Earnings Call: Q2 2027

Nov 4, 2026

Quarterly report

Summary

Q2 revenue set a record, but EBITDA, operating profit and net income fell YoY, mainly due to a prior-year one-time gain. Forecasts were raised, with added investment for mobile network quality and growth plans for AI data centers.

We will now begin NTT's FY 2026 Q2 financial results press conference. Thank you very much for taking time out of your busy schedules to join us today. I am from NTT's Public Relations Division. Ichihashi is my name. I will be your host. First, let me introduce today's attendees. Representative Director, President, and CEO, Mr. Akira Shimada. Senior Vice President and Director of Finance and Accounting Department, Nakamura. Senior Vice President and Director of Corporate Strategy Planning Department, Akitoshi Hattori. Today's materials were posted on NTT's official website at 1:30 P.M., so please refer to them as well. Now, let us begin the press conference. Mr. Shimada, please. Thank you very much for joining us today. This is Shimada, President of NTT, Inc. I will explain our financial results for Q2 FY 2026. In FY 2026 Q2, operating revenues increased and profits decreased year on year. Operating revenues reached a new record high for Q2. Operating revenues was JPY 7 trillion 362.2 billion, up by JPY 589.4 billion year on year, driven by business growth at NTT DATA Group and expansion of the Smart Life Business at Docomo, centered on financial services. JPY 137 billion was the forex impact. Profit in Smart Life Business increased, but due to the reversal of the one-time gain from the data center conversion into REIT vehicle carried out in FY 2025 of approximately JPY 130 billion and other factors, EBITDA was JPY 1 trillion 655.7 billion, down by JPY 84.8 billion year on year, and operating profit was JPY 830.1 billion, down by JPY 115 billion year on year. Excluding the reversal of FY 2025 one-time gain, profit increased year on year, and progress is in line with expectations. Profit was JPY 500.2 billion, down by JPY 95.5 billion year on year due to the decrease in operating profit and other factors. Regarding operating revenues and profit by segment, in Integrated ICT Business segment, although costs were incurred to strengthen the customer base and improve network quality, both revenues and profit increased year on year thanks to the expansion of the Smart Life Business centered on financial services and other factors. As a result of our efforts to strengthen the customer base, MNP is performing well and continues to maintain a positive balance. In addition, ARPU is improving thanks to strong sales of docomo MAX and other factors, and mobile service revenue continued to improve. We will continue to work toward returning mobile communications service revenues to growth by strengthening the customer base and increasing ARPU. In Global Solutions Business segment, although revenues increased thanks to business growth in Japan and overseas, forex impact, and other factors, profit decreased year on year due to the reversal of the one-time gain from the data center conversion into REIT vehicle carried out in FY 2025 of approximately JPY 130 billion. Excluding the absence of FY 2025 one-time gain, profit increased year on year. In Regional Communications Business segment, although legacy business revenues decreased, revenues increased year on year thanks to growth in optical business revenues and other factors, while profit was flat year on year. In others, real estate, energy, and others, revenues increased year on year thanks to the expansion of the residential business at NTT Urban Solutions, an increase in electricity sales volume at NTT Anode Energy, and other factors. Profit decreased year on year due to an increase in electricity procurement costs resulting from soaring fuel prices and other factors. I will now explain the consolidated financial results forecast of NTT for FY 2026. Docomo will explain the details later, but we have factored in the positive impact on mobile communication service revenues from recent strong sales and the mobile pricing revision announced the other day, among others. Accordingly, we have revised upward operating revenues, EBITDA, and operating profit by JPY 20 billion each, and profit by JPY 14 billion. In addition, we increased the full-year plan for capital investment funded by the profit revised upward to ensure steady execution of mobile network quality improvements amid growing communications traffic. To achieve the full-year plan, we will continue to strengthen the customer base while working to expand our enterprise business in Japan and overseas, and the Smart Life Business. Revenue and profit plans for each company are as shown. Capital investment plans for each company are as shown. Next, let us move on to topics. First, let me turn to NTT Group technology supporting motorsports. NTT Group has served as the title sponsor