Rigaku Holdings Corporation Q3 FY2026 earnings call

Overall Financial Health:

• Total sales revenue increased across all categories (multi-purpose analysis, semiconductor process control, parts/services).
• Operating profit ratio improved significantly, though a special loss of approximately 7.5 billion yen related to the American Medical Analytical Device (RAD) business reduced reported earnings.
• Gross margin improvement plans initiated in H1 are showing results, with further expected gains in Q4 from price increases and new product effects.

Strategic Product Roadmap:

• New semiconductor metrology products (Logic GA-CFET, Memory T-SAX, Advanced Packaging inspection) are progressing smoothly through customer validation (POR).
• Key launches include Gen4 XRF/MF3400 next year and Onyx 3200, which saw rapid adoption.
• Hybrid Metrology solutions developed with ONT are being applied to memory and logic production lines.

Operational Shifts:

• Multi-purpose analysis equipment is successfully shifting focus from academic institutions to industrial clients, driving two-digit growth expectations.
• Semiconductor process control is entering a high-growth phase, aiming for over 30% annual sales growth, fueled by AI semiconductor investments and increased X-ray tool penetration.
• Service contracts are expanding globally based on a growing installed base, providing stable recurring revenue.

Multi-purpose Analysis Equipment: Reported a 4% year-over-year sales growth, marking a return to positive territory after previous declines. The operating profit margin improved by 4 percentage points, driven by demand recovery in Japan and the US, with a 16% increase in demand for 4K/3K equipment. Semiconductor Process Control Equipment: Demonstrated strong momentum with a 30% year-over-year revenue growth and a 189% increase in supply volume compared to the prior year. This segment is transitioning into a full-scale expansion phase, supported by high demand from memory manufacturers and North American IDMs. Parts and Services: Experienced steady top-line growth, with the service business expanding by 6.5%. While the install base continues to grow globally, profits were negatively impacted by one-off special factors.

FY2026 Annual Outlook:

• Maintained revenue guidance at 1,010 billion yen, noting potential upside if Q4 execution meets targets.
• Maintained operating profit guidance at 194 billion yen, excluding the impact of special factors.
• Management anticipates that Q4 will be the strongest quarter historically for semiconductor process control, helping to offset slight delays in multi-purpose analysis sales recovery.

FY2027 Forward-Looking Statements:

• Expects a superior market environment across all three business segments.
• Multi-purpose analysis: Projected two-digit annual supply growth as the shift to industrial customers accelerates.
• Semiconductor Process Control: Aiming for sales growth exceeding 30%, driven by a 70% increase in order backlog and expanding applications in AI semiconductors (Logic, DRAM, Flash).
• Parts and Services: Expected to maintain stable profit rates without the burden of current year's special losses.

Special Factor Impact:

• A one-time impairment/loss of ~7.5 billion yen was recognized due to frozen US Department of Defense budgets affecting the RAD business, significantly impacting Q3 profitability.
• Future performance may fluctuate if similar non-recurring items arise or if volume targets are not met before such provisions are fully absorbed.

Sales Timing Risks:

• Recovery in multi-purpose analysis equipment sales is delayed by approximately one quarter relative to initial plans, potentially pressuring short-term revenue recognition.
• Supply chain constraints in semiconductor process control require continuous capacity expansion to meet accelerating demand; failure to scale could limit revenue capture despite high orders.

Q: What is the strategic rationale behind the significant shift from academic to industrial clients in multi-purpose analysis, and how does this affect long-term stability? / A: Management explained that academic budgets have been constrained for years, making industrial applications the primary driver for sustainable growth. By targeting industries like power semiconductors and consumer electronics, RIGAKU aims for more predictable, high-volume demand. This shift is already yielding two-digit growth in industrial supply, positioning the segment for stable, long-term expansion rather than relying on volatile academic funding.

Q: How is RIGAKU addressing the supply-side challenges given the 70% increase in orders for semiconductor process control? / A: The company is actively increasing its own manufacturing capacity and enhancing supplier relationships to handle the surge in demand, particularly for AI-related semiconductors. Management emphasized that while orders have risen sharply, sales growth is capped by delivery capabilities. They are investing heavily in scaling production to convert this order backlog into revenue, aiming for sales growth that exceeds 30% annually as capacity expands.

Q: Can you clarify the nature of the special factor loss and its expected duration? / A: The loss stems from a re-evaluation of the American Medical Analytical Device (RAD) business, where US DoD budget freezes made near-term recovery unlikely. This is a one-time, non-recurring item. Management stated that once this special factor is excluded, the core business shows strong operational improvements. They do not expect similar large impairments in the future unless significant external shocks occur, and they aim to return to guided profit levels in subsequent quarters.

Q: What role does AI play in the future roadmap for semiconductor metrology? / A: AI drives demand not just for data centers but for the underlying chips (Logic, DRAM, Flash) requiring advanced inspection. RIGAKU views AI as a long-term technology evolution driver rather than a short-term trend. Their new products, such as those for advanced packaging and hybrid metrology, are specifically designed to address the complex measurement needs of AI chip manufacturing, ensuring continued relevance and growth in this high-value segment.