Thank you very much for your patience. We will now begin SoftBank Corp's investor briefing for the second quarter of fiscal year ending March 31st, 2027. First, let me introduce today's speakers. Mr. Akiyama, Senior Vice President and CFO, Head of Finance Unit. Mr. Yuki, Head of Corporate Planning. Mr. Sasaki, Head of FP&A Corporate Planning. Mr. Onoguchi, Head of Accounting and Finance. Mr. Kawamura, General Manager, Strategic Finance and IR. Today's briefing is also being streamed live over the internet. Now, I'd like to invite Mr. Akiyama, Senior Vice President and CFO, to present an overview of SoftBank Corp's consolidated financial results.
Good evening. I'm Akiyama from SoftBank. Thank you very much for joining us today. Here is our executive summary. Four key takeaways: record highs in revenue, adjusted EBITDA, operating income, and net income. Strong progress with revenue and profit growth. Upwardly revised FY 2026 full-year forecasts. Cloud and AI drove growth in enterprise. Enterprise operating income grew by 20%. In consumer segment, ARPU and mobile revenue significantly increased due to price revisions. Now, I'm going to go more into details.
Results for FY 2026 first half. Revenue and profit increased, and progress toward full-year forecast was 58.4% for operating income and 65.1% for net income. In terms of revenue, we posted increase in all segments, especially with three segments with double-digit growth. Adjusted EBITDA, all segments increased, hitting a record high. Four segments posted two-digit growth. Operating income, we hit a record high again. In Media & EC segment, there was a huge one-time impact last year, and we saw an impact from that, but excluding, underlining business was going well with 13% increase.
In enterprise and finance segment contributed a lot to the income growth. Media & EC, excluding one-time factor, they grew significantly compared to the last term. In terms of net income, increased due to an increase in operating income and sales of assets. If you take a look at the bottom right, Energy Global or SB Energy was sold, and we posted JPY 50 billion gain on sale. Last year, due to PayPay's tax effect, we saw a positive impact last year, but this year it's gone. To summarize, we saw increase due to an increase in operating income and sales of assets, but we saw some impact on tax. That was net income. From here, I would like to report an upward revision.
This describes each segment revisions, especially the colored part, the revenue centering on the consumer segment. All segments performed well. That has been reflected. Operating income will be explained on the next slide. Net income, as I mentioned just before, due to the income gain on the sale of Energy Global contributed. Now, I would like to touch upon the each segment revisions. Please refer to the information gathered by segment. First, the consumer segment. Improved profitability of mobile devices and ARPU. Compared to the beginning of the term, the ARPU increased, so that is one factor of upward.
Under such circumstance, why only the JPY 5 billion of upward revision, you might ask. Towards the end of the fiscal year, for the customer acquisition cost will be spent. Considering that, we revised with this figure. Enterprise segment remains the same. This segment is doing very well now, and we do have a stronger performance, and we do have the high target of enterprise we would like to pursue to achieve that. The third one is the distribution, and we do have a strong performance of ICT products for enterprises.
The fourth one is the Media & EC segment. Last week, LINE Yahoo and PayPay each also announced the earnings results, and they are both doing well. Other, so primary, refined estimates of upfront investments and R&D expenses. JPY 15 billion was the figure that we reviewed the full-year outlook, which is JPY 15 billion. This is structured as reserve expenses. The total, as for operating income, JPY 60 billion total have been upwardly revised. From here onward, I would like to report on the result by segment. First, Enterprise segment.
The revenue of Enterprise segment. The revenue from AI, Cloud & AI, so almost 37% increase in revenue. AI computing infrastructure lease is the driving force. As for Cloud & AI, the last earnings announcement, we announced that to achieve 30% of CAGR growth to target. Here, we already have nearly 37% of growth, so we believe that we are growing steadily. Next fiscal year, we do have data center actually in operation, so we would like to expand our revenue in this category. Next is the enterprise segment per category. Cloud & AI revenue is expected to grow as well. Here, progress is on track, and we would like to also.
We believe that segment income increased and driven by growth in Cloud & AI and other factors. Looking at the costs, which seems a little bigger, I would like to explain. Especially the cost is about network-related cost, and this segment, we are focusing on expanding its business. The HR cost and also outsourcing cost is increased. Including this increase, we have grown a profit by 20%. I believe we are progressing in a way that balances both business expansion and profitability. Next, we will move on to the consumer business.
