SCREEN Q2 FY2027: AI chip demand drives higher sales and profit

SCREEN delivered higher sales and profit in the first half of FY2027. Revenue rose 12.5% year on year, operating profit increased 17.4% and net profit attributable to owners of the parent grew 18.2%. The operating margin also improved to 17.7% from 16.9% a year earlier.

• Revenue: ¥308.4 billion, up ¥34.1 billion from a year earlier
• Operating profit: ¥54.5 billion, up ¥8.0 billion from a year earlier
• Ordinary profit: ¥55.9 billion, up 19.5% year on year
• Interim earnings per share: ¥199.06, up from ¥168.51 a year earlier. The comparison is on a post-stock-split basis

As demand for generative AI expands, investment in semiconductor miniaturization and advanced packaging has gathered pace, lifting equipment demand for advanced logic and memory. Higher sales were the main driver of operating profit growth, with SCREEN capturing semiconductor demand and improving its profit margin. However, an economic slowdown in some regions, including China, and geopolitical risks in the Middle East continue to cloud the global outlook.

The semiconductor production equipment business (SPE) recorded revenue of ¥251.3 billion and operating profit of ¥57.5 billion, both above the year-earlier period. Sales to foundry customers declined, but memory sales, particularly for DRAM, and post-sales revenue increased. By region, sales to Taiwan fell while those to the U.S. and South Korea rose, as SCREEN captured investment demand related to generative AI.

The graphic arts equipment business (GA) generated revenue of ¥29.1 billion and operating profit of ¥1.7 billion, up 12.8% and 40.4%, respectively, year on year. Growth in both recurring business, including ink, and equipment sales lifted profit.

The display production equipment and coater/developer business (FT) posted revenue of ¥19.0 billion and operating profit of ¥0.8 billion. Lower equipment sales and higher fixed costs contributed to a steep 74.3% year-on-year decline in operating profit.

The printed circuit board-related equipment business (PE) generated revenue of ¥7.0 billion, with equipment sales and post-sales revenue increasing. Higher fixed costs and other factors resulted in an operating loss of ¥0.1 billion, narrower than the ¥0.2 billion loss a year earlier. The operating loss in other businesses also narrowed to ¥0.1 billion from ¥0.9 billion. Overall, SPE is driving growth, while a recovery in FT remains a challenge.

Total assets at the end of the interim period rose 9.7% from the end of the previous fiscal year to ¥792.5 billion, while the equity ratio was 65.9%. Net assets increased as profits accumulated, while inventories and contract liabilities also grew.

Operating cash flow swung to an outflow from a year-earlier inflow, weighed down by higher inventories and a decline in other current liabilities. Investing activities included spending on equipment, and cash and cash equivalents fell ¥29.3 billion from the start of the period to ¥196.4 billion. The annual dividend forecast is unchanged and represents an increase from the previous year even after accounting for the 1-for-2 stock split in April 2026. The earnings release did not report a new share buyback decision.

SCREEN left its FY2027 full-year forecast unchanged from the level announced on July 28. It expects revenue of ¥743.0 billion, operating profit of ¥156.5 billion and net profit attributable to owners of the parent of ¥115.0 billion, with all three expected to exceed the previous year's results.

By the end of the interim period, SCREEN had achieved 41.5% of its revenue forecast, 34.8% of its operating profit forecast and 32.7% of its net profit forecast. The company maintained its outlook based on current customer investment trends, making only revisions to the allocation among segments. Its assumed exchange rates from the third quarter onward are ¥150 to the U.S. dollar and ¥175 to the euro. Currency moves and changes in customers' capital spending plans will affect its ability to meet the forecast.

SCREEN integrated its semiconductor advanced packaging business, which had been developed as a new business area, into SCREEN Finetech Solutions. As part of the change, the business was moved from the "Other" category to the display production equipment and coater/developer business (FT), and prior-year segment figures were recast to reflect the new classification.

The move consolidates the business and streamlines its management structure. Advanced packaging is becoming increasingly important as a technology that supports higher performance and energy efficiency in chips for generative AI. Investors will want to track how the integrated business translates into equipment sales and earnings in future disclosures.

Research and development expenses in the interim period rose 22.3% year on year to ¥21.5 billion, while capital spending increased 110.7% to ¥25.5 billion. Depreciation and amortization rose 17.5% to ¥8.1 billion, reflecting increased investment in R&D and in production and business infrastructure.

Capturing demand for semiconductor miniaturization and advanced packaging requires not only equipment technology development but also stronger supply capacity and service capabilities. Higher investment appears aimed at preparing for growth opportunities, but if orders and utilization do not keep pace, depreciation and fixed costs could weigh on earnings.

Growing investment in the semiconductor market is a tailwind, but SCREEN's performance remains sensitive to customer capital spending and shifts in the global economy. Investors should also watch the deterioration in operating cash flow during the interim period and the uneven performance across businesses.

• Changes in capital spending: Delays or cuts in customer semiconductor investment could affect sales of SCREEN's core semiconductor production equipment and maintenance services.
• Geopolitical and economic uncertainty: Middle East risks and economic stagnation in some regions, including China, could affect customers' investment decisions and component supplies.
• Differences in segment performance: FT recorded a sharp profit decline as equipment sales fell and fixed costs increased. A slow recovery could make SCREEN even more reliant on its semiconductor business.
• Working capital and foreign exchange: Higher inventories and other factors pushed operating cash flow into negative territory. The full-year forecast assumes exchange rates of ¥150 per U.S. dollar and ¥175 per euro from the third quarter onward, leaving results exposed to actual exchange rates and working-capital movements.