Hitachi, Ltd.

Reported first-quarter FY2026 consolidated revenue increased 20% year on year, and adjusted EBITDA margin was 11.9% after improving 110 basis points. Kato said revenue increased 10% on a comparable basis from business expansion alone, before adding the effects of the Middle East, one-time factors and foreign exchange; adjusted EBITDA followed a similar trend. 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. Core free cash flow also exceeded the previous year, aided by improved collection of trade receivables. For FY2026, Hitachi raised guidance for revenue, adjusted EBITDA, net income, core free cash flow and ROIC; it now expects revenue to increase 11% year on year including restructuring and FX effects, adjusted EBITDA margin to reach 13%, and revised FX assumptions to JPY 160 per U.S. dollar and JPY 185 per euro from Q2 onward. Management also said it plans to increase CapEx by over JPY 170 billion year on year, and noted about JPY 400 billion of unexecuted buyback remains from Q2 onward.

Kato framed the quarter as a strong start to the second year of Inspire 2027, emphasizing that growth drivers excluding one-off items look sustainable. He pointed to AI transformation, modernization, energy infrastructure demand, and HMAX as key engines, and said Hitachi is expanding capital spending and strategic investment to support organic growth and AI adoption. His tone was constructive but cautious, repeatedly noting that Middle East conditions and the broader external environment remain uncertain.

Kato gave several specific financial markers: Q1 revenue was up 20% year on year, adjusted EBITDA margin was 11.9% after a 110 bps improvement, and quarterly profit was roughly flat versus last year despite an approximately JPY 50 billion special dividend headwind. Core free cash flow improved year on year even without large advance payments, helped by better trade receivables collection and higher adjusted EBITDA. For the full year, he said Hitachi now expects revenue up 11%, adjusted EBITDA margin at 13%, and higher revenue forecasts across DSS, Energy, Mobility and Connective Industries; he also said CapEx will rise by over JPY 170 billion year on year and that about JPY 400 billion of buybacks remains unexecuted from Q2 onward.

Analysts focused heavily on Energy margins and sustainability, asking why Q1 was better than expected and whether the same drivers can continue. Kato said the outperformance came from strong orders, product mix, capacity expansion, productivity gains, and better project management, while also noting that some efficiency gains may fluctuate. Questions on domestic IT services centered on whether 7% growth is enough to reach JPY 5 trillion; management said AI-driven productivity, which was about 10% achieved at FY2025-end versus an internal FY2027 target of 30%, plus selective inorganic growth, are needed to get there. Other questions covered HMAX mix, GlobalLogic/HDS integration, storage pricing, and the 800V data center architecture and solid-state transformer opportunity; management said HMAX growth is coming across multiple sectors, GlobalLogic and HDS are now operating as one entity to drive cross-sell, storage pricing is being passed through, and Hitachi Energy expects early contribution from grid-to-rack power conversion while SST remains a longer-term opportunity.