Mitsubishi Electric Q2 FY2027: Profit jumps 60%, outlook raised

Mitsubishi Electric posted higher revenue and profit in April-September 2026. Operating profit rose 59.6% year on year and net income increased 56.8%. The operating margin improved to 11.5% from 8.2%, with profit growth outpacing revenue growth.

• Revenue: ¥3.1251 trillion, up 14.4% year on year, an increase of ¥392.6 billion
• Operating profit: ¥358.1 billion, up 59.6%, an increase of ¥133.7 billion
• Net income: ¥297 billion, up 56.8%, an increase of ¥107.6 billion
• Foreign exchange impact: Currency movements lifted revenue by about ¥137 billion year on year

Strong performance in infrastructure and factory automation systems helped profit growth exceed sales growth. The cost of sales ratio fell to 65.6% from 68.3%, while the company's change in depreciation method, from declining balance to straight-line, also contributed. The change boosted operating profit by ¥19.6 billion, meaning the increase included an effect from a change in accounting estimates.

First-half pretax profit rose 58.9% to ¥403.5 billion. In addition to higher operating profit, equity-method investment income increased by ¥30.1 billion from a year earlier.

Industry & Mobility and Life, Mitsubishi Electric's two main businesses, increased profit, while Infrastructure also posted a gain. Digital Innovation, by contrast, swung to a loss, highlighting divergent performance across the portfolio.

Industry & Mobility recorded revenue of ¥908.3 billion and adjusted operating profit of ¥123.6 billion, up 14.7% and about 2.3 times, respectively. Factory automation systems led the segment's profit growth, with revenue up 28% and adjusted operating profit about 2.5 times higher. Automotive equipment revenue increased 3%, while adjusted operating profit roughly doubled.

Life reported revenue of ¥1.2814 trillion and adjusted operating profit of ¥141.4 billion, increases of 12.4% and 52.5%, respectively. Both air conditioning and home appliances, and building systems, posted gains in revenue and profit, making Life a key pillar by both sales and earnings.

Infrastructure generated revenue of ¥672.7 billion and adjusted operating profit of ¥60.6 billion, up 16.6% and 50.0%, respectively. Defense and space systems stood out, with revenue up 33% and adjusted operating profit about 2.5 times higher. Energy systems also recorded increases in revenue and profit.

• Semiconductor & Device: Revenue increased 14.0% year on year, while adjusted operating profit rose 37.3% to ¥33 billion
• Digital Innovation: Revenue increased 14.0% to ¥48.3 billion; adjusted operating profit swung to a ¥300 million loss from a ¥3.6 billion profit a year earlier
• Other: Revenue increased 15.3%, while adjusted operating profit rose 40.4% to ¥18.3 billion

Overall, growth in factory automation, air conditioning and home appliances, and defense and space supported earnings. Investors will need to watch the Digital Innovation loss and how future business restructuring affects profitability across the segments.

Mitsubishi Electric revised its forecast for the year ending March 2027, projecting revenue of ¥6.55 trillion and adjusted operating profit of ¥710 billion. Compared with the previous year, the company expects revenue to rise 11.1% and adjusted operating profit to increase 41.6%.

The earnings release says the company revised its most recently announced forecast, but does not provide the previous figures or explain the reason for the changes. The size of the revisions therefore cannot be compared. First-half revenue reached about 47.7% of the full-year forecast, making the company's ability to sustain business momentum in the second half a key focus.

The equity ratio attributable to owners of the parent stood at 63.6% at the end of the first half, up from 60.8% at the previous fiscal year-end. Operating and free cash flow both exceeded year-earlier levels, and Mitsubishi Electric has raised its dividend forecast and approved a large share buyback.

The interim dividend was ¥30 per share, up ¥5 from ¥25 a year earlier. The board approved a share buyback of up to ¥200 billion, or 80 million shares, from November 2026 through March 2027. The company also plans to cancel 23 million shares. Mitsubishi Electric says the measures are intended to strengthen shareholder returns and improve capital efficiency, while maintaining investment.

After announcing its results, Mitsubishi Electric outlined plans to pursue partnerships and transfer stakes in its automotive equipment and power distribution and control equipment businesses. The moves are intended to bring in technologies and sales networks needed for growth while reshaping the allocation of management resources.

• Automotive equipment business: Mitsubishi Electric signed an agreement to sell a 50% stake in Mitsubishi Electric Mobility to an investment management company affiliated with Hon Hai Precision Industry. The planned sale price is ¥115 billion
• Rationale for the automotive equipment partnership: The companies aim to combine Mitsubishi Electric's electric powertrain, software and control technologies with Hon Hai's speed and scale in market expansion to offer platforms for electric vehicles
• Power distribution and control equipment business: Mitsubishi Electric plans to sell a 51% stake in a new company to ABB Ltd. and establish a joint venture. The planned sale price is ¥82.4 billion
• Earnings impact: The automotive equipment transaction is expected to result in an impairment loss of about ¥100 billion in the year ending March 2027. The power distribution and control equipment transaction is expected to generate a gain of about ¥90 billion in the year ending March 2028

For the automotive equipment business, Mitsubishi Electric aims to put its technology to use while drawing on Hon Hai's sales and expansion capabilities. In power distribution and control equipment, it plans to tap ABB's technology and global sales network as demand for electrification grows and competition intensifies. The partnerships are intended to bolster growth and competitiveness, though the different timing of the related gains and losses could make short-term earnings more volatile.

Research and development spending reached ¥120.2 billion in the first half, up 6% year on year. The full-year plan is ¥250 billion, 6% above the previous year's actual spending of ¥235.9 billion.

• Research and development spending: Up 6% year on year in the first half; the full-year plan is also 6% higher than the previous year's result
• R&D spending as a share of revenue: 3.8% in the first half, down from 4.2% a year earlier
• Capital investment and asset purchases: Investing cash flow for the acquisition of property, plant and equipment included an outflow of ¥155.5 billion in the first half

In its new medium-term management strategy, Mitsubishi Electric says it will shift from structural reform to business-model transformation. The company plans to expand maintenance and services, make greater use of customer data, and strengthen what it calls circular digital engineering, combining AI with those capabilities. The rise in R&D spending is positioned as an investment in moving beyond sales of existing products toward higher-margin models that combine digital technology and services.

Mitsubishi Electric says global economic conditions, foreign exchange, product supply and demand, component procurement, technological innovation and geopolitical risks could affect its results. Investors will also be watching how the restructuring proceeds and whether profit growth can be sustained.

• Foreign exchange: A weaker yen lifted first-half revenue. A reversal in currency trends could affect sales and the profitability of overseas businesses.
• Demand and component procurement: Changes in the global economy, product supply and demand, or component procurement conditions could affect production, delivery schedules and margins.
• Technology, quality and information security: Falling behind rapid technological change, product quality problems or information security incidents could hurt sales and customer trust.
• Execution of business restructuring: The automotive equipment and power distribution and control equipment transactions involve challenges such as regulatory approvals, transfers and continuity of customer supply. Delays or other setbacks could alter expected growth benefits or the timing of earnings impacts.
• Profit sustainability: First-half earnings included a boost from the change in depreciation method. Investors will need to assess growth in underlying business earnings excluding the effects of accounting changes.

A key question is whether Mitsubishi Electric can sustain profit growth across its businesses even without the revenue boost from the weaker yen and the benefit from the depreciation-method change. Whether the reshaped portfolio delivers the stable and higher-margin earnings the company is targeting will influence its longer-term prospects.