Trend Micro (4704) investor relations material

Executive summary

• Achieved highest-ever quarterly net sales in Q2 2026, up 13% year-over-year to ¥74.7B, with ARR growth continuing to improve, but costs surged 29%, leading to a 54% decline in operating income.

• Investments focused on cloud-related expenses and AI transformation, directly impacting profitability.

• ARR is now the primary metric for future growth, with Vision One platform driving nearly half of ARR and showing 49% year-over-year growth.

• Management remains committed to long-term growth targets and AI-native transformation, despite short-term profitability pressure.

• Net income dropped 37% year-over-year, impacted by higher operating expenses and strategic investments.

Financial highlights

• Q2 2026 net sales: ¥74.7B (+13% YoY); operating income: ¥6.2B (-54% YoY); net income: ¥3.5B (-37% YoY).

• Total operating expenses rose 29% YoY, driven by cloud and AI-related investments.

• ARR growth reached 6%, achieving internal targets; Vision One ARR grew 49% YoY, with net retention at 122%.

• Cash flows from operating activities decreased 63% YoY; cash and equivalents at period end: ¥214.2B (+14% YoY).

• Cost per SaaS ARR dollar for cloud/AI was $0.14 in H1, up slightly due to new service launches.

Outlook and guidance

• FY2026 net sales forecast remains at ¥301.5B (+9% YoY); operating income forecast revised downward to ¥44.4B due to higher cloud and AI-related costs.

• Net income attributable to owners of the parent projected at ¥30.7B, down 16.1% from previous guidance.

• No major non-operating items expected in H2; FX plan remains at JPY 157.

• Management expects ARR and revenue to improve in H2, with investments starting to pay off and cost efficiency improving.

• Long-term targets (2028) for net sales CAGR of 8-10% and double-digit ARR growth reaffirmed.