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Investing.com -- NEC Corporation delivered a strong start to its fiscal year with first-quarter revenue reaching ¥715.7 billion, up 3.7% year-over-year and exceeding both Jefferies estimates of ¥694.4 billion and consensus forecasts of ¥695.8 billion.
Operating profit surged 679.5% year-over-year to ¥35.4 billion, while adjusted operating profit reached ¥41.7 billion, representing a 228.8% increase from the previous year. The adjusted operating profit margin improved by 4 percentage points year-over-year to 5.8%.
In the IT Services segment, sales grew 2.6% year-over-year, with domestic sales increasing 3.9%. The segment’s adjusted operating profit margin improved by 5.1 percentage points, which the company attributed to its focus on higher margin projects, favorable project mix, and topline growth. BluStellar also contributed to domestic IT earnings during the quarter.
While domestic IT services orders declined 3% year-over-year, NEC noted that when excluding large projects from the previous fiscal year, organic growth was approximately 11%. The public sector showed 7% growth despite facing tough comparisons with the previous year’s 26% growth, driven by steady project flow from fire department projects and local government standardization initiatives.
The Social Infrastructure segment posted a 9.6% year-over-year sales increase with adjusted operating profit margin improving by 4.7 percentage points to 5.7%. A significant contribution came from the Advanced Networks Solutions (ANS) business, where sales grew 21.3% year-over-year and operating profit margin improved by 2.6 percentage points to 3.4%.
Jefferies analysts noted that if the margin improvements seen in Q1 continue into Q2 and beyond, NEC may need to raise its full-year guidance to reflect first-half earnings upside. The impact from reciprocal tariffs was limited in Q1, but remains a factor to monitor in the second half of the fiscal year.
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