ORIX Q1 FY2027: Net Profit Soars 162% on Kioxia Gain, Lifts Full-Year Outlook

ORIX’s consolidated operating revenue for the first quarter (April–June 2026) rose 17% year-on-year to 876.6 billion yen. Operating profit climbed 12% to 133.9 billion yen, while pre-tax profit surged 179% to 406.1 billion yen. Net profit attributable to shareholders jumped 162% to 280.8 billion yen.

The standout driver was equity-method investment income, which rocketed tenfold to 207.9 billion yen from 19.4 billion yen a year ago, as ORIX booked gains through TB Investment Business L.P., a Toshiba-backed fund, from the sale and revaluation of Kioxia Holdings shares. An additional 64.3 billion yen gain from the sale of subsidiary SGK Holdings (Sugitaka) further boosted the bottom line. Unrealized holding gains on investment securities significantly inflated earnings.

Life insurance also performed well, with segment profit up 16% on higher premium income and investment returns. Operating lease revenue and service income grew, but rising operating and SG&A expenses partly offset gains. Annualized ROE reached a high 24.4%.

Starting this quarter, ORIX reorganized its management segments into four: APAC, Infrastructure, Europe/Americas, and Insurance. Combined segment profit soared 173% to 424 billion yen. The breakdown is below.

APAC: The segment, encompassing finance, fee businesses, and corporate investments, saw profit surge 455% to 289.8 billion yen, accounting for nearly 70% of total profit. The spike came from the aforementioned Kioxia-related equity-method gains and the Sugitaka sale. Appraisal gains on investment securities also contributed, making one-off items the dominant profit driver. Assets were roughly flat at 4,742.7 billion yen.

Infrastructure: Profit fell 37% to 43.3 billion yen, as the prior-year period included a gain from the sale of Hotel Universal Port Vita. Operating lease revenue rose, but the absence of large asset sales weighed on results. Assets stood at 3,567.3 billion yen.

Europe/Americas: Profit skyrocketed 495% to 63.0 billion yen, driven by valuation gains on private equity investments at ORIX USA. An increase in loans and the yen’s depreciation also lifted asset values by 4% to 2,856.6 billion yen.

Insurance: Life insurance profit grew 16% to 27.9 billion yen on higher premiums and investment returns. Assets expanded 2% to 3,259.3 billion yen, cementing the segment as a stable earnings source.

Total assets edged up 1% from the previous fiscal year-end to 18,256.4 billion yen, driven by higher equity-method investments, loans, and assets classified as held for sale from ORIX Bank. Liabilities were flat at 13,413.8 billion yen, as a decline in long-term borrowings was offset by an increase in discontinued operation liabilities. Shareholders’ equity grew 5% to 4,710.4 billion yen, with book value per share rising to 4,312.66 yen. The equity ratio remained healthy at 25.8%.

In a significant shift, ORIX changed its dividend calculation basis to adjusted net profit—excluding Kioxia-related gains and losses—because those items do not generate cash and are highly volatile. The payout will be the higher of 39% of adjusted EPS or 156.10 yen per share, underscoring a focus on stable returns. The expected second-quarter interim dividend is 107.27 yen per share. Share buybacks are also ongoing to enhance capital efficiency.

ORIX raised its full-year net profit forecast to 530 billion yen, up 18.5% from the prior fiscal year, reflecting expected Kioxia-related gains to be booked mostly by the first half. However, because those gains are subject to stock price fluctuations and cannot be reasonably estimated, adjusted net profit for the full year remains undisclosed. For the cumulative first half, adjusted net profit is assumed at 300 billion yen.

(Note: FY2025 net profit is estimated from the earnings report. The company only discloses the published profit forecast.)

Two major strategic moves shaped the quarter:

Kioxia share revaluation: Through TB Investment Business L.P., in which Toshiba is a partner, ORIX captured gains from the sale and revaluation of Kioxia Holdings shares. The 207.9 billion yen equity-method income in Q1 largely reflects this. This one-off boost significantly inflated net profit, but future gains or losses will hinge on Kioxia’s share price and potential IPO timing.

ORIX Bank divestiture completed: The sale of all shares in consolidated subsidiary ORIX Bank to Daiwa Next Bank, announced in April 2026, was finalized on August 3. The banking business is classified as discontinued operations, with related gains/losses to be recorded in Q2. The transaction streamlines the balance sheet and is expected to improve capital efficiency.

Key risks identified in the earnings release and risk disclosures include:

• Kioxia share price volatility: Gains and losses depend on stock price swings, potentially causing large quarter-over-quarter earnings fluctuations. The dividend policy adjustment provides some stability, but earnings remain lumpy.
• Foreign exchange risk: Overseas businesses, particularly in Europe/Americas, hold significant foreign-currency assets and earnings. Sudden currency moves, especially in USD/JPY, directly impact financials.
• Dependence on asset sale gains: Profits were boosted by one-off sales such as Sugitaka and hotels. The ability to sustain large scale divestitures is uncertain.
• Competitive and interest rate environment: Intensifying competition in finance and leasing, and rising interest rates, could increase funding costs. In life insurance, changes in investment yields affect earnings.
• Organizational restructuring risk: The segment reorganisation and ORIX Bank sale require optimizing internal controls and personnel allocation.