remain at roughly the same as the previous year, despite the impact of special dividends associated with the air conditioning business reorganization in the year before. As for core free cash flow, excluding the impact of large advance received, it increased by over JPY 200 billion year-on-year, attributed to higher adjusted EBITA and improvement in net working capital, driven by better turnaround of receivables.
Now I will explain the financial position. Total asset at the end of Q1 FY 2026 stood at about JPY 15 trillion, staying at nearly the same as the end of FY 2025. Cash conversion cycle dropped from the end of FY 2025, mainly due to less receivables and more advanced payments to improve the capital efficiency even more. Next is revenue by region. We expanded overseas, led by Europe. Including Forex impact, energy grew across all regions, including Europe and North America, hitting 35% in total.
Mobility grew by 18% total overseas, led by the rail control business, particularly in Europe. CI grew by 21% total overseas, mainly in China, driven by an expansion in building system services, as well as semiconductor manufacturing, and inspection and measurement equipment system. This page is order result by segment. DSS increased by 7%, driven by growth in the domestic AI transformation business, modernization business, and global storage business.
Energy saw a significant increase despite nuclear energy's rebound from large-scale project in the previous year. The power grid business benefited from solid demand for power grid equipment in several large-scale HVDC project in Europe. Order backlog exceeded JPY 10 trillion. Mobility increased overall due to large orders in a rail control project. Order backlog increased compared to the end of FY 2025, including Forex impact. CI expanded as a whole, driven by increases in its semiconductor manufacturing and inspection measurement equipment, as well as clinical chemistry and immunity analyzers. Through the highlights of the FY 2026 forecast. As for organic growth investment, we plan to increase CapEx by over JPY 170 billion year-on-year, with focus on power grids and energy. With regards to shareholders' return, there is an unexecuted buyback of about JPY 400 billion for Q2 onward, and it will continue with share buyback.
We are also revisiting forex rate set for Q2 onward. Here, I will explain the net income and cash flow on a year-on-year basis. Net income is expected to increase year-over-year due to higher operating income, despite a fluctuation in non-operating gains and losses from business reorganization and portfolio reforms executed in FY 2025. Core free cash flow is expected to increase year-on-year, excluding the impact of large advance received. Despite increase of CapEx, such as capital expenditure for production expansion and a rebound from special dividends tied to last year's business reorganization, higher adjusted EBITA and a better net working capital will contribute. Finally, I will explain the Lumada business, a key pillar for our growth, on page 27. Here is the performance of Lumada and HMAX, which is a solution for Lumada digital service business. Lumada accounted for 43% in Hitachi's consolidated revenue.
For FY 2026, we plan to reach approximately JPY 5 trillion, 22% increase year-on-year, which accounts for 44% of revenue, while improving adjusted EBITA by 17%. The Q1 revenue growth was mainly driven by Lumada business such as domestic IT services and global storage and DSS building system services, NCI, and semiconductor manufacturing equipment, and medical analyzers in measurement and analysis systems. As for HMAX, Q1 revenue reached approximately JPY 110 billion. We achieved a 22% progress towards the full-year forecast of JPY 505 billion for FY 2026.
Key drivers are HMAX in railway, CI, and DSS. This concludes the briefing on the Q1 performance and the full-year forecast for FY 2026. We recognize that Q1 represents a good start for the second year of the Inspire 2027. In particular, we believe that the growth drivers, excluding the one-off factors explained today, are highly sustainable. On the other hand, the Middle East affairs and external business environment remaining uncertain will push forward a growth strategy as well continues to enhance risk management.
Thank you, Mr. Kato. We will now move on to the Q&A session. Those who have a question, please press the Raise Hand button shown on your Zoom screen. We will call names from among those who have raised their hands, so please unmute your audio, state your company name and your name, and then ask your question when your name is called out. Please turn off Raise Hand button when you no longer need to ask questions. Please note that questioners' video won't be displayed today. We'll take questions in order of the Japanese channel first. We'll take questions from press and institutional investors and analysts during the same Q&A session. So if you have questions, please use the Raise Hand button. Mr. Takizawa, could you please unmute yourself, and please ask questions in Japanese?
My name is Noriyuki Takizawa from Fidelity. Thank you very much for this opportunity. My first question about Q1 Energy business, the improvement of the margin compared to your assumption, was it better? Compared to the full-year, I think the number is higher. What is the reason for that? After Q2 and onwards, do you think for the same reason it is going to be higher? Could you please explain that?
