Yokogawa Electric: FY2026 Q1 Earnings Deep Dive Report

1. Executive Summary

Yokogawa Electric’s FY2026 Q1 consolidated financial results marked a robust start, characterized by a significant surge in orders and revenue growth compared to the same period last year. The performance was strongly driven by the acquisition of large-scale domestic projects in the core Control segment and the rapid expansion of demand related to AI data centers in the Measuring Instruments segment .

While the weak yen contributed to top-line and operating profit growth, the company also demonstrated strong project-winning capabilities and an improving trend in gross margins on a constant-currency basis. The full-year FY26 earnings forecast remains unchanged from the guidance issued in May. Despite macroeconomic concerns such as geopolitical tensions in the Middle East, the company maintains a stable growth trajectory, supported by active investment appetite—particularly in the energy sector—and a substantial order backlog.

---

2. FY26 Q1 Performance Highlights and Currency Impact Analysis

The consolidated financial summary for the first quarter is as follows, showing significant year-on-year growth in orders, revenue, and operating profit .

• Orders : ¥183.4 billion (+23.1% YoY; +12.6% excluding currency impact)
• Revenue : ¥141.3 billion (+8.6% YoY; -0.4% excluding currency impact)
• Operating Profit : ¥16.5 billion (+1.8% YoY; -12.8% excluding currency impact)
• ROS (Return on Sales) : 11.7% (vs. 12.4% in the same period last year)
• Ordinary Profit : ¥16.9 billion (+8.1% YoY)
• Net Income Attributable to Owners of Parent : ¥12.2 billion (-19.4% YoY)

[Slide Commentary: Earnings Summary (YoY)]

This slide provides critical data illustrating the overall FY26 Q1 picture and the impact of foreign exchange. The depreciation of the yen against the US dollar—from ¥144.11 in the same period last year to ¥160.44 —provided a tailwind of +¥15.6 billion in orders , +¥11.7 billion in revenue , and +¥2.4 billion in operating profit . On a constant-currency basis, while revenue remained flat (-0.4%), orders achieved double-digit growth of +12.6% (+¥18.8 billion) , signaling strong project-winning capabilities that will drive future revenue.

The year-on-year decline in net income of -19.4% is primarily due to a one-time tax adjustment in the previous year (FY25 Q1) related to the recoverability of deferred tax assets, rather than a decline in the company's underlying earning power.

---

3. Analysis of Operating Profit Drivers and Profit Structure

Operating profit increased from ¥16.2 billion in the same period last year to ¥16.5 billion (+¥0.3 billion) . The breakdown of structural changes is as follows:

1. Decrease in gross profit due to lower revenue (excl. FX) : -¥0.3 billion
2. Gross margin improvement effect : +¥0.8 billion
3. Increase in SG&A expenses (personnel costs, etc.) : -¥2.6 billion
4. Positive impact of foreign exchange : +¥2.4 billion

While operating profit on a constant-currency basis was ¥14.1 billion, the +¥0.8 billion improvement in gross margin is noteworthy, reflecting the success of value-added solutions and rigorous project profitability management. Conversely, the increase in SG&A expenses (-¥2.6 billion) , primarily driven by personnel costs, reflects investments in human capital for future global growth and the impact of inflation.

---

4. Segment Performance and Market Trends

The trends in orders, revenue, and operating profit by segment clearly illustrate the shifting business balance at Yokogawa Electric.

[Slide Commentary: Segment Performance]

This slide highlights the contrast between the core "Control" business and the rapidly growing "Measuring Instruments" business, visualizing how the latter reinforces the company's overall performance.

(1) Control Segment: Stable Foundation and Regional Focus

• Orders : ¥153.5 billion (+10.2% YoY; +1.5% excluding FX)
• Revenue : ¥131.4 billion (+7.8% YoY; -1.1% excluding FX)
• Operating Profit : ¥14.2 billion (-3.4% YoY; -16.9% excluding FX)

Regionally, despite a reactionary decline from large-scale orders in the Middle East last year, the segment was driven by large-scale project wins in Japan (¥40 billion in orders, +¥7.3 billion YoY) and Asia (¥50 billion, +¥7.8 billion) . Growth in India (+¥3.0 billion) and Southeast Asia/Far East was particularly robust.

