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Fujitsu Ltd (TYO:6702) reported its Q2 2025 earnings, highlighting a record net profit of ¥262 billion and a significant improvement in its adjusted operating profit margin. The company’s revenue increased slightly by 0.9% year-over-year to ¥1,566.5 billion. Fujitsu also announced strategic initiatives in AI and data, including the acquisition of BrainPad Inc. Despite the positive financial results, the stock data indicated an unusual change, with a notable price movement of 69.4%.
Key Takeaways
- Fujitsu achieved a record net profit of ¥262 billion.
- Adjusted operating profit surged by 83.6% year-over-year.
- The company is expanding its AI capabilities, with 30,000 engineers using AI tools.
- Fujitsu’s modernization business saw a 38% increase in revenue.
- Acquisition of BrainPad Inc. to bolster data and AI capabilities.
Company Performance
Fujitsu’s overall performance in Q2 2025 was robust, marked by a record net profit and substantial growth in adjusted operating profit. The company’s focus on digital transformation and AI integration has driven significant growth in its strategic business portfolio, LILU, and modernization efforts. This performance aligns with the broader industry trend of increasing demand for digital solutions, particularly in Japan.
Financial Highlights
- Revenue: ¥1,566.5 billion (+0.9% YoY)
- Adjusted operating profit: ¥121.3 billion (+83.6% YoY)
- Net profit: ¥262 billion (record high)
- Adjusted operating profit margin: 7.7% (+3.4 percentage points)
Outlook & Guidance
Fujitsu has set ambitious targets for the full year, aiming for a ¥360 billion operating profit and a revenue goal of ¥3,450 billion. The company is also targeting substantial growth in its LILU and modernization businesses, with revenue targets of ¥700 billion and ¥330 billion, respectively. The strategic acquisition of BrainPad Inc. is expected to enhance Fujitsu’s capabilities in data science and digital marketing.
Executive Commentary
"We are seeking to achieve a record high level of profit of ¥360 billion," stated a Fujitsu executive, highlighting the company’s financial ambitions. Another executive emphasized the importance of the data and AI market, noting, "The rapidly growing data and AI market is a crucial area that forms the core of Fujitsu’s sustainable growth." Furthermore, the company remains committed to investments that enhance corporate value, as reflected in the statement, "We will continue to make investments that contribute to the growth of our corporate value."
Risks and Challenges
- Supply Chain Disruptions: Potential impacts on production and delivery timelines.
- Market Competition: Increasing competition in the digital transformation space.
- Economic Uncertainty: Global economic conditions could affect demand.
- Technological Changes: Rapid advancements may require continuous adaptation.
- Regulatory Changes: Compliance with evolving regulations in different markets.
Fujitsu’s Q2 2025 earnings reflect strong financial performance and strategic positioning in the growing AI and data sectors. The company’s focus on innovation and expansion through acquisitions positions it well for future growth, despite potential challenges in the market landscape.
Full transcript - Fujitsu Ltd CFD (6702) Q2 2026:
Supporting Speaker, Fujitsu: To start the FY 2025 second quarter consolidated financial results briefing, please look at the materials. Page 3 shows an overview of our financial results for the first half. First, Service Solutions, our main segment, had strong performance with higher revenue. Adjusted operating profit revenue for the first half was ¥1,066.5 billion from the prior year. Excluding the impact from restructuring that took place during the prior fiscal year, revenue was up 6.4% and the revenue up 4.8%. In this, in Japan in particular, there was a strong continued growth in demand for digital transformation and modernization, and revenue was up 9% year on year. Adjusted operating profit was ¥119.6 billion, up ¥30.9 billion from the prior year, an increase of 34.8%.