and official technology partner of the NTT INDYCAR SERIES, North America's premier open-wheel racing series. Through AI and large real-time data analysis at Indy 500 event, the world-class sports event held at Indianapolis, we have raised our brand awareness as a technology company by enhancing the operation of a venue that welcomed 350,000 visitors at a time and delivering an immersive race viewing experience. Building on its proven track record in IndyCar Series, we will commence partnership with McLaren Racing, which operates one of Formula 1's most prestigious teams from January 2027. Here is the video message from McLaren CEO, Zak Brown. Please take a look at the video. Hello, everyone. It's great to officially welcome NTT to the McLaren Mastercard Formula 1 Team. We've built a strong relationship with the wider NTT Group over many years, so it's exciting to begin this next chapter together in Formula 1. At McLaren, we're always looking at how technology and innovation can help us perform at our best, and that's something we share with NTT. AI has enormous potential across our sport and our business, but it's important that we adopt it responsibly and securely. Together, we have a shared ambition to lead the way in the responsible and innovative use of AI in Formula 1, with AI security governance at its core. As NTT continues its global business expansion and brand growth, we're excited about the partnership's potential to use McLaren and Formula 1's global platform to bring NTT customers closer to our sport. We're really looking forward to what we can achieve together. Zak was on the movie F1 as well. As you have heard from Zak Brown, CEO, this partnership came about thanks to the high expectation placed on our advanced technology and expertise in AI security governance. We will work toward making the team the world's safest and most efficient racing team in its use of AI, while accelerating the growth of business opportunities by leveraging both parties' customer and fan bases. In addition to highly recognized NTT INDYCAR SERIES in North America, by participating to Formula 1, we will work toward enhancing brand awareness across Latin America, Europe, and Asia. Next is the payment of interim dividend. As we announced at the beginning of this fiscal year, we will pay interim dividend of JPY 2.7 per share in November. The total annual dividends per share, including the year-end, is expected to increase for the 16th consecutive year. We are also currently carrying out share buyback, and the aggregate repurchased amount as of the end of October is JPY 104.9 billion against JPY 200 billion, the amount of buyback until March 31, 2027. It is progressing smoothly and is about 50% complete. This page shows the progress under the midterm management strategy since August. This concludes my explanation. Thank you for your attention. We will now take questions from the reporters. First, we'd like to take questions from the reporters who have come to the venue. If you have a question, please raise your hand. The person on the front row, please. Yomiuri Newspaper, Kobayashi is my name. There was unauthorized access or PHP. Many security-related issues have been pointed out these days, and this may be impacting some of your services too. So, what is the degree of the impact on your services and your countermeasures, and your projections going forward? Thank you, Kobayashi-san, for your question. First of all, the cyberattacks, attack on the main network services or our life-supporting systems that support the important infrastructure, we are not seeing major impact so far. But in October, communication services-related cyberattacks detection count was seven times bigger than last year, and we are defending effectively so far. That said, NTT Group and our subcontractors, vendors, in the past two months, customer information leakage has occurred in 12 cases. About five for our own group, and subcontractors, seven cases. The ones that are related to our company is information leakage or suspected leakage. NTT Solmare, Comic C'moA, providing Comic C'moA, and NTT Smile Energy, this is power, electricity monitoring system, and NTT Data West. These three companies had customer information leakage or suspected leakage. Other than that, phishing mails, where the employees' emails were viewed, two cases, Japan National Stadium Entertainment and NTT Global Network, which does the global network. They had phishing mail attack, and employees' emails were viewed. Our entire group is now trying to prevent the recurrence. But the fact that the customer information leakage is happening is, we are very sorry about. We apologize. For our group companies, we are making sure that they take basic measures and take countermeasures, and also reconfirm the measures to prevent the recurrence, and also reinforce the vulnerability management. Our subcontractors, vendors, and cloud, we will inspect