This is the sales revenue. As you can see, including the services sales as well as goods sales and all sub-segments experiencing the revenue growth. Looking at the very bottom of the graph, the mobile service. Due to the price revision and the new price plan implementation, this contributed to the ARPU improvement. Looking at the mobile revenue trend. The right side of the graph is the mobile revenue comparison year-on-year. The second quarter is about JPY 22.4 billion revenue was recorded. The next consumer segment income.
It shows JPY -800 million, but we are on track and mobile increase, and also due to the sales commissions and the sales promotion expenses increase. Let me talk about sales commissions and the sales promotion expenses. Especially this time, the device purchase support program increased mainly due to this absence of FY 2025 Q2's one-time improvement from device purchase support programs and higher amortization of capitalized sales commissions. Also, the incentives that we had as an expense were capitalized.
As for year-on-year, this amortization is still in the phase to increase. That is why this promotion-related cost had the impact on this decrease in the profitability. Let me share with you three of our mobile-related KPIs. First, ARPU, which was increased by JPY 230, driven by new price plans and price revisions in June and July. ARPU's forecast is shown at the bottom right, and our forecast at the moment is JPY +190 for the full year. Three months ago, we said JPY 160 for the full year, but thanks to the great performance, we revised the full-year forecast upward. Then churn rate, 1.31% or - 0.10% year-on-year. It was painful year last year, but we are beginning to see a good result.
Next KPI, smartphone cumulative subscribers and net additions. With improved churn, net loss shrank. We will keep on focusing on financial discipline so that we can turn back to net additions for the full year. Coming back to the segment, business result, Media & EC. LINE Yahoo announced their financials last week, and they posted both growth in revenue and income. Finance segment. PayPay is performing well continuously.
In terms of the payment service and gain from the interest business, the financial segment is going well. Distribution segment and other. ICT for enterprise business is performing well, posting growth both in revenue and income. On the right-hand side shows other segment. Now, I would like to go through the status of investment and finance. First, CapEx. CapEx is progressing in line with our full-year plan. Please take a look at the graph. Very left bottom is telecommunications-related investment.
The total amount is the same as last fiscal year, but the progress is a bit behind compared to the last fiscal year. We do have more plans of the acceptance towards the latter half of the fiscal year. Also AI-related investment. In the first half, the amount is rather smaller, but we have a plan, the full-year plan about JPY 160 billion, and such capital investments will proceed as scheduled in the second half. Next is adjusted free cash flow. Regarding adjusted EBITDA, increased year-on-year, therefore, we believe that generation of basic cash ability is progressing smoothly.
On the other hand, free cash flow. The impact of working capital and the strategic investments, which we are currently actively pursuing, are reflected, resulting in a decrease compared to the same period last year. As you can see here, the strategic investment is proactively made this term. As you can see on the right bottom of the slide, you can also see the breakdown. Next is the net interest-bearing debt and net leverage ratio.
In the first quarter, the net leverage ratio increased, and towards the second quarter, it would decrease. That was presented previously, as mentioned. EBITDA also increased, and the profit from the sales of SB Energy was also counted. Therefore, the financial leverage has eased slightly, so these factors have contributed. The balance sheet. Our financial business is getting much stronger, so our proactive investment is also being made. Therefore, the total assets have increased substantially. The scale of total assets has exceeded JPY 20 trillion. On the other hand, profits are also being recorded steadily, and accumulation of equity capital is continuing.
Regarding the equity ratio, as of the end of September, it stands at 15.6%. Currently, while capital accumulation is progressing, the expansion of the denominator is having a somewhat larger impact. From the consolidated, excluding the financial business, from the consolidated figures, on the right side of the slide is the balance sheet. The financial business and the other businesses are different, so our consolidated total balance sheet excludes the financial sector. At the end, I would like to go through the summary. This concludes my presentation. Thank you so much for your attention. We would like to take questions. Thank you.
Now, we will move on to the Q&A session. If you wish to ask a question via Zoom, please join the meeting using the instructions provided in advance and click the raised hand button. Once you have joined Zoom, we kindly ask that you turn off the live webcast from our website to prevent audio feedback. To give as many participants as possible the opportunity to ask questions, each participant may ask up to two questions. We will now begin taking questions. Please raise your hand if you have a question. First, from the venue.
Tokunaga from Daiwa Securities. I have two questions. First, looking at mid-long-term management plan and dividend policy, we understand that you are going to examine further before the full-year announcement. Every time the full-year earnings are ready to be announced, you will make a decision whether or not to change the dividend policy or mid-long-term plan, or do you do that more frequently, like a quarterly basis?