The adjusted operating profit margin was 11.2%, an improvement of 2.5 percentage points from the prior year due to the benefits of higher revenue in addition to increased profitability. In the lower box, consolidated total revenue was ¥1,566.5 billion, up 0.9% from the prior year. Looking at this figure, excluding the impact of restructuring, it is up 3.6%. Adjusted operating profit was ¥121.3 billion, up ¥55.2 billion year on year, an increase of 83.6%. The adjusted operating profit margin was 7.7%, an improvement of 3.4 percentage points from the prior year. Each business posted higher profits and adjusted operating profit for the first half reached a new record. At the very bottom, net profit was ¥262 billion, a new record. In addition to profit from business operations, we recorded a gain on the sale of shares in Fujitsu General Limited and Shinko Electric Industries Co., Ltd.
Page 4 shows the progress we have made in consolidated adjusted operating profit. The result for the first half was ¥121.3 billion, up ¥55.2 billion, ¥66 billion in the prior year. The rate of progress made over the year against our target operating profit is shown in the pie charts. It improved from 22% in the prior year to 34%, an increase of 12 percentage points, representing solid progress. On the right-hand side of the page, operating profit for the second half of the fiscal year is forecast to be ¥238.6 billion at the same level as the prior year. For the full year, we are targeting an operating profit of ¥360 billion, an increase of ¥52.7 billion year on year. Page 5 gives an overview of profit and loss for each segment.
In the following pages, I will go through results for each segment separately, but let me note outright that each segment reported a profit. Service Solutions are a growth driver, had higher revenue and higher profit. Steady progress is also being made on improving profitability as planned. The far right column shows the percentage increase or decrease from prior year excluding the effects of restructuring. There is an increase in sales revenue using the same conditions as FY 2025 excluding investors still at the contact center business. Below that is Hardware Solutions. Although revenue declined due to small scale low profitability businesses in the Asia Pacific region, progress was made on cost efficiencies resulting in significantly higher profit. From fiscal year 2025, we have changed from using the gross sales standard for recording revenue from software from the other companies to a net sales standard.
In short, we have made this revision to better reflect the scale of revenue from the profitable portion of actual business, extracting revenue from low value added products from outside companies and Ubiquitous Solutions. Revenue and profit increase due to consolidating our businesses in Japan and cost improvements. From page six, I will show a breakdown of results for each segment. Starting from page 7 is Service Solutions. Revenue is ¥1,066.5 billion, up 6.4% excluding the impact of restructuring. There is continued strong demand for digital transformation and modernization deals primarily in the Japanese marketplace. Revenue from business in Japan was up 8.9% from the prior year. Adjusted operating profit was ¥119.6 billion, up ¥30.9 billion from the prior year. The adjusted operating profit margin was 11.2%, an improvement of 2.5 percentage points from the prior year.
On the next page, I will explain the factors behind the change in adjusted operating profit using a waterfall chart. Page E is a breakdown of the changes since last year in the discovery profit for Service Solutions. On the very left, adjusted operating profit for the first half fiscal 2024 was ¥88.7 billion and that will be the starting point for the factors on the right that impact the results in the first half of this fiscal year. First, profit increased by ¥18.8 billion from the impact of high revenue. The main factor was the increase in the gross margin because of higher revenue in Japan. Second, profit increased by ¥21.2 billion from profitability improvements. This is the result of continuous initiatives to improve productivity such as standardization process for development work. In addition, outside of Japan, we started to steadily see the results of restructuring.
Overall, the gross margin improved by 2 percentage points. Third profit decreased by ¥9.2 billion because of higher expenses. We proactively made progress on expanding new investments directly linked to business growth including enhancements in new bounds, the modernization, business consulting, and security. Bringing this together, adjusted operating profit for the first half of fiscal 2025 Service Solutions was ¥119.6 billion. The operating profit margin was 11.2%, an improvement of 2.5 percentage points year on year. Next is page 9. I will now provide some additional information on each of the items in the previous waterfall chart. First, we look at the status of orders which led to sales. This page shows orders in Japan. Orders in the first half rose by 3% compared to the prior year.
While the growth rate may appear a bit weak, if you look at the growth excluding the multi-year contracts and large-scale deals that were won in the prior year, growth was up 6%. We perceive this to be decreasing speed for demand in each fiscal year. We will now comment on each industry segment. Orders in the Enterprise segment was down 3% from the prior year. Including the impact of large-scale business deals for multiple years contracts, orders were up. Looking at the first half by industry, order in the retailing and distribution industry held firm. Orders in the manufacturing industry was strong. There continues to be a strong flow of inquiries on digital transformation related projects or modernization projects, and the finance segment orders were up 1% compared to the prior year.