and check once again. This is where we are. Thank you very much. I have one more question, a different topic. GMO's unauthorized access, the attacker's website, a blocking request was issued by MIC, the ministry. The personal information or company's information may be exposed to the website for coercion in the future. What do you think of the significance of blocking, necessity of blocking? Well, this is an ongoing case, so I'd like to refrain from making comments on this one. But blocking, so user protection and the confidentiality of communication, you have to have both for blocking. Until now, the emergency evacuation was the only thing, but after that, the piracy site, the comic site, or the online casino this year, these are cases that are difficult to handle. We need to develop guidelines for the emergency evacuation, and ultimately, it needs to be legalized. That is our approach to the government. Thank you. Next question, please. To the left, the third row from my side. Sankei Shimbun, my name is Takagi. I have two questions. The first question is related to unauthorized access and your cybersecurity service. I believe you have many of them, and the inquiries to your companies. What is the current status of the inquiries? I would like to know the current status. Since there was large-scale attack at this time, and this cannot be dealt by a single company, so the government and the private sector companies, what is the division of the roles between the two in order to cope with the unauthorized access? Yes. First of all, this summer, NTT Data and NTT Docomo Business against the cyberattack using AI, they have started the service to counterattack that. Thanks to your support, we have over 100 inquiries. I cannot explain how many there were actually, but there are AI services which are available at the moment in order to cope with the situation. Having said that, there are items that we need to take into consideration from now. For example, on so-called frontier AI, the cutting-edge model is not available domestically, so we need to access overseas. We have this challenge, and from that perspective, higher sovereignty frontier AI needs to be brought to Japan. Customers' source code safety should be guaranteed. That will be required. Currently, we are using ones which are available domestically, and with the permission of the customers, we use the AI that is already hosted on overseas cloud. But depending on cases or privacy, we need to make sure to have an environment we can use more higher sovereignty AI. Also, starting from this October, Active Cyber Defense is now enacted as law from the government, and it has just started. But national defense, and this is the case related as a country. As a result of that, to the private sector and to the citizens of Japan, I believe this will serve as the convenience for us. But our services and Active Cyber Defense of our government will not be aligned with each other, and this will be something that will be devised by the government. Thank you. I have another question. Just changing the topic. In France, depending on the data volume, there will be taxation. There was the revision of the digital or related act, and that was amended. Putting aside that this will be in operation going forward, the maintenance and the management fee of the network, who will bear the cost? From the past, I believe you were conscious about this kind of issue, but going forward, who will bear the cost of network? Can you share your views once again? This seems new, but this is an old issue. From the time we had the advent of internet, who will pay that cost? We always had that discussion, but from that perspective, the communication operator like us, as we have been explaining, we have roughly 20% each for mobile traffic, so we need to make sure to make investment. Otherwise, we will have the deterioration of the quality. So we will ensure to do the investment. This time, we have the increase of CapEx that is incorporated as a part of our forecast. In principle, the users will be responsible for paying the cost. But in addition to that, it may be not the right expression, but without paying too much, we need to make sure to have some of the cost to be borne by the operators, and we would like to make sure to assert that. Thank you. Next question, please. So, line four, center person in glasses, please. Nikkei newspaper, Shimizu is my name. Thank you for this explanation. So, about Docomo's upward revision. First of all, for Docomo, you had a conservative projection to begin with, I think. But with the upward revision, how much the price revision have you factored in? In the second half of the year, do you have room for further upward revision? Second question, in May, when you issued revised the midterm plan, the consumer target was flat EBITDA. But with the upward revision, is there room for further upward revision? So, Docomo will