transcosmos Q2 FY2027: Revenue rises as earnings slide on investment

transcosmos reported first-half revenue of ¥203.3 billion, up 5.8% from a year earlier. Operating profit fell 16.6% to ¥6.7 billion, while net income attributable to owners of the parent declined 24.7% to ¥4.9 billion. Sales grew, but earnings fell.

• Drivers of revenue growth: Orders increased in BPO and CX services, while sales also grew at domestic affiliates and subsidiaries in South Korea and Greater China.
• Factors behind lower operating profit: Investment in consulting and AI, stronger information security, foreign-exchange effects and lower utilization in some businesses weighed on earnings.
• Ordinary profit decline: Ordinary profit fell 29.2% to ¥6.5 billion. The company no longer had the foreign-exchange gain recorded a year earlier and booked a foreign-exchange loss in the current period.
• Net income decline: First-half net income fell 24.7% year on year. Gains on the sale of investment securities and compensation income were recorded as extraordinary gains, but were not enough to offset the decline in operating profit.

The company said Japan's economy recovered moderately as employment and income conditions improved, while rising prices and uncertainty over overseas economies clouded the outlook. transcosmos is seeking to capture demand from companies looking to use AI and address labor shortages. Investors will watch whether it can turn investment in growth areas into higher profits.

Standalone services recorded revenue of ¥129.8 billion, up 2.6% year on year, while segment profit fell 6.4% to ¥3.9 billion. Higher orders for BPO and CX services lifted sales, but investment in consulting, AI and information security weighed on profit.

Domestic affiliates posted revenue of ¥24.7 billion, up 13.3%, while segment profit declined 12.1% to ¥1.4 billion. BPO subsidiaries expanded the scope of work they handle, but weaker profitability at some listed subsidiaries dragged on earnings.

Overseas affiliates grew revenue 10.6% to ¥55.9 billion, while segment profit fell 38.3% to ¥1.3 billion. Sales rose at subsidiaries in South Korea and Greater China, but utilization declined in China's offshore development business amid economic security concerns. Foreign-exchange effects also had an impact.

Domestic and overseas affiliates delivered relatively strong revenue growth, but the decline in overseas affiliate profit stood out. In Japan, transcosmos is expanding domestic BPO services into supply-demand adjustment and planning work. Overseas, it is strengthening AI-enabled customer support and staff training.

Total assets at the end of the first half stood at ¥219.6 billion, down ¥4.2 billion from the previous fiscal year-end. The equity ratio was 58.9%. Cash and cash equivalents fell ¥8.5 billion from the start of the period as outflows from investing and financing activities exceeded cash generated by operations.

The decline in total assets was mainly due to lower cash and deposits following debt repayments and a decrease in trade payables. Operating cash flow was below the year-earlier level, reflecting lower pretax profit and changes in trade payables and accrued expenses. transcosmos plans no interim dividend and expects to pay ¥145 per share at the fiscal year-end. The earnings release made no mention of a share buyback.

transcosmos left its FY2027 forecast unchanged from the announcement made on April 30, 2026. It expects revenue to rise 4.1% from the previous year, operating profit to increase 1.5% and net income attributable to owners of the parent to grow 3.2%.

The company maintained its full-year forecast despite first-half revenue growth and lower profit. Meeting the target will depend on converting order growth into earnings in the second half and limiting the impact of investment in AI and consulting, foreign-exchange movements and weaker utilization in some businesses.

transcosmos is expanding its AI-enabled BPO and CX services. In Japan, it is broadening supply-chain order-management support to include services for supply-demand adjustment and planning, aiming to help clients improve operational efficiency and cost competitiveness.

• CX platform: The number of companies using "trans-DX for Support" has grown to 156. transcosmos is rolling out "trans-DX Plus for Support," which adds AI agent capabilities and a choice of generative AI models.
• AI-enabled training: "trans-AI Tutor," developed in South Korea, has been introduced in Vietnam, cutting the training period for new operators by 50%.
• Overseas operations: transcosmos opened "CX Square Park23 Bali," its seventh site in Indonesia, strengthening its capacity to provide multilingual CX services.

The company is applying AI not only to improve service efficiency but also to enhance customer support and training quality. These initiatives could support medium- to long-term order growth, but investment weighed on first-half profit. Improving profitability and productivity after implementation will be important.

transcosmos said the outlook for the business environment remains uncertain amid rising prices and uncertainty over overseas economies. The company is seeking to convert demand for AI adoption and solutions to labor shortages into orders, while investors will need to watch how investment costs and changes in utilization affect profit.

• Foreign-exchange volatility: The company no longer had the foreign-exchange gain recorded a year earlier and booked a foreign-exchange loss in the current period. This could cause fluctuations in the profitability of overseas operations and in ordinary profit.
• Utilization in overseas businesses: Utilization in China's offshore development business declined amid economic security concerns, contributing to a steep drop in overseas affiliate profit.
• Hiring and costs: Securing specialized talent and maintaining service quality remain challenges. Continued increases in wages and operating costs could put pressure on margins.
• Returns on growth investment: transcosmos is increasing investment in AI, consulting and information security. The challenge is to translate that spending into profit through higher orders and improved operational efficiency.