This is mainly because there were large-scale contracts for financial institutions the first half of the prior year, but orders continue to remain at a high level in the first half of 2025 as well. In public and healthcare segment, orders were at 8% compared to the prior year. The main reason for this is that we won large-scale system and new projects. Critical orders were up 8% year on year. The main reason for this was a system renewal project for Japan Discovery Direct Sports competition. There is also continuing high-level orders in the national security field, specifically from the Japanese Ministry of Defense in business in Japan currently. Looking at individual customers, one can see some unevenness from the impact of changes to the economic environment. However, gross volume of the deals in our pipeline is continuing to expand across all segments.
In the second half, we will continue to make progress on steadily winning deals for further expansion in the volume of deals. Page 10 shows our order backlog in Japan. The left side of the page shows the revenue target of ¥1,800,000,000,000 for the full year. Against this, in the light blue colored column that is the fourth column from the left, the total actual revenue from the first half and backlog of orders planned for fiscal 2025 is shown to be ¥1,479.1 billion. This covers 82% of the revenue for the full year. This cover ratio is the same level as the prior year, and we consider this to be strong progress to achieve our year target. We need ¥320.8 billion in orders from our pipeline to be converted into sales in the second half.
While it is not the gross volume of our deal pipeline expanding and we believe there is a sufficient probability of achieving it, we will continue to work to achieve the full year target. Page 11 shows orders from outside of Japan. Orders in Europe were up 28% from the prior year. The growth is from winning a multi-year contract from data center related large scale renewal projects. Orders in the Americas were down from the prior year due to a pullback from a multi-year deal in the first quarter of the prior year because the region’s overall scale of orderly Fujitsu agents can be large. Orders in Asia Pacific were up 8% from the prior year. The step up in growth was because we were able to win a retail industry related multi-year renewal project contract in Oceania.
Page 12 shows the progress of LILU, which is positioned as a cornerstone of our business portfolio transformation. Overall orders in the first half were ¥318.6 billion, up 43% from the prior year. The bar graph below shows revenue, which was ¥311 billion for the first half, representing very strong growth of 55% from the prior year. The vertical areas grew by 94%, roughly double the amount from the prior year. The shared revenue from Revamps and the total revenue of Service Solutions grew from 20% last year to 29%. Our revenue target for fiscal 2025, the final year of our mid-term management plan, is ¥700 billion as shown on the graph on the far right, representing a target growth rate of 45%. Our actual revenue in the first half is only 44% of the amount, less than half of the absolute value of the target.
Our growth rate is trending above our target for the full year, so we are on a solid trajectory to achieve our revenue target. Page 13 shows the status of our modernization business, another pillar of our growth. The level of orders in the first half was ¥154.1 billion, up 3% year on year. As shown on the right side, actual orders last year were up sharply by 65% over the previous year, which is driven by the acquisition of large public sector deals. Among the factors, looking at this year’s first half, this year is weak in comparison with fiscal year 2024 because of the pullback, but we are receiving even more orders than last year’s high level with solid growth in line with our plan. In the bar graphs below, our revenue in the first half was ¥161.3 billion, up 38% from the prior year.
The graph on the right side shows that this viscous revenue target, which is ¥330 billion, actual results in the first half were nearly half the amount, with the growth rate trending above our target.
Financial Presenter/Executive, Fujitsu: With page 14, I would like to provide additional information on improvements in profitability. There have been continued improvements in profitability, boosting profits by ¥21.2 billion with a gross margin up 2% from the prior year. There’s been no change in our key initiatives to strengthen our delivery performance. Mainly there is standardization and automation. The utilization rate of the Japan Global Gateway, or JGG, is 48%, so nearly half of all projects are using it. In addition, the use of generative AI in the development process is rapidly expanding. Already we are providing a usage environment to securely use generative AI tools to 30,000 system engineers in Japan and to partner companies. Of our current level of over 20,000 projects, generative AI tools have been used in some way in roughly one third of the projects.
