Nikon Q1 FY2027: Revenue up, operating loss shrinks; net profit sinks 86%

Revenue grew 3.8% year on year to ¥164.18 billion, supported by gains in precision equipment, healthcare, industrial, and digital manufacturing. However, gross profit margin contracted to 39.3% from 42.5%, as selling, general and administrative expenses eased to ¥66.83 billion from ¥68.24 billion. The operating loss was ¥997 million, an improvement from a loss of ¥1.19 billion a year earlier.

The steep 86.4% drop in net profit to ¥1.29 billion, from ¥9.47 billion, largely reflected the reversal of a one-off tax benefit. In the prior-year period, Nikon recorded an income tax credit of ¥8.67 billion, which had flattered the bottom line. This quarter, income tax reverted to a cost of ¥196 million.

Nikon also reorganized its reporting segments, renaming the former Components unit to Industrial and transferring subsidiary Nikon Vision into the Imaging Products business. Prior-year segment data has been retrospectively adjusted.

Imaging Products, the company’s largest segment, saw external customer sales slide 8.9% to ¥72.97 billion, and segment operating profit declined 27.5% to ¥8.10 billion. Intensifying competition in mirrorless cameras and sluggish demand in China weighed on results, with sales falling in all major regions: Japan, the United States, Europe, and China.

Precision Equipment revenue climbed 13.1% to ¥38.27 billion, driven by solid demand for FPD lithography tools and semiconductor lithography equipment. Even so, higher R&D costs pushed the segment into an operating loss of ¥2.63 billion, reversing a profit of ¥1.89 billion a year earlier. Sales to China expanded briskly, but profitability suffered.

Healthcare delivered a 19.9% jump in revenue to ¥27.79 billion and swung to an operating profit of ¥1.05 billion from a loss of ¥1.84 billion last year. Biological microscopes and eye-disease diagnostic devices performed well, and eye-care solution sales in the United States boosted margins.

Industrial, the former Components business, reported an 18.3% revenue increase to ¥17.93 billion and an 80.6% surge in operating profit to ¥3.01 billion. EUV-related components, industrial microscopes, and glass products contributed, lifting the segment’s operating margin to 16.8%.

Digital Manufacturing revenue rose 23.9% to ¥6.32 billion as metal 3D printer installations grew, but the segment remained in the red with an operating loss of ¥2.20 billion, halved from a loss of ¥4.19 billion a year ago. Heavy development spending continued to weigh, though the path to profitability is becoming clearer.

Corporate and eliminations, which include growth-investment-related costs and headquarters expenses, amounted to a negative ¥8.63 billion, improving from a negative ¥9.68 billion, helping trim the overall operating loss.

For the fiscal year ending March 2027, Nikon projects revenue of ¥732.0 billion, up 8.1% year on year, operating profit of ¥11.0 billion, and net profit attributable to owners of the parent of ¥10.0 billion. The company expects an operating loss of ¥5.5 billion in the first half, turning profitable in the second half.

Progress against the full-year forecast stood at 22.4% for revenue after the first quarter, but operating profit was negative, leaving a steep climb for the remaining nine months. Management is pinning hopes on large FPD lithography orders, continued healthcare expansion, and new product launches in the imaging segment. The latest guidance incorporates a revision from the previous public forecast, though the size of the adjustment was not disclosed.

Total assets at quarter-end reached ¥1,097.13 billion, up ¥22.13 billion from the previous fiscal year-end, partly due to mark-to-market gains on equity holdings. The equity ratio held firm at 54.1%, compared with 54.6% at end-March 2026.

Operating cash flow improved to a net inflow of ¥20.53 billion, compared with ¥4.41 billion a year earlier, helped by higher customer advances and an increase in trade payables. Investing cash flows were a net outflow of ¥15.97 billion, and financing cash flows an outflow of ¥7.56 billion, leaving cash and equivalents at ¥157.06 billion.

On shareholder returns, Nikon plans to halve the annual dividend to ¥20 per share for FY2027, with ¥10 interim and ¥10 year-end. In FY2026, it paid ¥40 per share (¥25 interim, ¥15 year-end). The sharp reduction reflects a more cautious payout stance amid earnings uncertainty. No share buyback program was announced in this earnings release.

Key risks disclosed in the quarterly report include:

• Litigation risk: A customs dispute with Indian tax authorities remains unresolved. India’s Supreme Court has admitted the tax authority’s appeal, and the case is under review; Nikon has not recognized a provision, so any adverse outcome could have a material financial impact.
• Compliance risk: At subsidiary Optos Plc, sales of refurbished products may have violated U.S. government contracts or regulations. The company has booked a provision of ¥1.44 billion, but additional compensation or fines are possible.
• Currency sensitivity: With a high ratio of overseas sales, a sharp appreciation of the yen poses a downside risk to earnings.
• Product cycle: The Imaging Products business faces market fluctuations and fierce competition; Precision Equipment is susceptible to changes in capital expenditure demand.
• Growth investment: The path to profitability for digital manufacturing and other new areas remains lengthy, and earnings will continue to be pressured during the investment phase.

Growth-investment-related costs booked under corporate adjustments totaled ¥3.14 billion in the quarter, down from ¥4.15 billion a year earlier, but R&D expenses in the Precision Equipment and Healthcare segments continue to weigh on profits. Investments in next-generation semiconductor lithography and expanding metal 3D printer applications remain ongoing. Depreciation came to ¥10.52 billion (vs. ¥10.31 billion), and the company executed ¥15.97 billion in capital expenditures for property, plant, equipment, and intangibles, underscoring its commitment to future growth.