Murata Q2 FY2027: Operating profit jumps 49%, outlook raised

For the six months ended September 2026, Murata posted revenue of ¥1.0907 trillion, up 20.8% from a year earlier. Operating profit rose 48.9% to ¥245.9 billion, while profit attributable to owners of the parent increased 40.6% to ¥186.2 billion. Operating margin improved to 22.5%, from 18.3% a year earlier.

• Stronger demand: Wider investment in data center infrastructure lifted sales of capacitors, inductors and EMI suppression filters.
• Automotive growth: Demand for components used in the automotive market remained firm, supported by advances in ADAS and a rising EV mix.
• Better utilization and foreign exchange: Higher production volumes improved operating leverage, while the weaker yen also boosted profit. Higher fixed costs and lower product prices were headwinds.

AI and data center demand is driving growth. Electronic component demand remained resilient despite higher raw material and energy prices and inflationary pressure as tensions in the Middle East persisted. Higher sales and increased utilization of production facilities contributed to profit growth.

Components: Sales grew, led by data center and automotive demand. Multilayer ceramic capacitors (MLCCs) gained across a range of applications, including sales through distributors and to television makers. EMI suppression filters and inductors also benefited from demand for data centers and televisions.

Devices and modules: Performance varied by product group. Sales of sensors and actuators increased in functional devices, while high-frequency and communications-related products, including resin multilayer substrates and modules for smartphones and PCs, declined. In energy and power products, power modules for data centers increased, but some battery products fell in certain applications.

• Communications and televisions: Higher sales of MLCCs and EMI suppression filters, among other products, supported growth across applications.
• Computers: Components and power modules for data centers increased. Expanding AI-related investment was a tailwind.
• Home appliances: Components for audiovisual equipment increased, while lithium-ion rechargeable batteries for air conditioners declined.

Strong demand from data centers and automotive customers is helping offset Murata’s traditional reliance on smartphones. Some products for communications equipment and PCs remain weak, highlighting widening differences in demand across product groups.

Murata raised its consolidated forecast for FY2027, projecting revenue of ¥2.26 trillion, operating profit of ¥520 billion and profit attributable to owners of the parent of ¥396 billion. All three forecasts are above the previous estimates. Compared with the prior year, the company expects increases of 23.4%, 84.5% and 69.3%, respectively.

The company raised its revenue forecast on expectations that data center-related demand will increase further. Higher production volumes and a better product mix are also expected to improve profitability. First-half revenue and operating profit were about 48% and 47%, respectively, of the full-year forecasts. Sustained demand and further improvement in profitability will be key to meeting the targets in the second half.

Total assets stood at ¥3.2492 trillion at the end of September, up ¥50.1 billion from the end of the previous fiscal year. The equity ratio attributable to owners of the parent edged down to 84.9% from 85.0%.

Murata generated cash from operations while investing in growth, including expanded production capacity. It also bought back shares and paid dividends. The interim dividend was ¥35, up from ¥30 a year earlier. The company is balancing investment to meet rising demand with shareholder returns while maintaining a high equity ratio.

Murata is expanding production capacity and building production facilities. Cash flow from investing activities was negative, with spending on property, plant and equipment higher than in the same period a year earlier.

• Expanding production capacity: Murata is continuing capital investment in anticipation of growing demand from AI data centers and the automotive sector.
• Improving product mix: The company aims to expand sales of electronic components for a broad range of applications, including data centers, automotive and communications.
• Research and development: In a fast-changing electronic components market, a key challenge is to consistently deliver new products that meet customer needs.

Investment weighs on cash flow in the short term, but sustained demand could lift profitability by increasing utilization. Investors will be watching whether AI-related demand proves temporary or persists long enough to generate returns on the added capacity.

Murata cites shifts in the electronic components market, foreign exchange, raw materials and technological competition among factors that could affect its results. Demand strength is not the only consideration: changes in costs and supply conditions also warrant attention.

• Market conditions and demand swings: Economic trends, the electronic equipment market and changes in supply and demand could affect sales volumes and product prices.
• Raw material prices and supply shortages: Higher prices or difficulty sourcing raw materials could raise manufacturing costs or disrupt production.
• Foreign exchange: A stronger yen could reduce the yen value of overseas sales and weigh on profitability relative to expectations.
• Technological change and competition: Failure to develop and reliably supply new products that keep pace with market changes could prevent Murata from capturing customer demand.
• Geopolitics, regulation and accidents: Changes in laws, regulations or social conditions in different countries, as well as accidents, could disrupt operations or supply chains.

The weaker yen and higher production volumes that supported first-half profit growth may not provide the same lift in the second half. The sustainability of data center demand, foreign exchange and raw material prices will be important to meeting the full-year forecast.