NSD Q1 FY2027: Revenue, Profit Rise as AI, DX Demand Drives 29% DAS Growth

Consolidated first-quarter revenue reached ¥29,930 million, up 9.6% year-on-year. Operating profit rose 17.4% to ¥4,175 million, ordinary profit climbed 17.3% to ¥4,263 million, and net income attributable to owners of the parent increased 15.2% to ¥2,514 million. The gross profit margin improved to 24.1% from 22.9%, lifting the operating margin to 14.0% (13.0% last year). EBITDA grew 15.5% to ¥4,828 million, with an EBITDA margin of 16.1%. The DAS business, covering data analytics, AI and solutions, was a standout: its revenue jumped 29.2% to ¥16,059 million, driven by a 33.1% surge in DX and AI-related work. NSD kicked off a three-year medium-term plan from this period, off to a strong start as it balanced aggressive investment with higher revenue and profit.

The System Development business, covering the first four segments, delivered revenue of ¥26,083 million, up 8.6%, and operating profit of ¥4,462 million, up 12.6%. Financial IT grew 14.7% to ¥9,589 million, with operating profit up 13.2% to ¥1,802 million, aided by large-scale core system renewal projects at major banks. Social Infrastructure IT revenue rose 7.5% to ¥6,153 million, and operating profit jumped 20.4% to ¥1,162 million, reflecting a recovery in communications and public-sector orders and the closure of unprofitable projects. Industrial IT edged up 2.3% to ¥6,923 million, with profit up 6.1% to ¥953 million, as gains in commercial and construction offset the end of a large service-sector contract. IT Infrastructure revenue increased 7.7% to ¥3,418 million, and profit rose 7.2% to ¥544 million. The Solutions segment saw revenue surge 18.9% to ¥4,068 million, but remained in the red with an operating loss of ¥72 million, narrowed from a loss of ¥220 million a year earlier, as investment in business development offset growth in healthcare and security solutions. The company’s growth driver, DAS, saw DX and AI-related new technology revenue jump 33.1%, underscoring the strong momentum.

Total assets at quarter-end stood at ¥90,024 million, down ¥7,418 million from the prior fiscal year-end, mainly due to a ¥5,163 million decline in trade receivables and contract assets and a combined ¥2,426 million reduction in cash and securities. Liabilities decreased ¥2,043 million to ¥20,599 million, while the equity ratio remained robust at 76.0%. Net assets fell ¥5,374 million to ¥69,425 million, as dividends of ¥7,288 million (an interim payment related to the prior year’s ¥96 annual dividend) and share buybacks of ¥558 million outweighed the quarter’s net income. NSD plans to pay an annual dividend of ¥97 per share for FY2027, marking the 11th consecutive year of increases, and continues to repurchase shares, underscoring its commitment to shareholder returns. Depreciation and amortization, including goodwill of ¥326 million, supports the earnings base.

Key risks identified by NSD include: potential softening of corporate IT investment due to inflation and higher interest rates, as well as geopolitical uncertainties; intensifying competition for skilled AI and upstream engineering talent, which could constrain growth if recruitment and training fall short; the need to turn the Solutions segment profitable by controlling costs and scaling up; and fierce competition from major system integrators and emerging AI firms. Order intake remains solid, but the company must respond nimbly to external changes and convert investments into earnings.

NSD left its FY2027 full-year guidance unchanged. It projects revenue of ¥126,000 million (+6.9%), operating profit of ¥19,500 million (+2.2%), ordinary profit of ¥19,700 million (+1.9%), and net income of ¥13,100 million (+0.7%). First-quarter revenue achieved 23.8% of the full-year target and operating profit 21.4%, putting it on track. The relatively modest profit growth reflects upfront spending on human capital and AI research, which the company sees as strategic investments for future growth.

NSD launched a three-year medium-term plan from this fiscal year, focused on capturing AI and other new technologies and cultivating multiple areas of strength. The company is shifting system development toward upstream work to enhance profitability and concentrating resources on AI solutions. It is also investing in human capital, particularly in training 'AI expert' personnel. The plan is already showing results: the DAS business expanded 29.2%, highlighting the early materialization of the medium-term plan’s benefits. Future keys will be harvesting these investments and turning the Solutions segment profitable.