The actual usage of each project is still just for a portion of the processes and the effect is limited. First we want to expand the range of applications and then we seek to deepen the usage in a wide range of processes. There are some hurdles, including cases in which we need customers’ consent to use generative AI. By the end of this fiscal year, we seek to expand usage of generative AI tools to 50% to 60% of all projects, even if it were just for a portion of processes. The usage of generative AI for delivery is not just to generate cost efficiencies. We also see it as an important way to raise the value we provide to customers in need to broaden demand for digital transformation and modernization.
Initiatives to standardize and automate delivery are directly linked to higher service quality and the highest speed at which we provide services. We believe that providing high value-added services will also lead to an improvement in profitability. Page 15 provides an overview of each segment. In Service Solutions.
Supporting Speaker, Fujitsu: We were able to.
Financial Presenter/Executive, Fujitsu: Increase the profit with a good balance among all subsegments. First is Global Solutions. Revenue was ¥249.3 billion, up 1.1% over the prior year. Excluding the impact of restructuring, actual revenue was up 6.1%. Adjusted operating profit was ¥3.8 billion, an improvement of ¥9.9 billion from the prior year. The main factors behind the increase in revenue was the growth of Uvance in terms of profit in addition to the benefit of higher revenue. Being more discerning on development expenses for each offering had a positive impact. Although profitability is low, has led to an improvement in profits. While continuing to make necessary investments in such areas as development of offerings and upgrades to our modernization knowledge centers, we will work to further increase revenue and improve profitability in international regions. Revenue was ¥171.2 billion, down 1.6% compared to the prior year.
Compared to the prior year, there was a negative impact from exchange rate. Excluding the impact of revenue was essentially from the prior year. Adjusted operating profit was ¥16.7 billion, up ¥13.5 billion from the prior year. Effects of the business portfolio transformation and significant impact and led to profitability improvement. Adjusted operating profit was 0.6% improvement against the previous year ¥271.2 billion, down 1.6%. Compared to the prior year.
Supporting Speaker, Fujitsu: There was.
Financial Presenter/Executive, Fujitsu: A negative impact.
Supporting Speaker, Fujitsu: Excluding that from.
Financial Presenter/Executive, Fujitsu: The prior year, the effects of business portfolio transformation had significant impact on that. I would like to talk about things other than Service Solutions. First, I would like to talk about the Hardware Solutions. Revenue was ¥424.8 billion, down 7% from the prior year. Including the impact of the change in the way revenue is recorded, revenue declined by 1.2%. Adjusted operating profit was ¥12.5 billion, up ¥9.4 billion from the prior year. In System Products, revenue in Japan was essentially unchanged from the prior year. Outside of Japan, in addition to changes in the way revenue is reported, revenue declined because of reforms to businesses and areas in Asia Pacific with smaller scale and low profitability. Adjusted operating profit increased because of the impact of an improvement in business efficiency from the integration of manufacturing.
The sales at ESAS Technologies, which launched last year, revenue in Network Products was still sluggish but increased by 6.7% over the prior year. Profit increased due to an increase in sales of higher margin products and cost cutting efforts. The top part of the page, Ubiquitous Solutions revenue was ¥113.1 billion, up 4.2% from the prior year. Adjusted operating profit was ¥21.7 billion, up ¥10.3 billion from the prior year. The adjusted operating profit margin was 19.2%, an improvement of 8.7 percentage points from the prior year. Revenue increased mainly because of higher demand generated from the ending of support for Windows 10. Profit significantly improved because of lower component costs due to exchange rate movements and the shift in sales for a focus on profitability. Towards the bottom is inter-segment eliminations of corporate.
