QD Laser,Inc. Q2 FY2026 earnings call

• Company Overview & Vision

  • QD Laser was spun out of Fujitsu Laboratories in 2006, listed on the Tokyo Stock Exchange Growth Market in 2021, and currently has 47 employees, with two core business segments: Laser Device and Visual Information Device.
  • The company's long-term vision is to become a major player in the optical semiconductor industry by leveraging its unique quantum dot and retinal projection technology as a global technical partner for customers.

• Stable Management Base Building

  • Total company combined revenue and outstanding orders reached 74% of the full-year fiscal 2026 plan as of the end of the second quarter, a stronger progress rate than the prior two fiscal years.
  • The Laser Device segment added 16 new customers in the second quarter, reaching 113 certified customers as of September 2025, which is on track with KPI targets. The company continues to launch new products (both innovative new designs and customer-specific modified products), targeting sample completion and marketing launch by the fourth quarter of fiscal 2026.

• Growth Initiative Progress

  • The company was awarded the Small and Medium Enterprise Growth Acceleration Subsidy in September 2025, which will be used to accelerate capital investment for quantum dot laser development and production.
  • For quantum dot lasers, the company is targeting 1 to 2 volume production orders from current 6 R&D customers for data center optical interconnect applications, where quantum dot lasers' unique high-temperature operating stability addresses a key unmet need for optical interconnects placed close to hot high-performance GPUs/CPUs.
  • The Visual Information Device segment is executing a structural transformation to B2B and B2B2C models from its prior direct-to-consumer focus. Ongoing initiatives include: joint development of retinal projection XR glasses with a domestic customer (progressing well on miniaturization, weight reduction, and performance improvement), negotiations for retinal projection unit supply to overseas customers, discussions for domestic distribution of overseas customer retinal projection devices leveraging QD Laser's existing expertise, exploratory discussions for industrial and medical applications of optical unit technology.

1. Laser Device (LD) Segment: First half fiscal 2026 revenue was 580 million yen, an 11% increase year-over-year, marking the highest first half revenue since listing. It contributed 91.9% of total company first half revenue. Key product performance: DFB lasers saw strong growth in measurement light sources and semiconductor wafer process-related sales; high-power lasers grew across all end markets including levelers for construction/DIY, sensors for semiconductor fabs, and machine vision; small visible lasers faced slow growth due to a large customer's inventory adjustment; quantum dot lasers for R&D use grew 136% year-over-year, with 6 customers purchasing units for data center optical interconnect R&D this fiscal year. The segment contributed 97 million yen in operating profit, a 35% increase year-over-year. 2. Visual Information Device (VID) Segment: First half fiscal 2026 revenue grew 43.2% year-over-year, with development contracted revenue making up the majority of current revenue amid ongoing business restructuring. It contributed 8.1% of total company first half revenue, and the segment is still undergoing structural transformation with no positive operating profit reported in this period.

• Short-term guidance: Maintains target of full company net profitability in the 2027 March fiscal year (next fiscal year), and confirmed the full-year 2026 March fiscal year plan is on track to be achieved based on current 74% progress. Capital investment from the SME subsidy will not contribute to volume production until 2027 fiscal year or later. 1.0 billion yen in total capital investment is planned, with 50% (up to 500 million yen) covered by the subsidy, focused on expanding in-house production capacity for quantum dot lasers (doubling existing in-house equipment, not full insourcing of externally produced components).
• Mid-term guidance: Targets annual average 11% revenue growth for baseline business (excluding quantum dot laser volume growth) through 2035, with volume production of quantum dot lasers for data centers gradually starting from 2028 fiscal year. The company expects the market for quantum dot laser-enabled optical interconnects to emerge by 2030 fiscal year.
• Long-term guidance: Announced the "10 Billion Yen Declaration", targeting 10 billion yen in total revenue by fiscal 2035, driven by baseline business growth plus volume production of quantum dot lasers from 1 to 2 large global customers.

• Volume commercialization of quantum dot lasers for data centers depends on customer R&D progress, and there is risk that customers may select alternative laser technologies even after testing QD Laser products. - High output and multi-wavelength development for quantum dot lasers is technically challenging, with no guarantee of timely performance improvements to meet customer requirements. - The large new crystallization equipment for the new production site is scheduled for installation in 2027 fiscal year, and delays in equipment delivery or installation could push back development timelines. - Consumer adoption of XR/AI glasses, the key long-term market for retinal projection technology, is uncertain and depends on third-party customer product launches and market acceptance. - The company's total assets decreased by 234 million yen compared to the end of fiscal 2025, and cash and cash equivalents decreased by 544 million yen year-over-year, creating pressure on near-term liquidity before profitability is achieved.

Q: How will the SME subsidy funds be allocated between the two business segments, and what is the capital investment focused on? / A: The full 500 million yen maximum subsidy will be used for Laser Device segment capital investment, specifically to add one large in-house crystallization machine for quantum dot laser production. The company does not plan for frequent large capital investments going forward; future R&D investment will primarily be funded by operating cash flow, and the Visual Information Device segment will continue to progress via customer-funded joint development to maintain financial discipline.

Q: What is the largest long-term market opportunity for retinal projection technology, and what is QD Laser's strategic position? / A: The largest opportunity is in AI-enabled XR/AI glasses, which have the potential to become a mass-market consumer product replacing smartphones. Retinal projection offers inherent advantages of easy focus and low power consumption that fit this application. QD Laser will operate as a B2B/B2B2C component supplier to customer brands developing these products, rather than selling end consumer products directly, and views AI-connected wearable devices as the biggest long-term growth opportunity for this segment.

Q: What is QD Laser's position on dilutive equity financing like warrants ahead of the 2027 fiscal year profitability target? / A: The company has no current plans for equity financing including warrants to fund operations. The company prioritizes funding approaches that deliver clear value to existing shareholders, and management is fully committed to achieving profitability in fiscal 2027 with full resolve.

Q: Why is the company only targeting 1-2 volume production orders for quantum dot lasers when there are 6 R&D customers currently? / A: It is unrealistic to expect all 6 R&D customers to reach volume production quickly, as each customer's R&D must reach a成熟 outcome before adoption, and some customers may ultimately select alternative laser technologies. Targeting 1-2 volume wins is a realistic near-term goal, and the company will continue working to improve product quality to win more designs over time.