come next, so if you could ask that question to President Maeda, I'd appreciate it. That said, the upward revision this time is the strong sales up till now. Of course, from December, the customer pricing is revised. So, we did the revision accordingly. This time, the customer pricing was revised because of various backgrounds. One is cost. Cost is rising. We have to take measures to pass on the cost increase. We considered the profit and loss forecast, and that it will be the basis for our plan for next year. We are not thinking of revisiting our midterm management strategy at this moment. Thank you very much. Another question from the venue, and then move to the online. The person at the very back of this room. Kawashima from Kyodo News. First question is on data center. The other day, with Anthropic, the NTT DATA Group will establish a new center in Osaka, and is there anything that you can share with us at this moment? The second question is related to the deceleration of AI, mainly in America, but is there any impact to your performance? On the data center in Osaka, allow me to make no comment at the moment. With respect to AI data center, globally, we are working on data center business. Currently, we have 2 GW scale, and at around 2030, it will double, and that is our plan at the moment. In principle, cloud operators and hyperscalers are trying to build data centers for AI. Rather, on order basis, we are responding to the demand. In the areas where we are able to obtain orders, we start to do the sourcing by groundbreaking. At least for two years from now, until 2028 to 2029, the demand is not dropping at all. We are not so concerned. That is the honest opinion. Does that answer your question? Yes. From online, we have Matsumura-san from Zaikai. First question. The offer-type human resource system, so NTT Group Job Scout started. What is the purpose behind this launch? Second is a related question. Recently, telework or remote working is now switched to the commuting once again by many companies. Once again, NTT's work-life or work-style reform after COVID-19, could you update us on your thinking again? Thank you for the question. First of all, offer-type HR system was introduced. Business is now shifting to project type. That is one big background. One company's skilled people alone cannot be enough for the project. For example, when a data center is being built, it starts from land acquisition and power acquisition, and how you connect the cable with the subsea cable and the capacity of the cable. One project is becoming bigger. What I said, NTT Urban Solutions, NTT Anode Energy is involved, and the domestic backhaul means NTT East and West are involved, and NTT DATA, if it is about the subsea cable, and NTT DATA is of course involved. Docomo Business may do data center business in some cases. In one company, it is difficult to gather all the necessary resources. This scout-type announcement of the project, we can scout and draw people, the necessary people in the group. Until now, we had the job board. We say, "This is the project. Please raise your hand if you are interested." It was a raise-hand type, volunteer-type HR system. We are taking this one step further. Now we have 66 companies, 100,000 employees introducing the same system. Your own capability or newly acquired capability are entered into the database so that we can visualize each individual's capabilities. Then AI makes a judgment and says, "For this project composition, this person is most suited." The AI gives recommendations. That is the system. The organization that may need to offer the person may be a bit concerned, but we think this will be a very useful scheme to have successful projects, so we will do trial and error. The work from home, we are trying to find the right way. Recently, 65% are still working from home. Of one week, 65% of the time, people work from home, and 35%, they come to the office. That has been the breakdown all along. We ran questionnaire, around one-third at home and two-thirds One-third at the company, two-thirds at home. That is the result or the preference based on the survey. I think this suits the employees' preference. We want to continue this. Now, let us go back to the venue to take more questions. The lady in the fourth row, please. NHK, my name is Miyoshi. Docomo's rate plan will be revised, and that was announced, and this will become one of the factors to increase revenue. On the other hand, the other two companies have already raised their price, and you are finally on the same ground. Improvement of the network quality improvement. How are you planning to attract the customers by differentiating yourself? Can you talk about your policy going forward? Yes. Later, please ask the same question to Maeda, President Maeda. It may be a better idea, but this is not just a simple rate increase. We are trying to improve the convenience of the customers to change the service. For example, if it is ahamo, if it is close to the cap, there were challenges. But if they reach the cap, there will be another step, and there will be an information asking for, would it be acceptable in order to make sure that there will be no drop in speed? This has some ingenuities so that the customers will not suffer from the inconvenience. This is not a mere rate plan improvement. This will be covered by Maeda-san later on. Next question, please. Second row, person in the blue jacket, please. 