It was an operating loss of ¥32.5 billion with a decline in expenses of ¥4.5 billion compared to the prior year. We are moving forward in advanced R&D areas, primarily in the field of computing, including AI-related products, quantum computing, and next generation CPUs, while systematically making investments in medium to long term business growth and enhancing management systems for data-driven management. We are also continuing to work to achieve greater efficiencies in corporate costs. I will now talk about the status of cash flows and the balance sheet. Cash flows including one-time cash inflows and outflows. Core free cash flows was ¥164.2 billion, a significant increase in inflows of ¥70.4 billion from the prior year. In addition to higher profits, progress was made on bringing greater efficiencies to working capital, including inventory assets.
There was a carve out of Shinko Electric Industries as well as reduction in capital expenditures towards the bottom of the table. Free cash flow including one-time inflows and outflows was ¥426.7 billion, an increase in inflows of ¥378.5 billion from the prior year. In addition to the improvement in forecast flow, there were inflows from the sales of shares in Shinko Electric Industries and generally limited, resulting in a significant increase. Page 20 shows the status of assets, liabilities, and equity. I will omit the explanation for this page. It’s not on the slide, but this concludes my explanation of the financial results of this fiscal 2025. I would like to comment on our progress in relation to our internal forecast. The results of the first half were roughly in line with our expectations, slightly exceeding our internal forecast.
In terms of segments, results in Service Solutions were as planned, while results in Hardware Solutions and Ubiquitous Solutions slightly exceeded our internal forecast, primarily because of cost improvements. We made steady progress in our results in the first half without any major deviations from our plan, either positive or negative. Market demand for Service Solutions was roughly as expected. Looking at individual customers, one can see slightly stronger or weaker demand as we progressed in the first half, but given the total volume of the pipeline of deals, no significant changes were apparent in the expansion of our demand. We will continue to pursue revenue growth and profitability improvements as we work to.
Supporting Speaker, Fujitsu: Achieve our full year targets.
Financial Presenter/Executive, Fujitsu: Page 22, this is a financial result forecast for fiscal 2025. Revenue is projected to be ¥3,450 billion. Adjusted operating profit is projected to be ¥360 billion. Adjusted net profit is projected to be ¥250 billion. All of these figures remain unchanged on page 23. There have also been no changes to our forecast for each segment. Page 24 shows our forecast for adjusted consolidated results and adjustment items. There have been no changes to our forecast for adjusted consolidated results, adjustment items, or consolidated results. Page 25, likewise, no changes on our cash flow forecast. Page 26 shows the trend of adjusted operating profit on a consolidated basis since fiscal 2019. The bar graph shows the total consolidated profit with a blue portion representing Service Solutions.
This fiscal year, the final year of our mid-term management plan, we are seeking to achieve a record high level of profit of ¥360 billion and a record high adjusted operating profit margin of over 10%. As I explained, we made progress in the first half towards these targets while progressing on our business portfolio transformation. We will continue to work to achieve improvements in our consolidated profit and profitability, primarily Service Solutions, to meet our mid-term management plan targets, of course, but also beyond that to sustainably improve our corporate value. Next, this is not directly related to this first half financial results. I would like to bring your attention to the timely disclosure we made today regarding an investment aimed at accelerating our business growth. As I noted in my remarks today, Fujitsu positions Ubiquitous Solutions as a cornerstone of business growth.
Today, we announced the implementation of a tender offer to acquire shares of BrainPad Inc. and the conclusion of a business integration agreement with the purpose of further strengthening the data and AI business, which is one of Ubiquitous Solutions’ focus areas. BrainPad Inc. is one of Japan’s trailblazers in the field of data science and digital marketing and has a very strong competitive advantage in these areas. The rapidly growing data and AI market is a crucial area that forms the core of Fujitsu’s sustainable growth. Through this acquisition, we will further enhance the value we provide and accelerate sustainable growth by leveraging the synergistic strength of both companies. For further details, please refer to the timely disclosure materials. Moving forward, we will continue to make investments that contribute to the growth of our corporate value while exercising appropriate discipline.
That concludes my presentation for today, but I would like to close with some announcements. We recently uploaded our Integrated Report and Sustainability Data Book 2025 to our website. These materials introduce our overall initiatives to create value. Please take a look. That concludes my presentation. Thank you very much.
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