Circlace (5029) Q1 FY2027 Earnings Deep Dive: Record-High Revenue Driven by Robust DX and AI Demand, Strategic Investment Accelerates Business Transformation

1. Introduction: Overview of Q1 FY2027 Earnings

Circlace Inc. (Securities Code: 5029) delivered a strong top-line performance in its Q1 FY2027 earnings , achieving the highest revenue for a first quarter in the company's history .

Consolidated revenue reached 1,242 million yen (+24.1% YoY) , representing a 21.8% progress rate against the full-year forecast (5,700 million yen), outpacing the previous year's trajectory. While the company reported an operating loss of 79 million yen (compared to a 64 million yen loss in the same period last year) , this was primarily due to temporary growth investments (40 million yen) in AI-related tool development and new service construction . Profitability in the core business continues to improve steadily.

This report extracts and covers 10 key topics from the company's earnings materials to provide a deep analysis of its business transformation and future growth story.

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2. Q1 Consolidated Earnings Summary: Record-High Revenue

The company's quarterly revenue trend confirms a sustained growth trajectory, underpinned by strong customer demand for cloud implementation support and DX services.

Slide Analysis (Page 5)

This slide illustrates the quarterly trends in consolidated revenue, operating profit, and operating margin . As shown in the chart on the left, Q1 FY2027 revenue reached 1,242 million yen , a significant 24.1% increase from 1,000 million yen in the same period last year. This is the highest figure for any Q1 on record. Key growth drivers include the rapid expansion of the ServiceNow business (+84.4% YoY) and the SaaS service "AGAVE" (+35.3% YoY) . The operating profit chart on the right shows a negative figure (79 million yen) for Q1; however, this reflects the company's typical seasonality, where training, hiring, and investment costs are concentrated in the first quarter, compounded this year by temporary AI-related investments .

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3. Factors Affecting Operating Profit: Growth Investment vs. Core Profitability

The company has provided a clear breakdown of the factors contributing to the YoY decline in Q1 operating profit (widening of the deficit).

Slide Analysis (Page 6)

This waterfall chart is critical for understanding the factors behind the change in operating profit from the same period last year (Q1 FY2026: 64 million yen loss) to the current period (Q1 FY2027: 79 million yen loss) .

Analysis of the graph reveals that solid profit improvements were achieved across all core business segments. Specifically, the Salesforce business (+21 million yen) , ServiceNow business (+8 million yen) , Global/AI business (+5 million yen) , and SaaS (AGAVE) business (+3 million yen) all contributed to profit growth. These gains were offset by "AI-related investments" (40 million yen) and "other expense increases" (12 million yen). In short, while the core business's earning power is improving, the Q1 deficit is a result of strategic, proactive investments in new tool development and AI agent utilization for future growth.

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4. Performance and Progress Analysis by Key Service

Circlace's business is broadly categorized into the AI & Data Innovation segment , which handles cloud infrastructure construction and operation, and the SaaS segment , which deploys proprietary products. Progress for each service is as follows:

① Salesforce Business: Steady Revenue Growth Through Structural Reform

• Revenue: 800 million yen (+8.8% YoY)
• Status: While adapting to market changes in new development areas, the company is seeing an expansion in business improvement projects leveraging AI and data , particularly in customer success (maintenance, operation, and adoption). Structural reforms, such as shifting toward higher-margin projects, are driving improved profitability.

② ServiceNow Business: Continued Dramatic High Growth Driven by Market Demand

• Revenue: 330 million yen (+84.4% YoY)
• Status: The business is achieving overwhelming growth through collaboration with consolidated subsidiary AoraNow and strengthened partnerships. The company is accelerating the development and provision of new services utilizing AI agents , leading to a surge in DX and business transformation support projects. Hiring of engineers and consultants is progressing well, significantly strengthening delivery capabilities.

③ SaaS Service (AGAVE): Steady Growth in Stock Business

• Revenue: 54 million yen (+35.3% YoY)
• Contracted User IDs: 12,700 IDs (+9.7% YoY)
• Status: "AGAVE," a cloud service specializing in labor and payroll management for expatriates, is being driven by the overseas payroll service (2,119 IDs, +56.8% YoY) . To mark its 10th anniversary, the UI was renewed, and the service was recognized at the "HR Award 2026" supported by the Ministry of Health, Labour and Welfare, further enhancing its brand awareness and credibility.

④ Databricks / Microsoft Azure & MSPP / xP&A Areas

• The area supporting data infrastructure construction and governance enhancement for AI utilization using cutting-edge data technologies like Databricks is also launching successfully and is expected to become the second pillar of growth.

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5. Strategic Topics and Alliances Driving Growth

During Q1, the company announced several key initiatives and alliances that will directly strengthen its future competitiveness.

1. Active Hiring and Internal Proof-of-Concept for AI Agent Employees: To demonstrate and promote itself as an "AI-native company," Circlace has successively introduced internal AI agents such as "CDX-one," which handles company-wide inquiries, and "EVAN," which automates and improves the quality of PMO tasks. This builds a cycle of accumulating internal efficiency know-how to feed back into customer services.
2. Comprehensive Alliance with Zenforce in the Salesforce Domain: By partnering with Zenforce, which has strengths in the SME market, the company has established a structure to support clients ranging from enterprises to mid-sized and small businesses. This includes launching joint AI agent projects and improving utilization rates through cross-assignment.
3. Educational DX Collaboration with Ritsumeikan Asia Pacific University (APU): The company is supporting the construction of a data infrastructure that provides an optimized learning experience for each student, expanding its footprint in the educational DX sector.

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6. Full-Year FY2027 Earnings Forecast and Growth Story

While accounting for the Q1 deficit caused by upfront investments, the company maintains its full-year consolidated earnings forecast and aims to achieve significant growth in both revenue and profit .

Slide Analysis (Page 18)

This slide shows the full-year revenue composition (plan) for FY2027 by business segment. Full-year revenue is planned at 5,700 million yen (+25.5% YoY) , with the breakdown as follows:

• Salesforce Business: 3,320 million yen (+11.4% YoY)
• ServiceNow Business: 1,600 million yen (+40.8% YoY)
• Databricks / Microsoft / xP&A: 540 million yen (+129.8% YoY)
• SaaS Service (AGAVE): 240 million yen (+25.7% YoY)

In particular, the ServiceNow business and Databricks-related areas are expected to show very high growth , reflecting a clear strategy of tilting resources toward high-growth sectors. For operating profit, the company plans a V-shaped recovery and significant profit increase to 570 million yen for the full year (+114.1% YoY, 10.0% operating margin) . This is based on a scenario where the AI investments and organizational strengthening initiated in Q1 will bear fruit in terms of full-scale profit contribution from Q2 onwards.

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7. Conclusion: Key Points for Mid-to-Long-Term Corporate Value Enhancement

It is important to look beyond the superficial operating loss in Circlace's Q1 FY2027 earnings and scrutinize the underlying content.

• Top-line Expansion: Q1 revenue reached a record high (1,242 million yen, +24.1%), confirming strong demand.
• Quality of Investment: The primary cause of the deficit is "AI-related investment (40 million yen)," while the profit-generating capability of each core segment is steadily improving.
• Establishment of High-Growth Drivers: Diversification and value-add of the business portfolio are progressing well, as evidenced by the 84.4% revenue growth in the ServiceNow business and the increase in AGAVE user IDs.

Moving forward, the focus will be on the process of shifting toward a profit-harvesting phase, aiming for a full-year operating profit of 570 million yen (10.0% operating margin) , as the internal application and customer deployment of the AI tools invested in during Q1 accelerate.