Yes, in May, we announced the latter half of mid and long business plan, and we kicked off a great start, but it is just. Six months of five years. When it comes to revising or examining our midterm management plan, we will take a look at that at the end of fiscal year rather than in the middle of fiscal year. About dividend, it does not have to be waiting until the full year end. In fact, we are discussing more frequently internally, but like Miyakawa-san mentioned, we want to be sustainable in terms of dividend and growth.
We should have more discussion before changing or deciding future dividend policy. Income for the second quarter included a factored in one-time impact. It was one of the reasons why you want to wait until the end of full year before changing or deciding dividend policy or midterm management plan. We want to exceed the forecasted income of this fiscal year, which is JPY 60 billion or something.
We are beginning to be more confident than before. There are a lot of good opportunities for investment. Currently, we want to have a more comprehensive discussion before changing the course. Next question is about consumer business. You revised upward by JPY 5 billion, but the forecast of ARPU was up by JPY 30 for the full year. Outperforming ARPU and increasing expensive, even you see both, but you revise JPY 5 billion. If ARPU is up by JPY 30, you can forecast more than JPY 5 billion for the consumer business.
I believe that the next half of this fiscal year, you may have more investment.
About consumer business income, ARPU is better than expected, and the mobile revenue, device revenue also was better than expected. On expense side, it is broadly expected, but toward the end of the fiscal year, we are considering investment in the growth opportunity that the breakdown.
What kind of users you want to get? You said that you want to spend money more strategically. Which area is your focus in terms of acquisition?
Yes, we shifted focus to long-term users, and that kind of strategy remains the same. Having said that, our customer base is very important, and we want to increase, or we may increase resources to build customer base, even though we narrow down the focus to long-term users. We may have to expect expense increase in acquisition cost. Expense for a quick incident or security, cybersecurity response was factored in. We are examining how much we should expect in terms of cyberattacks countermeasures. But for this fiscal year, we have some headroom in other section that can be utilized for cyberattacks countermeasures, for example.
Next question from the venue. Kikuchi-san from SMBC Nikko Securities, please unmute and ask your question.
Thank you so much. Two questions. First is regarding the sales promotion cost. At the beginning of the fiscal year, tens of billions of yen and a certain amount of cost will be spent on the promotion cost or also the device purchase support program related to cost. However, also the contract cost amortization and the customer acquisition cost amortization and so on. But compared to the first quarter, it could be a little smaller. In the large meeting just before, the second half might be a bit lower. I think it was mentioned like that. So what is your forecast as of now towards the next fiscal year?
Promotion-related cost. At the beginning of the fiscal year, the device purchase support program cost was committed year-on-year about tens of billions of yen or so, and that will be added. Regarding the support plan, due to the trade-in, it was better than we had expected. Therefore, that cost burden was a bit smaller. Also the incentive amortization, this is on track, so there is no major change compared to the plan we had at the beginning of the fiscal year. Towards the end of the fiscal year, we have been taking the following our plans strategically, including the customer acquisition, and so that it could contribute to the next fiscal year's revenue.
We would like to also consider some expenses for this purpose for certain allocation of the cost. The next one is about impact of the next fiscal year. Incentive amortization burden will be lighter towards the next fiscal year. For the next fiscal year, that burden would be improved year-on-year. Regarding the Toku-suru Support, there will be some change of movement on the acquisition activity. But we would like to make sure as a total, we should be able to generate proper profits.
The point is that it hasn't peaked out towards the second half of the year. In the second half of the year, still there will be an impact as the negative factors, but it is expected to be somewhat less severe compared to the previous term. Regarding the second point, the churn rate has improved, but over the five years, if we look at, the churn rate should be a little lower than now. President Miyakawa also mentioned that it will be reviewed from this year or so, or the last year. From this spring, the churn rate has also improved and also acquiring the long-term users.
Is this a change in policy this time, or because of the net losses that you were facing, that is why you were going to take some countermeasures, or you are not so much focused on the net losses now?
One year ago, we changed our policy, and we started focusing on the longer-term users, which also caused some pains on our end for some periods of time. Under such circumstances, and based on our policy, we were also trying to take initiative so that we could also increase the number of subscribers. We have no intention to loosen our policy, and we would like to focus on increasing revenue and profit. That is ultimately the most important thing, which has not changed at all. We do not accept those kinds of things.
Thank you.
Next, Okumura-san from Okasan Securities.
