Hitachi, Ltd.

In Q1 FY2026, consolidated revenue increased 20% year over year and adjusted EBITDA reached an 11.9% margin, with both metrics at record first-quarter levels. Management also said quarterly profit was broadly in line with the prior year despite an approximately JPY 50 billion special dividend impact tied to last year’s air conditioning business reorganization, and core free cash flow exceeded the prior-year level. Excluding special factors, consolidated revenue grew 10% in Q1. For FY2026, Hitachi raised its outlook: revenue is now expected to increase 11% year over year including FX and restructuring effects, adjusted EBITDA margin is expected to reach 13%, and guidance was also lifted for net income, core free cash flow, and ROIC. FX assumptions for Q2 onward were revised to JPY 160 per U.S. dollar and JPY 185 per euro.

Kato emphasized that the quarter was a strong start to the second year of Inspire 2027 and said the growth drivers, excluding one-off factors, are “highly sustainable.” He highlighted broad-based strength across sectors, especially Energy Power Grids, and pointed to AI transformation, modernization, Lumada, and production/productivity improvements as core supports. His tone was constructive but cautious, repeatedly noting that the Middle East and the external business environment remain uncertain.

Kato said revenue growth was driven by business expansion and favorable foreign exchange effects, while adjusted EBITDA margin improved by 110 basis points on business expansion and other factors before corporate strategic investment, Middle East effects, one-time items, and FX brought the reported margin to 11.9%. He also noted that core free cash flow improved despite the absence of large advance payments, helped by better collection of trade receivables, and later said it was up by over JPY 200 billion year over year excluding the effect of large advance receipts. On capital allocation, Hitachi bought back JPY 150 billion of shares in Q1, which represented 27% of the plan for the fiscal year, and plans to raise CapEx by over JPY 170 billion year over year, focused on power grids and energy.

Analysts focused heavily on Energy margins, asking why Q1 was better than expected and whether the improvement was sustainable. Management said the outperformance came from strong order intake, especially for transformers and other base orders, plus higher capacity, improved productivity, ERP benefits, AI use, and better project management; they also said cost inflation can often be passed through via pricing indices, which helps stabilize margins. Questions on domestic IT services centered on whether 7% growth can eventually become double-digit; Kato said AI productivity gains and selective inorganic investment are the two levers, but current demand exceeds available IT resources. On HMAX and the digital businesses, management said Q1 revenue was about JPY 110 billion with strong contribution from CI, buildings, high-tech, and mobility, while the new DE&AI BU leadership under Anand Vijay is intended to accelerate AI-led business expansion.