Thank you very much for your question. This time, Q1 performance of Energy business, at first, we had a plan. However, compared to that, the number was better. There are some factors behind that. In terms of Japanese yen, there is an impact from the foreign exchange. However, in U.S. dollars, it is increasing. Mainly the order situation, compared to our assumption, it was very strong. Q1 order situation, I explained, large-scale orders we have received as well. Other than that, what we call base orders, they are not large orders. However, for example, transformers and those equipment, those are very successful, and that really contributed to the performance of Q1. We were doing CapEx spending, including the increase of hiring.
We are increasing the capacity, also productivity has been enhanced. Last year it was as well, in Q1 as well, compared to our assumption, it was better. We have a lot of products we are making, we have so many different projects going on. As much as possible, we would like to strike a very good balance, we were spending our investment on IT, that is really contributing. During the explanation, I was talking about the foreign exchange, also other than temporary factors and other than special factors, we have added some explanation at page seven of the slide. As you can see here, as for the revenue, the percentage I talked about after Q2, it looks modest compared to Q1.
However, looking at the value in Q1, there is an increase more than 3x as much. In Q2 and Q4, you can see it in terms of the growth rate. The growth rate year-on-year might be the same as Q1, and the margin as well. 100 basis points and over is our assumption. That means basically that this should remain. However, having said that, what we cannot project right now is the enhancement of the efficiency of production in the field. This is really the contribution of the field and the effort of them, but it's possible that it might change up and down. Thank you very much.
Thank you. My second question, it might be related to your explanation. You were talking about HMAX EBITA ratio was 22%. You have four segments. HMAX exposure, for example, it should be different from the breakdown of Lumada business. What is the specific sub-segment or segment that has a contribution of HMAX or the improvement of the profit margin?
Yes. HMAX, last fiscal year, we only had the fiscal year's number. Year- on- year Q1 growth cannot be disclosed. I'm sorry, we don't have the number here. However, we believe that there is a two-digit growth, especially the contribution comes from CI building and high-tech business and mobility, railway business. They have contributions. As for building, as we have announced, HMAX for building for remote monitoring. As for high tech, especially the predictive analysis for the equipment, and also each of them really contributed. As for the margin, about 20% and over evenly. Compared to the other sectors' profit margin, the growth here really looks significant. This really is attraction. Thank you very much.
Thank you.
On to the next questionnaire. Mr. Hirakawa, please unmute yourself and ask your question in Japanese, please.
BofA Securities, my name is Mikio Hirakawa. Thank you for taking my question. The first question is about the domestic IT. As explained, AX and the modernizations really driving the performance. I understood that. On the other hand, during the Investors Day, you said 7% growth. If you continue to do that, then that will reach to the JPY 3 trillion of revenue at some point. However, the JPY 5 trillion, which is the significant figure, has been already represented, and there's a significant demand for the AX. Right now, your number is the 7% of the revenue growth. Can you actually foresee the double-digit growth? If you have that visibility, when that's going to be realized, and do you have enough capacities, leveraged by AI, for example? That's my first question.
For this year, domestic IT service is the domain that you asked. The late single-digit order is visible now. As asked, this is not enough to hit the JPY 5 trillion. There are two drivers. One is the leverage of AI. How much of the productivity improvement we could achieve is one key. As of the end of 2025, 10% of the productivity improvement was achieved. We are trying to push this number up. For the next year, FY 2027, this number should go up to 30% from 10%. That's the internal target. This is ambitious target, how far we could achieve it is still not really visible, but this is a great contributor to the improvement of the productivity. Another one is inorganic growth investment. For the domestic and IT service, we don't that much around it.
However, some specific targeted domain, if there is any opportunities out there, we would like to seize the moment. These two factors, if these two driver will work, then we could actually start to on for see as the JPY 5 trillion was in the range of achievement. As for the productivity improvement effect, that would contribute to the higher profitability.
Productivity improvement itself, how does it work? Because now you have a better visibility, that's actually how it explained?
Yes. In a domestic market, we have a limited number of the IT resources, we haven't been able to fully accommodate all the demand. If we can improve the productivity leverage by AI, we could accommodate more the customer's needs and demand.
Thank you. The second question is about the HMAX. During your presentation on the HMAX, you brought up the CI specifically and the buildings and IT as contribution drivers. To me, the railway is the starting point of HMAX, so that the railway business accounts for the significant part of the HMAX. I'm sure that it's difficult to express that for FY 2026 ended in March 2027 or the following year. How this HMAX exposure will change, how the HMAX is going to grow, and how the energy is going to be playing its role in this context?