I have two questions. First, about Cloud & AI. JPY 44 billion revenue increase in the first half. I wonder, security Cloud & AI compute, could you tell us the breakdown, which contributed what?
High profitability is going to be the same next year and onwards, while data centers are coming up. In Cloud & AI, in the first half, we saw increase of revenue by JPY 44 billion. Half came from AI compute sales. Remaining is cloud and security. About profitability of this business, sales of AI compute remains a good growth driver, and depreciation mainly comes from data centers and GPU. But taken into account, still, we are seeing good, high profitability.
Who are the customers of getting AI compute, and is it for training or inference, or are they domestic customers or global customers?
I think it is mainly demand in Japan, and the purpose is mainly for training. Both contribute a lot to our high revenue in Cloud & AI business.
Next question is about upward revision of net income, which was by JPY 50 billion. It reflects gain on sales of SB Energy, but it does not reflect other factors. Is my understanding correct? For example, you talked about interest rate payments. Did that offset?
For net income, upward revision may seem small, but excluding gain on sales of SB Energy, we reflected increase of interest rate, which was higher than we anticipated at the beginning of the fiscal year. So, the interest payment was factored in. That is why the upward revision of net income may look small.
Miyakawa-san mentioned that next year's income is likely to increase more. Is it not only net income, but also operating income? Which area are you confident next year and onwards in terms of income?
About guidance for next fiscal year, we want to talk about that at the next earnings announcement. Our goal is to achieve higher net and operating income than this year. Please wait until we announce the forecast for the FY 2028.
Thank you.
Thank you. Next, Masuno-san from Nomura Securities. Please unmute and ask your question.
The first question is about investment in AI-related businesses among the JPY 160 billion. Japan Computing Resource has been already sold out across the industry. The Rubin investment will start across the industry. If it is early, maybe as soon as the fourth quarter, I believe. How much would be the Rubin-related investment? Regarding Tomakomai, 50 MW, among the 50 MW, right now, 10 MW has already been completed, and the revenue from that 10 MW are now operating, and the remaining 40 MW will be for the next term. Also at Sakai. I would like to hear those detailed part of the AI-related investment, please.
This fiscal year's AI-related investment, as for Sakai Data Center accounts majority. As for Tomakomai, as you mentioned, now the capacity is 50 MW. That is what we are building, and we are going to start with 10 MW at the beginning, and from next fiscal year onwards, that will be monetized, and it will be expanded further. At Sakai Data Center, the monetization will be a year later, so we expect that profit from Sakai Data Center afterwards. Regarding Rubin, that will be the next fiscal year. At Sakai, other than 140 MW, additional 110 MW will be supplied. I think that was a commitment.
In Kansai, 110 MW, when will that be available? I wonder if you have any plan.
Regarding the power at Sakai Data Center, we first start with 140 MW or 150 MW scale, and then including the further expansion. Schedule-wise, we will be expanding up to 150 MW. That is what we are assuming. Regarding the GPUs, we are not in a position to make any comments at this time.
The second question is about slide 17, about sales promotion costs and the device-related things, and also customer acquisition. I think this amortization, you were talking about this JPY 15.6 billion, but this JPY 25.6 billion.
Go ahead. Under the graph, it says, "Sales commissions and sales promotion expenses, mainly deferred cost." That written section corresponds to the amortization expense of capitalized sales commissions mentioned in the comment on the right side. As for device purchase support program cost, it is referred to the second line.
That said, even you mentioned under promotion cost, there is not much creative or imaginable content like that visible at this point, is it?
What do you mean?
Is there any new creative, very— Very drastic static other than device purchase support plan.
We do not have any drastic plan, but we would like to utilize what we have been doing under the certain discipline.
My last comment, that means the next fiscal year, you will follow the same policy. Is that correct?
We do not have an intention to soften our discipline towards the next fiscal year.
Next, Mr. Henderson from JPMorgan Securities.
Just follow-up question on Cloud & AI increased revenue. Looking quarter-on-quarter, it looks very performing well. Cloud, okay. Security, I assumed it contributed about JPY 10 billion or something. Is it traditional system integrator area or PaaS? Once PaaS service will be paid service, do you expect more monetization in that area in next year?
Sales of AI compute expanded in the second quarter, that is for sure. Cloud, there are a lot of products around the cloud, and they are continuously growing as well. Security, existing security-related services are expanding as well, which is positive to the bottom line. PaaS or Patching- as- a- Service that we are working on, it is not hugely incorporated in the first half of this fiscal year. We want to first make sure that our security posture is strong enough and also focus on vulnerability assessment of customers. Next year and onwards, we believe that it will be a huge contributor to the income.
