Digital Arts (2326) Q1 2026 earnings summary

Executive summary

• Contracts grew 15.7% year-over-year to 2,306 million yen, driven by strong cloud service demand, especially in the public sector with GIGA School Concept and Next-Generation School Affairs DX projects.

• Net sales increased 1.6% year-over-year to 2,270 million yen, with growth mainly from cloud products, but revenue recognition lagged due to accounting rules for cloud contracts.

• Operating profit declined 5.2% year-over-year to 795 million yen, as higher costs and delayed revenue recognition offset sales growth.

• The company maintained cost controls, with expenses kept within plan limits despite increased investment in human resources.

• The company continued to expand its market share in the public sector, especially in GIGA School Concept Phase 2 projects.

Financial highlights

• Gross profit rose 1.5% year-over-year to 1,531 million yen.

• Contract operating profit surged 39.1% year-over-year to 831 million yen, with margin improving from 30.0% to 36.0%.

• Ordinary profit fell 4.8% year-over-year to 806 million yen; profit attributable to owners of parent dropped 4.9% to 556 million yen.

• EBITDA decreased 4.8% year-over-year to 1,037 million yen.

• Basic earnings per share decreased to 40.09 yen from 41.96 yen year-over-year.

Outlook and guidance

• Full-year contracts forecast at 16,475 million yen (+55.9% YoY); net sales projected at 12,550 million yen (+25.7% YoY).

• Operating profit expected to reach 6,150 million yen (+34.9% YoY), with ordinary profit and profit attributable to owners of parent also forecast to rise significantly.

• Dividend forecast includes a special 30th anniversary dividend, totaling 45.00 yen per share at the second quarter-end.

• Growth to be driven by expanded solution proposals, cross/up-selling, and maximizing public sector orders.

• Management expects continued demand for security solutions amid rising cyber threats.