AI inside (4488) Q1 FY2027 Earnings Deep Dive Report

1. Earnings Summary: Achieving Revenue Growth and Strengthening the Business Foundation

AI inside Inc. (TSE Growth: 4488) reported solid growth in both revenue and profit for the first quarter of the fiscal year ending March 2027. Driven by its flagship AI-OCR service, "DX Suite," and its recurring revenue model, net sales reached 1.19 billion yen, a 105.1% increase year-on-year . Furthermore, the internal implementation of AI led to significant reductions in outsourcing costs, resulting in a sharp rise in operating profit to 183 million yen, up 183.7% year-on-year .

The following table summarizes the financial performance for the current quarter and progress against the full-year forecast.

This performance overview highlights that, in addition to steady revenue growth, the company achieved significant profit increases across all metrics—operating profit, ordinary profit, and net income—compared to the same period last year . Progress against the full-year forecast is on track, with internal AI-driven efficiency gains contributing directly to improved profit margins.

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2. Revenue Structure Analysis: Stable Growth Centered on Recurring Revenue

The primary characteristic of AI inside's business model is that the majority of its revenue is derived from recurring billing (stock revenue).

The graph above shows the trend in Q1 net sales over the past five years. From 874 million yen in Q1 FY2023 to 1.19 billion yen in Q1 FY2027, the company has achieved five consecutive years of revenue growth, primarily driven by recurring sales . A breakdown of this quarter's revenue shows that against one-time sales of 51 million yen, recurring revenue reached 1.139 billion yen (approximately 95.7% of total revenue) , confirming the establishment of an extremely stable revenue base.

Optimization of Cost Structure and Improvement in Gross Margin

Key factors supporting this quarter's profit surge were cost management and operational efficiency. Cost of sales decreased from 216 million yen in the same period last year to 190 million yen, with the cost of sales ratio improving from 19.1% to 16.0% . This was primarily due to a reduction in outsourcing costs (down from 113 million yen to 89 million yen) resulting from the promotion of internal AI utilization. The company is evolving into a highly profitable entity while continuing necessary investments for future growth, such as R&D and communication expenses.

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3. Key Performance Indicators (KPIs) and Customer Base Status

This earnings report discloses various KPIs that demonstrate the usage status of the flagship product "DX Suite" and the depth of the customer base.

① Trends in Contract Numbers and User Count

• Number of Contracts : 3,136 (101.0% year-on-year)
• Number of Users : 79,517 (119.0% year-on-year)

Not only is the number of contracts growing steadily, but the number of users per contract has increased significantly. This indicates that "DX Suite" is expanding from specific departments to others within organizations, penetrating as a DX foundation for the entire enterprise.

② Impact of Lite Plan Price Revision and New Acquisitions

This quarter, the company implemented a base price increase for the "DX Suite Lite Plan." Although this led to temporary churn, the churn rate remained at an extremely low level of 0.76% , well below 1%. Furthermore, new orders for the Lite plan in Q1 were 111.4% of the previous year's level (88 contracts) , indicating that the impact of the price hike remained within the scope of initial projections.

③ Usage Performance (Number of Items Read)

The average monthly number of items read reached 370 million (124.5% year-on-year), showing strong growth. The implementation of the proprietary LLM/Generative AI foundation model "PolySphere-4" in the second half of the previous fiscal year dramatically improved the accuracy of reading handwritten characters and unstructured forms. This accuracy improvement has increased user frequency, creating a growth trend in data processing volume.

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4. Strategic Focus: From AI-OCR to "AI Agent Execution Platform"

AI inside is accelerating its strategy to evolve its product from a mere AI-OCR (character recognition) tool into an "AI Agent Execution Platform" that automatically processes entire business workflows .

The slide above illustrates the future direction of DX Suite's evolution and the expansion of its automation domain.

Functional Evolution of DX Suite (Expansion Toward Full Automation)

Traditionally, DX Suite focused on digitizing characters from forms. However, with the latest functional enhancements, the platform now provides all users with the ability to automatically generate connection connectors tailored to external systems . This allows users to automatically link data to core systems (ERP), accounting systems, and CRM without individual system development. Since the entire process from receiving forms to system registration and data entry is automated, the impact on operational efficiency is significantly amplified.

Official Launch of the New Platform "Leapnet"

"Leapnet," which began official service in May 2026, is an integrated platform that uses multimodal RAG technology to turn diverse data accumulated within a company (PDFs, images, audio, etc.) into knowledge, allowing for the no-code construction of AI agents directly linked to actual business operations. In addition to operating and managing diverse agents via a single API, the company is also advancing a monetization model that allows users to sell or provide the agents they build to external parties.

Addressing Sovereign AI and On-Premises Demand

To meet the "Sovereign AI" needs of large enterprises and government agencies concerned about data leaving their premises or the country, the company has begun accepting orders for "AI inside Cube Atlas 192x," dedicated hardware that performs high-security AI processing in on-premises environments. The company's strength lies in its ability to provide a vertically integrated solution across the application, foundation, and infrastructure layers.

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5. Conclusion and Outlook

AI inside's Q1 FY2027 earnings were of high quality, combining stable revenue growth driven by a high recurring revenue ratio (approx. 95.7%) with rigorous cost management through AI utilization.

• Strengthening the Recurring Revenue Base : A stock-based business structure supporting five consecutive years of growth.
• Significant Margin Improvement : Reduction in outsourcing costs and cost of sales ratio (16.0%) through AI implementation.
• Evolution of Product Value : A shift from AI-OCR to an AI agent platform responsible for automating business processes.
• Promotion of New Businesses : Official release of "Leapnet" and deployment of on-premises AI infrastructure (Cube).

While maintaining a solid market share and customer base in the existing AI-OCR business, the company is successfully expanding into a new generation of AI agent platforms, confirming steady progress toward mid-to-long-term growth.