Digital Arts (2326) Q1 2027 earnings summary

Executive summary

• Achieved significant growth in net sales and profit, driven by strong demand for cloud-based security solutions in the enterprise and public sectors, especially from Phase 2 of the GIGA School Concept and central government projects.

• Cloud service product sales reached record highs, expanding the recurring revenue base and order backlog.

• Effective cost control and operational streamlining, including AI integration, supported profitability.

• The company focused on growing its security business, expanding public sector market share, and strengthening sales and development teams.

Financial highlights

• 1Q FY Mar. 2027 contracts: ¥3,498M (+51.7% YoY); net sales: ¥2,711M (+19.4% YoY); operating profit: ¥1,035M (+30.2% YoY); profit attributable to owners: ¥718M (+29.2% YoY); ordinary profit: ¥1,060M (+31.5% YoY).

• Gross profit margin: 64.9%; operating margin: 38.2%; gross profit increased to ¥1,761M.

• EBITDA for 1Q FY Mar. 2027: ¥1,332M (+28.5% YoY).

• Basic earnings per share rose to ¥53.53 from ¥40.97 YoY.

Outlook and guidance

• FY Mar. 2027 full-year forecast: net sales ¥12,000M (+10.8% YoY), operating profit ¥5,400M (+12.7% YoY), ordinary profit ¥5,505M (+13.7% YoY), profit attributable to owners ¥3,770M (+10.0% YoY).

• Annual dividend forecast is ¥100/share.

• Focus on expanding sales of new and related products, strengthening high-touch sales, and acquiring public sector projects.

• Contracts expected to decrease as GIGA School Concept project acquisition peaks, but net sales to rise due to backlog and cloud service growth.