Sub-segment order trends for the Control business:

• Energy & Sustainability : ¥84.7 billion (+3.8% YoY). Growth in the Power sector and downstream plant-related orders.
• Materials : ¥55.1 billion (+19.0% YoY). Steady performance in Chemicals and Mobility & Electric sectors.
• Life : ¥13.7 billion (+20.5% YoY). Expansion centered on the Food & Beverage sector.

(2) Measuring Instruments: Capturing the AI Data Center Wave

• Orders : ¥29.3 billion (+249.4% YoY; +206.4% excluding FX)
• Revenue : ¥9.4 billion (+30.6% YoY; +18.2% excluding FX)
• Operating Profit : ¥2.4 billion (+60.0% YoY; +35.4% excluding FX)

The Measuring Instruments segment captured the explosion in demand for AI data center-related testing equipment due to the rapid adoption of generative AI. Orders surged more than 3.5 times from ¥8.4 billion in the same period last year to ¥29.3 billion , significantly supporting the company's overall performance.

---

5. Order Backlog and Future Business Foundation

Order Backlog is a critical indicator for measuring Yokogawa's business stability. As of the end of FY26 Q1, the consolidated backlog reached ¥512.5 billion , an increase of +¥46.3 billion from ¥466.2 billion at the end of FY25 Q4 (+¥40.5 billion based on constant exchange rates).

Breakdown:

• Control (Japan) : ¥122.8 billion (+¥9.9 billion QoQ)
• Control (Overseas) : ¥357.4 billion (+¥16.9 billion QoQ)
• Measuring Instruments : ¥32.2 billion (+¥19.5 billion QoQ)

The substantial backlog provides strong assurance of revenue transparency and earnings stability for the coming quarters.

---

6. FY26 Full-Year Forecast and Growth Scenario

Yokogawa Electric has maintained its full-year FY26 consolidated earnings forecast as announced in May.

[Slide Commentary: FY26 Earnings Forecast (Unchanged)]

This slide outlines the company's full-year targets and underlying assumptions, which are essential for understanding progress against the initial plan and the rationale behind currency assumptions.

Full-Year Forecast (Assumption: 1 USD = ¥150.00)

• Orders : ¥645.0 billion (+4.4% YoY; +5.1% excluding FX)
• Revenue : ¥615.0 billion (+1.7% YoY; +2.4% excluding FX)
• Operating Profit : ¥85.0 billion (+3.0% YoY; +3.7% excluding FX)
• ROS : 13.8% (+0.2pt YoY)
• Net Income Attributable to Owners of Parent : ¥58.5 billion (+0.7% YoY)
• EPS : ¥229.75

Assumptions and Outlook

The assumed exchange rate for the full-year forecast is 1 USD = ¥150.00 , which is conservative compared to the Q1 actual rate (¥160.44). While there are geopolitical risks and potential project delays due to tensions in the Middle East, customer investment appetite remains strong, supported by long-term trends in energy transition (decarbonization/renewables) , sustainable infrastructure investment , and AI-related capital expenditure .

The company aims to achieve operating profit growth (¥85.0 billion) and an ROS of 13.8% by absorbing the increase in SG&A expenses (-¥8.5 billion) through gross profit growth from higher revenue (+¥6.5 billion) and improved gross margins (+¥5.0 billion).

---

7. Investment, Financial Foundation, and Conclusion

Resource allocation for future growth is proceeding steadily:

• R&D Expenses : ¥8.3 billion in FY26 Q1 (5.8% of revenue). The company plans to maintain a high level of development investment throughout the year.
• Capital Expenditure : ¥10.6 billion in Q1 (7.5% of revenue), securing capacity for future demand expansion.
• Financial Position : Total assets at the end of Q1 were ¥773.4 billion . The company maintains a very high equity ratio and a healthy balance sheet with interest-bearing debt of ¥24.2 billion .

Conclusion

Yokogawa Electric's FY26 Q1 results successfully combined solid order acquisition in the core Control business with the capture of the AI boom in the Measuring Instruments business. While remaining mindful of currency fluctuations and regional economic slowdown risks, the company is making steady progress toward its FY26 targets, backed by a record-high order backlog exceeding ¥500 billion.