Tokyo Electron Limited

Fourth quarter net sales were JPY 711.8 billion, up 28.9% sequentially; gross profit was JPY 333.1 billion, up 41.3%; gross margin was 46.8%, up 4.1 percentage points; operating income was JPY 205.6 billion, up 77.1%; operating margin was 28.9%, up 7.9 percentage points; and net income attributable to owners of parent was JPY 214.2 billion, up 80.8%. For fiscal 2026, net sales were JPY 2,443.5 billion, up 0.5% year over year; gross profit was JPY 1,107.8 billion; gross margin was 45.3%, down 1.8 percentage points year over year; operating income was JPY 624.9 billion; operating margin was 25.6%, down 3.1 points; net income attributable to owners of parent was JPY 574.4 billion, up 5.6%; R&D was JPY 277.8 billion, up 11.1%; capital expenditures were JPY 216.0 billion; depreciation was JPY 80.9 billion, up 30.3%; and Field Solutions sales were JPY 626.0 billion, up 16.3%. Cash and cash equivalents were JPY 506.2 billion at quarter-end, operating cash flow in Q4 was JPY 205.7 billion, investing cash flow was JPY 33.2 billion, financing cash flow was outflow of JPY 150.8 billion, and free cash flow was JPY 239.0 billion for the quarter and JPY 433.2 billion for the full year. Management also said total return amount in fiscal 2026 was JPY 437.4 billion and that the completed share repurchase totaled JPY 149.9 million. For fiscal 2027 first half, the company expects net sales of JPY 1.570 billion, gross profit of JPY 715 billion, and operating income of JPY 431 billion, all said to be record first-half levels; first-half SPE new equipment sales are expected to grow 41% year over year to JPY 1.200 billion. Full-year fiscal 2027 R&D is planned at JPY 330 billion, CapEx at JPY 190 billion, and interim dividend at JPY 361 per share.

Kawai said fiscal 2026 showed record sales, record net income, and completion of major capacity-expansion projects in Miyagi, Kumamoto, and Iwate, which he framed as preparation for the next growth phase. He emphasized that AI-server demand, advanced logic, DRAM/HBM, and a recovery in 3D NAND are driving demand, and pointed to wins in PORs and market share in key etch and advanced packaging processes. His tone was confident but measured: he repeatedly stressed strong inquiries and growth opportunities, while also saying profitability improvement remains a challenge because of inflation, FX, and logistics costs.

Kawamoto walked through the financials in detail, highlighting the fourth-quarter jump in sales, gross profit, operating income, and net income, and the full-year record in sales and free cash flow. He noted gross margin pressure in fiscal 2026 from higher parts/materials costs, product mix, and a larger overseas field-engineering base, while operating income was also affected by higher R&D spending. Balance-sheet discipline remained solid with cash and equivalents of JPY 506.2 billion, inventories of JPY 713.1 billion, and positive free cash flow of JPY 433.2 billion for the year; he also noted the company completed its share repurchase and will cancel 3,600,000 treasury shares on April 30, 2026.

Analysts pressed on the sustainability of the WFE market outlook, the confidence behind the strong first-half fiscal 2027 guide, and whether the company is effectively seeing pull-forward demand from AI-server customers. Management said the WFE market outlook of roughly $150 billion to $170 billion in calendar 2026-2027 reflects direct customer communication, but not firm commitments, and they said the main near-term driver is still strong AI-related demand. Questions also focused on why etch market share looked lower on a sales basis and on margin recovery; Kawai answered that the apparent share decline was driven by customer mix, regulations, and timing, while margin improvement depends on price actions, productivity gains, new products, and cost pass-through over the next one to two years.