JPY 110 billion is the actual result as of the end of the Q1, and half of this JPY 110 billion is CI. Specifically building and high tech, followed by railway business. The DSS and energy follow. As of now, in order to number the CI, since it has a significant exposure. That's the result. The ratio, I cannot really refer to it, but every sector, every BU expect it to grow. All of them will be as the contribution drivers in a mid-term perspective.
Thank you. That's all.
Thank you very much. Next, Mr. Yasui, could you please unmute yourself?
Thank you. Kenji Yasui from UBS. About energy, that's my first question. At first, you were talking about efficiency improvement. Could you please elaborate on this in concrete? At new factories, how you have increase, and the lead time for production is getting shorter. This is a new factory. You have new machines. Is that the contribution for the efficiency? In terms of the continuity going forward, if you can achieve high margin per revenue, is that true? The cost for materials is increasing, so how are you passing the cost to the end users and customers? What's the significance of this continuity? That's my first question.
Yes, for FY 2025, the trend is the same. FY 2025, the revenue increased. It's not only about the increase of the capacity of production. We cannot explain it only with that. I don't have clear numbers. However, to some extent, yes, production capacity increase was the contribution. That is really true. There is a significant contribution. To what extent we can continue this trend? Before efficiency, looking at the backlog situation, always the margin per backlog is what we are checking.
So far, the average backlog, we are looking at the gross margin. It's improving. It has been improving. In that sense, by managing the backlog, we can increase the gross margin ratio and the production efficiency. FY 2026, we saw a great improvement. FY 2024, the previous year, our ERP system introduction was completed, we are getting used to using it. FY 2025, we are seeing good results from that. About AI, we are using AI as well to enhance our business efficiency. We do have that project as well.
How AI utilization can improve productivity is the next point. Another factor is project management. We have had so many large projects and orders such as HVDC. The period is very long for those projects, so we might have some risks associated. However, we are doing de-risking out of EPC, E & P. Engineering and procurement are our focus. As for civil, the construction, we don't include the C part in the construction to receive orders. In terms of project management, we always make an effort. The cost, excessive cost to make it efficient. Well, compared to the past, that kind of cases are really declining. In terms of project management, we are really improving the situation. That really contributes to the profitability.
Additionally, about price situation, so many products are increasing cost. Your procurement cost increases and selling prices are increasing. I'm not talking about increasing prices because of the cost, but because of the high demand and supply situation.
Can't we just expect the profit increase because of the price increase?
Yes, as you point out, HVDC projects might have five to six years in the project. How to reduce inflation risk is one. Project management includes what I have described. I'm sorry I didn't explain that clearly. Basically, we're using a lot of indices, when costs increase, we can reflect them on the selling prices to customers. That is our system. These are indices where there are not so many cost reductions, but cost increases could lead to a path through. This is not profitability, this is not really increase of the profit, but we can of course increase the margin, but we can stabilize the business. That is our recognition.
Yes, thank you very much. My second question about the overseas GlobalLogic and storage business. Block storage business had been very good, you said. At the same time, DRAM and NAND, they are getting very high in terms of the prices. For storage business, did you enjoy increased profit? The selling prices are increasing, it looks like you have increased revenue and the GlobalLogic, especially in the U.S., because of the death of SaaS, you have a negative situation. When you look at the market situation, it looks like the situation is deteriorating. Could you please elaborate on this part?
Yes, about storage business, block storage. For high-end products, we have made announcement about new products, they are well accepted by the market. They are selling very well. Because of that, the storage business has really growing the revenue. DRAM, as you have pointed out, the prices are increasing. As for this one, basically, we are passing through the cost to the selling prices. The volume is increasing overall, that is why we have increasing revenue and profit next fiscal year. Q1 was not very good. That is part of the factors. The direction is an improvement stably. GlobalLogic, as a company, it's separated. However, from April this year, GlobalLogic and HDS are integrated in operation. There is a cross-sell effect, and HDS itself was logistics and also manufacturing accounts. They had them, and they have additional industrial and automobile industries accounts as well.
They are increasing profit and revenue, both of them. GlobalLogic, the market situation is very difficult. Also, they want to increase profitability. That is their focus. Strategically, for lower profitable businesses, they make decisions about orders receiving or not. They have a growth. CMAT, last year's acquisition, that is contributing as well. When you look at this one, unfortunately, the revenue in Q1 only, unfortunately, the revenue slightly declined, and profit unfortunately declined slightly. For the fiscal year, some of them are increasing. We'd like to increase the increasing part so that we can achieve increasing profit and sales, both of them. Since the integration is going on and they have a lot of collaboration, it's very difficult to split. Please look at the entire picture.
