KDDI CORPORATION Q4 FY2026 earnings call

Core Telecommunications Performance

• Mobile business completed a structural shift to LTV and value creation, delivering strong growth that beat initial forecasts. KDDI ranked #1 in connected experience for telecommunications quality for four consecutive years.
• Key new value-added services hit user milestones: AU Styling Direct exceeded 4 million connections in its first year, and 5G pass lane has approximately 2.5 million cumulative users. Mobile ARPU rose 100 yen year-on-year with stable churn, and smartphone subscriptions increased 360,000 year-on-year, achieving growth in both ARPU and subscriber count.
• The addition of Lawson to the group provided ~15,000 national store locations as high-value customer touchpoints, forming a foundation for new value creation.

Governance and Organizational Reform Post-Inappropriate Transactions

• The company is addressing issues from the fictitious circular transactions incident, with remediation targeted for completion by June 2026. Executive-level dialogues with group companies have been launched to build trust and align on perspectives.
• Top KDDI management will visit 14 strategic subsidiaries in person by the end of H1 FY27 to embed corporate philosophy, and AI will be leveraged to reduce unnecessary administrative burden for frontline employees.
• A new centralized Group Governance Division has been established, integrating previously dispersed finance, governance, and risk management functions, led by the CFO. This division will oversee consistent group-wide financial control and pass down lessons from the inappropriate transactions incident.
• The company has updated investment portfolio review processes to include second-tier subsidiaries, will divest non-strategic assets, and has already sold Capcom securities and LifeNet life insurance. Listing discussions have begun for AU Financial Holdings to support its further growth.

New Medium-Term Management Strategy: "Power to Connect 2028"

• The strategy is built around three "fusion" initiatives to compete in an AI-native society, where competitive advantage lies in non-AI-replicable assets (physical infrastructure, customer touchpoints, talent):
  1. Infrastructure Fusion (Digital Belt Vision): Long-term plan to 2040 to build a nationwide low-latency interconnected optical network connecting all telecom and data centers, expand into space communications, grow optical submarine cable infrastructure between Asia and North America, and develop nationwide AI computing infrastructure. Total infrastructure investment over 3 years will be 1.2 trillion yen.
  2. Human Resource Fusion: Target to cultivate approximately 3,000 new AI engineers and 2,000 new security engineers across the group, expand cross-assignment career paths between KDDI, group companies, and overseas offices, and combine field sales capabilities with AI-oriented thinking to improve customer engagement.
  3. Real-Tech Fusion: Integrate physical world assets with technology to deliver AI-enabled workforce solutions for physical workplaces and AI-powered lifestyle solutions, leveraging KDDI's large-scale customer data for high-precision consumer simulation to create differentiated value.

Capital Allocation and Shareholder Returns

• Capital expenditures will be controlled at 12% of revenue or below. The company plans approximately 1 trillion yen in growth investments over three years, focused on high-potential sectors, with disciplined evaluation of returns relative to growth opportunities.
• Key capital efficiency targets include maintaining or improving ROE and ROIC spread over the medium term, with these metrics incorporated into executive compensation to drive accountability.
• Dividends will follow a baseline of stable growth; share buybacks will be executed flexibly based on return comparisons.

For the full year ending March 2026: Consolidated operating revenue was 6.071 trillion yen, up 4.1% year-on-year. Adjusted operating income (excluding costs from fictitious circular transactions) was 1.1643 trillion yen, up 6.0% year-on-year. Net income attributable to parent shareholders was 756.7 billion yen, up 13.6% year-on-year, exceeding the previous medium-term EPS target of 748 billion yen.

Under the old segment structure for the reporting period:

• Mobile (Personal Services segment): Mobile revenue increased 32.6 billion yen year-on-year; excluding access charge impacts, the increase was 50 billion yen, exceeding initial forecasts. Operating income for the segment rose 31.7 billion yen year-on-year (45 billion yen excluding access charge impacts), driven by growth in new value-added services, finance, energy, and equity method income from Lawson.
• VX segment: Operating income increased 28.6 billion yen year-on-year, with substantial growth in the second half, supported by cost controls from structural reform and lapping of prior year promotional expenses.

Under the new segment structure launched with the 2028 medium-term plan, the company targets the two growth segments (Personal Growth and Business Growth) to eventually account for one-third of total consolidated revenue.

• For the fiscal year ending March 2027 (FY27), KDDI forecasts consolidated revenue of 6.41 trillion yen, up 5.6% year-on-year; adjusted operating income of 1.21 trillion yen, up 5% year-on-year; and adjusted net income of 731 billion yen, up 2.7% year-on-year (net income growth is slower partially due to defense tax increases).
• The new three-year medium-term strategy targets a 5% compound annual growth rate (CAGR) in consolidated operating profit, with double-digit CAGR growth for both the Personal Growth and Business Growth segments.
• DPS for FY27 is set at 84 yen, an increase of 4 yen (5%) year-on-year, confirming the company's commitment to stable dividend growth.
• The company approved a total share buyback program of up to 300 billion yen, including a 250 billion yen tender offer, and will cancel treasury shares exceeding 5% of total issued shares.
• Total planned investments over the three-year medium-term period are 1.2 trillion yen for infrastructure and ~1 trillion yen for growth-oriented sectors.

• Prior governance failures including the 2022 telecommunications outage and the recent fictitious circular transactions incident have eroded trust, and management acknowledges that 100 minus 1 can equal 0 in terms of reputation, requiring sustained company-wide efforts to prevent recurrence.
• In cybersecurity, AI has given attackers a major advantage, increasing cyber risk for the company and its clients, requiring expanded investment and capability building to respond.
• Political instability in Myanmar and ongoing macroeconomic pressures including mobile tariff reductions and rising fuel prices create ongoing headwinds for operational performance.
• Some new growth initiatives such as the smart drone business have experienced delays, though the company expects it to hit its original 10 billion yen sales target in the fifth year of operations.

There are no transcribed open question-and-answer exchanges between management and analysts/investors included in the provided transcript; all content consists of management's prepared remarks for the briefing.