Internet Initiative Japan (3774) Q1 2026 earnings summary

Executive summary

• 1Q25 saw strong network replacement demand and multiple large-scale project wins, including a Japanese megabank, driving revenue and profit growth above expectations year-over-year.

• Revenue reached ¥76.82 bn (+6.7% YoY), gross profit ¥16.69 bn (+18.1% YoY), and operating profit ¥6.03 bn (+34.6% YoY), with high profit growth even excluding one-time VMware license effects.

• Recurring revenue accumulation was a focus, with enhancements to security and mobility services, and a new management structure was launched to align with the mid-term plan.

• Security incident occurred in 1Q25, with immediate measures taken to prevent recurrence.

• Expansion of proprietary data centers continued, and significant investment in human capital included a 6% average salary increase and 269 new graduate hires.

Financial highlights

• 1Q25 revenue: ¥76.82 bn (+6.7% YoY); gross profit: ¥16.69 bn (+18.1% YoY); operating profit: ¥6.03 bn (+34.6% YoY); net profit: ¥3.78 bn (+13.7% YoY).

• Network services revenue rose 8.8% YoY to ¥42.5 bn; systems integration revenue increased 4.1% YoY to ¥33.6 bn.

• Gross margin improved to 21.7% (from 19.6% in 1Q24), driven by O/M project accumulation and rebound from VMware license impact.

• Adjusted EBITDA for 1Q25 was ¥8.62 bn.

• Comprehensive income for the period was ¥6.1 bn, up 35.1% YoY, mainly due to higher market value of investment securities.

Outlook and guidance

• FY25 revenue target: ¥340.0 bn (+7.3% YoY); gross profit target: ¥77.0 bn (+12.6% YoY); operating profit target: ¥36.5 bn (+21.2% YoY); net profit target: ¥23.0 bn (+15.4% YoY).

• Dividend per share forecast: ¥39.00 (+4.00 YoY), payout ratio 30%.

• CAPEX plan for FY25: approx. ¥30.0 bn, including ¥8.5 bn for Shiroi data center's 3rd site.

• Interim period (ending September 30, 2025) targets: revenues ¥158.0 bn, operating profit ¥15.5 bn.

• Headcount to increase by approx. 440, including 269 new graduates.