6501.T

• Overall Consolidated Performance

  • First quarter 2026 total revenue grew 20% year-on-year (10% excluding special factors), with revenue and adjusted EBITDA reaching record first quarter highs. All four segments achieved double-digit revenue growth.
  • Quarterly profit was broadly flat year-on-year, but this reflects a 50 billion yen special dividend from the prior year's air conditioning business reorganization; on a comparable basis, profit increased.
  • Core free cash flow rose year-over-year, driven by higher adjusted EBITDA and improved trade receivable collection that reduced the cash conversion cycle and improved capital efficiency.
  • Lumada, Hitachi's core digital growth platform, accounted for 43% of consolidated first quarter revenue. Full year 2026 Lumada revenue is targeted at 5 trillion yen (22% year-on-year growth, 44% of total projected revenue), with 17% adjusted EBITDA growth. HMAX, a key Lumada solution line, reached 110 billion yen in first quarter revenue, hitting 22% of its full year 505 billion yen target.

• Strategic Developments

  • Overseas IT services (GlobalLogic and Hitachi Digital Services) integrated operations at the start of the fiscal year; combined revenue grew 28% year-on-year in Q1, with strong synergy growth in energy and mobility. A new experience center opened in India to showcase HMAX building solutions, and alliances have been formed to strengthen physical AI capabilities.
  • Mobility completed the acquisition of Clever Devices, a North American public transportation IT firm, to expand into multimodal transit beyond rail.
  • Hitachi newly launched the Agentic AI Integration platform to accelerate AI transformation project delivery, with first deployments for large system integration projects starting in September 2026. A new executive leader was appointed to head the combined global digital business to speed AI-focused growth.
  • Share repurchases of 150 billion yen were completed in Q1, representing 27% of the full year plan, with 400 billion yen in remaining repurchase authority scheduled for execution through the rest of the fiscal year.

• Geographic Performance

  • Overseas revenue grew across all segments: Energy grew 35% overall led by Europe and North America; Mobility grew 18% overseas led by European rail control; Connective Industries grew 21% overseas led by China, driven by building services and semiconductor equipment demand.

• Management raised full year 2026 consolidated forecasts for revenue, adjusted EBITDA, net income, core free cash flow, and ROIC, reflecting a stronger-than-expected first quarter, solid order trends, and updated foreign exchange assumptions. Full year revenue is projected to grow 11% year-on-year (9% excluding special factors), with the adjusted EBITDA margin expected to reach 13%, an improvement of 100 basis points year-on-year after accounting for strategic investments.
• Foreign exchange assumptions for the second quarter onward were revised to 160 yen per U.S. dollar and 185 yen per Euro.
• Segment-level full year forecasts were all raised: DSS revenue increased 30 billion yen and adjusted EBITDA increased 8 billion yen; Energy Power Grids revenue increased 360 billion yen and adjusted EBITDA increased 76 billion yen; Mobility revenue increased 100 billion yen and adjusted EBITDA increased 9 billion yen; Connective Industries revenue increased 100 billion yen and adjusted EBITDA increased 14 billion yen.
• Capital expenditure for organic growth (focused on expanding Energy production capacity) will increase by over 170 billion yen year-on-year, and corporate strategic investment to accelerate AI adoption will also be expanded.

1. Digital Systems & Solutions (DSS): First quarter orders increased 7% year-on-year, revenue rose 11% year-on-year, and profit grew. Domestic growth was driven by AI transformation and system modernization businesses, with profit expansion supported by stronger project management, expanded Lumada operations, and AI-driven productivity improvements. Excluding special factors, full year 2026 revenue is projected to grow 6% year-on-year.
2. Energy Power Grids: First quarter orders grew significantly year-on-year, with revenue up 37% including foreign exchange effects. Profit increased on higher volume and productivity gains. Excluding special factors, full year 2026 revenue is expected to grow 21% year-on-year, with the adjusted EBITDA margin improving 130 basis points to 14.2%.
3. Mobility: First quarter orders increased 25% year-on-year, driven by large signaling and control projects and favorable foreign exchange. Revenue and profit grew, supported by strong Lumada railway signaling performance. Excluding special factors, full year 2026 revenue growth will match the first quarter pace, with margin improvement from better business mix and cost reductions. The adjusted EBITDA margin is expected to improve 120 basis points year-on-year.
4. Connective Industries: First quarter orders increased 25% year-on-year, led by measurement and analysis equipment. Revenue rose 13% year-on-year including foreign exchange, driven by expanded building systems services and growth in semiconductor manufacturing, measurement, and inspection equipment. Excluding special factors, full year 2026 revenue is projected to grow 6% year-on-year, with margin improvement from Lumada and service business expansion.

• The Kumamoto 2026 earthquake caused no material impact to Hitachi operations as of the call, but the company continues to monitor the situation and evaluate potential support for recovery efforts.
• The ongoing Middle East situation created a smaller-than-anticipated impact on Q1 results (limited disruption to a large project and minor raw material cost increases), but there remains significant uncertainty around potential impacts from the second quarter onward, which have been partially factored into the full year forecast and could drive volatility depending on how the situation evolves.
• Domestic IT services face a structural constraint of limited available domestic IT human resources, which is currently preventing the company from meeting all existing customer demand; AI-driven productivity gains are targeted to address this constraint.

Q: Energy's Q1 margin came in above plan, what drove this outperformance and will it continue for the rest of the year? / A: Stronger-than-expected order flow, including both large HVDC projects and robust base demand for small and mid-sized equipment like transformers, drove the outperformance. Foreign exchange also contributed, but capacity expansion, increased hiring, and IT-enabled productivity improvements also lifted results. While the year-on-year revenue growth rate will appear lower in remaining quarters, the absolute year-on-year revenue increase will be larger than Q1, and margin expansion of over 100 basis points is still expected for the full year. Productivity improvements from operational changes may lead to some volatility, but the underlying trend is positive.

Q: What is the outlook for double-digit growth in domestic AI transformation (AX) and modernization services, and can Hitachi meet existing demand given limited IT labor supply? / A: For the current fiscal year, low double-digit to upper single-digit order growth is the base outlook. Hitachi has an internal target to increase AI-driven productivity from 10% at the end of fiscal 2025 to 30% by fiscal 2027, which will free up capacity to serve unmet demand. Targeted inorganic growth in high-priority domains is also a lever to accelerate growth. If both levers deliver, the 5 trillion yen revenue target for domestic IT could be achieved.

Q: What is driving Hitachi Energy's efficiency and margin improvements, and can these gains be sustained amid rising material costs? / A: Capacity expansion contributed to efficiency gains, but other factors also play a major role: full adoption of the new ERP system, AI-enabled productivity improvements, and better project management. Hitachi now excludes high-risk civil construction work from most large EPC projects to reduce cost overruns, and long-term projects include contractual indexation to pass through raw material cost increases to customers. Backlog gross margin has been steadily improving, supporting sustained margin gains going forward.

Q: What is the current status of the 800V data center power architecture partnership with NVIDIA, and what is Hitachi's positioning on solid-state transformers (SST)? / A: Full commercial deployment of the 800V architecture is targeted for 2028, but Hitachi is leveraging existing technology to deliver early grid-to-rack power solutions starting in early 2027, simplifying deployment and reducing required space for data centers. Hitachi Energy has all the core technologies required for SST (power electronics, control systems) and is continuing R&D, but full conversion to SST will take a long time, so Hitachi is focused on delivering early contributions to data center buildouts with existing technology first.