Thank you very much.
Mr. Harada, please unmute yourself and ask your question, please.
This is Ryo Harada speaking from Goldman Sachs, thank you for taking my question. I have two questions. The first question is about energy. You've been stating a strong order intake for Q1. I believe you received a large-scale project. In a normalizing basis on where we are right now, and as for the midterm target for revenue, are you outperforming or rather in line? Can you give us more sense? Also, what I would like to know is 800 V data center architecture. You've been partnering with NVIDIA for development. The other day, Javier Nova made comments on the solid state transformers for this. If you have any trend on your end, I would like to know more in detail. That's the first question. Thank you. Can I go on the second question as well?
Yes. I'll answer to the first question. As for the power grid, as an energy sector, first quarter in the 37% in revenue. However, considering as the one-off effect in the Forex, it will be 24% increase. Out of 24%, I said 37% in growth and a breakdown is here. The power grid is 35% increase in a breakdown, in a dollar basis. Hitachi Energy is 22%, JPY 1 billion year-on-year increase. As for the on a full-year, for the full-year, we're expecting the similar growth. In that sense, in the midterm perspective, for this year, particularly as a late teen is what we anticipated, but for the full-year in a U.S. dollar basis, 20% of the increase is expected. The growth ratio-wise, we are outperforming.
We cannot really make decision based on this year as a single year, but if the next year continues to drive the same momentum, we will be able to outperform from the mid- and long-term perspective. It is too early for us to make any comments on that. We'll continue to keep an eye on it, and as I said, not just increase in order intaking, but our production improvement will contribute to the better results. As for the 800 V, Mr. Tamai, do you have any follow-up comments on that?
As you pointed out, 800 V-like architectures, the technical development has been supported by ourselves and the architecture itself. The 2028 is the year when the subject architecture is going to be applied and adopted. For us, the early adoption and delivery, taking advantage of the existing technology, that's the area where we can make an early contribution. That's the area where we're trying to expedite the pace of a partnership. The power, the conversion, especially from the grid to the LAC, this project is plans to be rolled out in early 2027.
Once we can deliver it, we can make it simpler and reduce the space for the deployment of the system. On the early pace that we can make a quick contribution to the data center. As for the SST, the control technology is power electronics and other technologies are integrated. Any of them are all the strengths in a capability that Hitachi Energy already has. Together with an R&D, we'll continue to work on for the future deployment. A convergence to the SST will take a long time. The data center's entire solutions, the early ramp-up of the data center is not the area where we can immediately contribute with an SST. As I said, to control the system is the area where Hitachi Energy can make a contribution in the early stage.
Thank you. The second question is about on page 10, DSS. GlobalLogic and synergy, Hitachi Digital Services has been growing strongly. As for the margin, as Hitachi as a whole, what kind of impact can we expect, especially of the Energy Mobility? In-house system development could contribute to the higher margin, I assume so. If you could share some numerical numbers or any quantified numbers, that would be very helpful. Also on the same page, Anand will be assuming the new position in this domain and with this new organization and change in the organization, what kind of expectation you have. On to the first question, Mr. Hatakeyama, can you answer to that?
As for the indirect synergy in our definition, taking advantage of GlobalLogic, Rail or Mobility, as well as the Energy synergy, it should be answered by myself. Please refer to page 27. All these numbers are the Energy and Rail. These fall under the Lumada business, and out of the Lumada revenue GlobalLogic in a digital domain for Energy and Mobility for the customers contributes to the revenue. When you look at the margin or profitability, for example, FY 2026 Lumada's digital services is 20% in total, and digitalized asset is 14%.
As for the HMAX business, GlobalLogic is involved in the HMAX business as well. All these businesses, once it starts to grow, the indirect synergy will grow accordingly. On to your second question. As announced, within the DSS, DE&AI BU is there. This is the place where Hitachi Digital, as well as GlobalLogic, HGS, and also Hitachi Vantara. In a nutshell, Hitachi's digital business driving center as a Business Unit. The head of this Business Unit used to be Mr. Abe. He is concurrently this position, now Anand Vijay will assume this position as the head of this BU, as is stated during the investor days. There is a huge tailwind for Hitachi and not just the HMAX business, we are trying to deliver on productivity improvement for our customers while pursuing the internal operation improvement.