日刊工業新聞、藤島です。お願いします。 Nikkan Kogyo Newspaper, Fujishima is my name. I have two questions. First, IOWN, second-generation optical PIC chip, and third-generation Japan Semiconductor in Iwate plant. The line will be established. A small line. This photonic electronic conversion PIC chip, how much progress have you made? PEC-1 is already being sold in Japan and abroad, and NTT Group companies have PEC-1 in their APN. I do not know if I can say this, but the U.S. telecom carriers are already using it too. PEC-1 is now spreading steadily. PEC-2, as I always say, will be in Q4. Broadcom, ASIC, and with an Accton will make this and launch. We will make the chassis. There are other companies that want the components, the parts. Once the product is sold, we can say it will be sold by who. I can be more detailed. If you could wait for a moment. PEC-3, Japan Semiconductor, and Shinko Electric. What was the other name? Furukawa. I am sorry. Four companies are with government money. We are moving this plan forward. As planned, the product will be launched in FY 2028. One more question. McLaren alliance that you announced today. Your alliance with McLaren was done with NTT Communications in the past. Once again, with the partnership with McLaren, you talked about AI, but what kind of concrete partnership are you planning? The car, the vehicle, the body, or will your logo be on the athletes, the driver's uniform? Yes, it will be on their uniform. McLaren Indy, McLaren team, we have supported. We have the key sponsor, and also we have been supporting the McLaren Indy team. In a technology-driven fashion, it is like the Docomo business. The data from McLaren car is sent to the U.K. company, then it is fed back to Docomo team. This relationship has continued for a long time. AI and security is important this time. We will consider what kind of technology, the service, how they will be offered, because the discussion has just started. The concrete offering will be clarified further down the road. We want to share that with you soon. Thank you. フリーランスの小山と申します。先ほどお答えいただいた件の確認を2点させていただきたいんですけれども、7月発表のNTTドコモビジネスとデータのフロンティアAIを使った脆弱性云々のサービスに関して、これは今般のいろいろな不正アクセスの問題を受けてニーズがすごく増えて、問い合わせが増えているとか、そういうことがあるのかどうかっていうのを。今般のっていうよりも、もうだいぶ前にもう100件以上超えているんで、そういう意味ではもしかするとさらに増えるかもしれないですね、そこはね。分かりました。もう1点が、総務省の要請でブロッキングをする云々のお話の中で、究極的には法制度を求めるっていうお話をされていたんですけれども、それというのは、法制度、法制化がされていない状況だと、現状ああいった要請は難しいので、対応が難しいので法制化をしたいと。最終的に法律にするかっていうのは、例えば、今までのケースだと、児童ポルノみたいなやつはガイドラインで緊急避難だっていうふうに認められてますんで、そういう仕組みづくりがいるというふうには思ってます。完全に最終的に、じゃあ法律の改正をしなくちゃいけないのかっていうと、ちゃんとコンセンサスを作る必要があるんじゃないかと。それもできれば、やっぱり想定して、事前にやっぱり作っておく必要がある。 If possible, we need to make sure to prepare that in advance. Understood. Thank you very much. それでは、他の、はい、お願いいたします。 Jiji Press. As you mentioned earlier, cybersecurity is now being reinforced in the financial results, expenses, or CapEx. How much impact will it have on expenses and CapEx? 多分、今までもサイバーセキュリティは、西日本でいろんなインシデントが発生して、 Cybersecurity in NTT West had various incidents, and since then, we have injected quite a big cost. 計画の中にもかなり入れ込んでいます。 It has been incorporated in the plan. I do not have the exact number at hand, but the past few years, we have been spending quite big cost to take security countermeasures. これからは、いろんな話が出てくると思いますが、AIがどんどん、 Going forward, as has been mentioned, AI will become more advanced and sophisticated, and we will need different countermeasures accordingly. フロンティアAIの先に、国内への導入がスタートするんじゃないかと。 Frontier AI may need to be introduced in Japan. Yes, that may be the case. We need a certain amount of investment and cost going forward. 逆に、提供する側も、引き合いもあるということですので、 In other words, you have inquiries in the service offering. How will this increase your earnings, possibly? AI自体の売上自体は、 AI revenue is growing dramatically, but now defense using AI. 現在のような環境になってくると、関心が高まって、 In the current environment, this will draw much attention in various areas. We want to help, and this may push up our earnings as a result. お時間の関係で、最後の質問。朝日新聞の江口といいます。 Eguchi from Asahi Shimbun. This is related to blocking. Just a clarification. With respect to this request, would you acknowledge that there was a request, and did you actually conduct a blocking? No comment. Understood. Thank you. お時間が参りましたので、大変、 It is time, so we would like to bring NTT's press conference to a close. After this, we will move to NTT Docomo's press conference, so please wait for a moment. Thank you very much.