Looking at Miyakawa-san's presentation, it looks over 7,000 companies signed up or made a request. If that is the case, maybe too many for you to address by your own. The resource perspective and automation perspective, how are you going to support those numbers of customers, like 7,000?
PaaS, we are receiving a lot of inquiries and requests by many, many customers, and we have not addressed all of them yet. Miyakawa-san mentioned earlier that we want to fully automate the PaaS process going forward so that we can do assessment more frequently than before. We want to have that kind of automation process in place as soon as possible. In the meantime, we may use human resources. That is why our enterprise business expects some personnel cost increase.
Thank you. We are looking forward to next year then.
Next question is from Fujishiro-san from Mizuho Securities.
Two questions. One is about domestic GPU- as- a-S ervice demand and supply forecast. Your investment scale is large, so even in the short term, the supply and demand may be loosened, which I am concerned about. JPY 160 billion that you planned to invest in this fiscal year. How that would be, how the situation right now, and regarding the scale of GPU-related investments for the next fiscal year. Could you please provide information on those points?
Regarding the GPU demand, the GPUs that been invested up to last fiscal year, basically, for our internal use and external sales, we already have covered. Regarding the new part, which is the Tomakomai data center, as it starts its operation, the GPUs will be coming in. We have already received a lot of inquiries and interest regarding that. Our future GPU-related investment, we are still discussing internally, and we would like to provide you an update when the timing is right.
Okay, so for this fiscal year's investment, is it correct to say that you have almost secured all the back orders?
Yes, the investment for this fiscal year, it will mainly be focused on the data center part.
The second question is also related to the question by Mr. Henderson just before. Regarding the PaaS, right now, no major impact on the result, but onwards, is there any impact on the mid-term plan? The monetization can be expected from the next fiscal year from the PaaS. Is that correct to say so? Even if it is not big, I would like to get some hints about the future medium-term business trends that you think, and also the fiscal year towards 2030.
As for Patching- as- a- Service, which started services from this August, as we started its service, the cybersecurity-related incident happened. Rather than monetization, for now, we would like to focus on contributing to or supporting our customers. We have shifted our direction to that. How this cybersecurity incident will go onwards, which is uncertain, but this kind of service, like Patching- as- a- Service, will be in a big need in the society in the future. Therefore, we also like to contribute to the society and like to contribute to our business profitability as well.
This fiscal year, we would like to face our customers sincerely. We would like to provide you more information when the situation becomes much clearer. This area has a lot of challenges, but at the same time, the necessity and the need in this kind of Patching- as- a- Service has become more clearer. We aim to work on this in a way that contributes to the business as well.
Are there any more questions? Tokunaga-san from Daiwa Securities.
Quickly, two questions. First, revise upward in other segment, JPY 15 billion. Is it because outperformance of subsidiaries or some timing shift of expenses? For subsidiaries?
Yes, a time shift of expense happened. Specifically, Satofull last year, because of the regulation change in September last year, we put a lot of sales promotion expenses. This year, Satofull didn't spend that expenses for sales promotion.
That was the background of the upward revision of other segment against the full forecast?
Yes, that was Satofull, one of the subsidiaries, and timing shift of expenses recorded. Also, expenses like investment for the future is also included in other segments. All in all, we revised our performance of other segment for the full year. Other segment still has a headroom where we have not identified what to spend. If or when we find opportunity in the second half of this year, we will spend. But if we end up not spending, that might have a positive impact.
So expenses, you didn't spend that much because of the GPU supply shortage or something?
Well, there was not some specific reasons why, but we just identified some expenses that we did not spend a lot. In the second quarter, broadband drove service revenue, and also telecom revenue increased by JPY 5 billion or something. I wonder if they are sustainable or not. Revenue increase in broadband because of launch of joint venture with Sony, which started in second quarter. That contributed a lot to broadband revenue.
So the broadband revenue continues to increase in the third and fourth quarter, do you think?
Yes, we believe that's the trend.
Thank you.
Thank you very much. This concludes our Q&A session, and we would like to conclude SoftBank Corporation's investor briefing for the second quarter for fiscal year ending March 31st, 2027. A recording of today's briefing will be available on demand on our corporate website at a later time. Thank you very much once again for taking the time to attend SoftBank Corporation's investor briefing for the second quarter of fiscal year ending March 31st, 2027.