DE&AI BU needs to cover the vast area, we decided to have exclusive personnel leading the team. Anand , taking advantage of the AI in a global arena, he has an extensive track record around that. Leveraging his experience, the DE&AI BU should be led by this great leader. Because of this organizational change, AI-leveraged business expansion should be achieved. I myself have a high expectation on this change in organization.
That is all from my end. Thank you.
There are so many people who are raising their hands. We would like to switch to the English channel to receive questions. For those on the English channel, could you please use the button to raise your hand? There is no one to raise their hands, we would like to switch back to the Japanese channel. We still have some time, those on the Japanese channel, if you have any questions, please raise your hand using the button. Mr. Ryugen, could you please unmute yourself?
T hank you very much, Hideaki Ryugen from Nikkei Newspaper. I have one question about energy business. Continuously, your order situation is good, favorable. In the early stage, you might have a strategy to make it a revenue, maybe production increase and others. Could you please elaborate on that part?
Yes, thank you for your question. Yes, investment to increase capacity and CapEx spending. As I explained today, we have a plan to increase the CapEx spending, especially FY 2024, FY 2025, FY 2026, and next year as well. Probably the same level of CapEx spending will be implemented. Right now we are hiring as well, and as planned, the progress has been good, and additionally, we are using AI for higher efficiency. That is our aim. As for making systems, we are expanding on IT systems, and since last year, the efficiency has improved. There is a contribution, and by utilizing AI, the cycle of our operation can be shorter going forward. We are going to tackle this initiative as well. When our aims are clearer, we would like to talk about that.
Thank you very much.
Thank you. Moving on to the next question. Mr. Nakanishi, unmute yourself and ask your question, please.
Thank you. Can you hear me fine?
Yes.
Thank you. My name is Nakanishi from Nikkei BP, I have two questions. First question is about the energy market outlook, mid and long-term perspective. I would like to know your outlook for both perspective. Based on the order intakes as well as the external environment, including the customers' trend and also the semiconductor trend, what kind of the items are factored in?
You ask about the mid and long-term perspective. As for the short and long-term perspective, for the short-term perspective, the industry outlook, we have a higher visibility. Based on the order intakes and the actual development of the orders, we have a better visibility on the short-term perspective.
As for the mid and long-term perspective, for the large project, multiple on a project, precondition terms and conditions need to be decided as a part of the framework agreement, and also our production capacity needs to be reserved as a part of the capacity reservation. This is a part of the agreement with our customers. Based on that, we make a decision on the CapEx investment. That actually only give us a sense for the large-scale projects.
Basically, the power demand is constantly monitored, including the demand for the other energy resources and also the industrial trend using multiple different methodologies. Recently, we tried to foresee 10 years' time. For example, in last year, as we stated, we are expecting our further growth until 2030. That's what we could say until last year. For that large system, or a delivery plan goes beyond 2030. Until 2030, we are expecting a further growth until 2035.
Thank you. Just a follow-up question, capacity is decided based on the customer's demand and needs. For example, does a customer make an advance payment for the sake of the CapEx investment? For example, in a case of a framework agreement, let's say if we have multiple different contract terms and conditions, including the payment, all these are defined and decided between us and customers. Even for the multiple ones, we try to get as a framework. The timing of the payment, actually the timing usually comes at the time of the signing of the contract. At the time, usually we receive the advance payment.
Another question is about the physical AI. Taking advantage of the domain knowledge, you try to deploy it in the infrastructure area. As for the physical AI compares to the global benchmark, how do you measure your capability and the strengths in terms of the physical AI, and what are the challenges that you need to address? Thank you.
As for the global benchmark, it's really hard to say. In the case of physical AI, our absolute strength is OT in a product that we have. We have business as a customer's energy or the CIs or real businesses. Using the multiple different physical AI together with the DSS, we try to deploy it, and this is the competitive advantage over the others. The model itself is not internally developed. However, the Frontier AI leveraged alliances formed with other counterparts, that would allow us to use the state-of-the-art technologies.
We try to maintain this kind of environment, and that itself is the foundation of ourself. What really matters to us is the speed because when it comes to the competition, how fast we can bring ourself, move ourself is key. Focusing on the speed, then we can even greatly leverage our capabilities and strength.
Thank you.
[Non-English content] Thank you very much. There's still some people who are raising their hands, but I'm sorry, it's time to close. With this, we would like to close March 2026 our earnings result presentation. Thank you very much for your participation for such a long time. Thank you.