AVILEN FY2026 Q2 Earnings Deep Dive Report

AVILEN, Inc. (Securities Code: 5591) delivered a strong performance in its FY2026 Q2 (cumulative) financial results , with both net sales and gross profit reaching record highs for a single quarter . This success is largely attributed to the company's overarching strategy of "Top-Tier Account Focus" and the promotion of cross-selling AI solutions. This report provides a multi-faceted analysis of the quantitative data and strategic topics presented in the earnings materials, detailing the company's growth narrative and the strength of its business foundation.

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1. Earnings Highlights: Record-High Quarterly Net Sales and Gross Profit

For the first half of the fiscal year ending December 2026, consolidated net sales reached 958 million yen (+21.6% YoY) , consolidated gross profit was 628 million yen (+11.9% YoY) , and consolidated operating profit was 168 million yen (+1.1% YoY) . Driven by deepened relationships with major clients and an acceleration in new project acquisitions, the company significantly surpassed its previous record highs for both net sales and gross profit.

Regarding progress toward full-year targets, the net sales progress rate stands at 44.8% against the full-year forecast (2,141 million yen), and the operating profit progress rate is 47.3% against the full-year forecast (356 million yen). Given the company's seasonal growth patterns, these figures indicate that performance is tracking steadily in line with the plan.

The slide below presents key data on quarterly consolidated net sales trends and their breakdown (AI Software Unit and Build-up Unit).

[Slide Commentary: Analysis of Quarterly Net Sales Trends]

As shown in the slide above (PAGE_9), growth is being driven by both the core AI Software Unit and the Build-up Unit .

• AI Software Unit : Cumulative Q2 net sales reached 651 million yen (+20.7% YoY) , marking a record high for a single quarter. While the YoY growth rate was limited to +6.7% in Q1, the unit achieved a rapid V-shaped recovery to +20.7% in Q2 , significantly bolstered by project wins from multiple new major clients.
• Build-up Unit : Cumulative Q2 net sales showed strong growth at 307 million yen (+23.6% YoY) . This is driven by a 1.6x increase in orders for consulting projects, such as customized content, amid rising corporate demand for AI/DX.

The steady expansion of net sales is not merely the result of lump-sum development contracts, but rather the fruition of expanding share-of-wallet through the account strategy (maximizing LTV) , which will be discussed later.

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2. Profit Structure and Sustainability: Maintaining High Profitability While Investing for the Future

We analyze the factors behind the operating profit growth of +1.1% YoY relative to the strong sales growth. To address the increasing sophistication and complexity of development projects, the company temporarily increased its use of strategic development partners (outsourcing) and accelerated the hiring of front-line personnel (consultants and engineers; 9 new hires by Q2) to prepare for future expansion, leading to a temporary rise in costs and SG&A expenses.

However, even during this investment phase, the company has maintained high levels of profitability, with a gross profit margin of 65.6% and an operating profit margin of 17.6% .

[Slide Commentary: Quarterly Operating Profit Trends and Profit Structure]

The slide above (PAGE_11) clearly illustrates the company's profit structure, which maintains steady growth while pursuing strategic investments.

• Cost Control and Resilient Gross Margin : Despite increased outsourcing costs associated with project growth, the company has secured a gross margin exceeding 65%—an exceptionally high level compared to industry peers —thanks to strict cost controls, including the utilization of its proprietary machine learning researcher community, " AVILEN DS-Hub ."
• Scenario for Profit Re-acceleration in H2 : In the second half, as the front-line personnel hired in H1 become fully operational and internal development capabilities are strengthened, outsourcing costs to development partners are expected to gradually decrease . This, combined with an increase in the number of projects and unit prices, is projected to drive up gross and operating margins, leading to significantly accelerated profit accumulation in H2 compared to H1 .

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3. Business Structure and Sources of Competitive Advantage: The True End-to-End Model and "DS-Hub"

AVILEN's strength lies in its "True End-to-End Model," which allows it to serve as a single partner providing everything from AI strategy formulation and talent development to AI software development and social implementation.

① Cross-selling "Build-up" and "AI Software" to Tap Potential Markets

For many companies, a "lack of AI-literate talent" is the bottleneck for AI adoption. The company has established a method of using its "Build-up Package" to enhance the AI literacy of client organizations, preparing them to be "AI-Ready," and then seamlessly introducing "AI Software" (customized or packaged). This allows them to capture untapped client segments that general AI vendors cannot reach, resulting in a significant expansion of their TAM (Total Addressable Market) .

② "AVILEN DS-Hub": A Technical Community with a <6% Acceptance Rate

The source of their technical prowess and high gross margins is their proprietary technical community, "DS-Hub." It consists of approximately 300 elite machine learning researchers and engineers who have passed a rigorous screening process with an acceptance rate of less than 6%. With about 80% of full-time engineers recruited from DS-Hub, the company achieves drastic reductions in recruitment costs, converts fixed labor costs into variable costs, and ensures high delivery quality simultaneously.

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4. Results of the Account Strategy (Top-Tier Focus) and LTV Expansion

The core of the company's mid-to-long-term strategy is the "Account Strategy (Top-Tier Focus)," which involves identifying and deepening relationships with key clients based on their commitment to AI, business scale, and relationship potential.

The following slide shows indicators of how this account strategy is expanding customer unit prices (LTV: Lifetime Value).

[Slide Commentary: LTV-based Client Count Trends and Major Client Expansion]

The data in the slide above (PAGE_24) confirms that the company's account strategy is delivering results with high precision.

• Number of Major Clients with LTV of 30 million yen or more : This has seen an astonishing increase from 21 in the same period last year to 40 (+90% YoY) .
• Number of Clients with LTV of 10 million yen or more : This has grown steadily from 81 in the same period last year to 110 (+35% YoY) .
• LTV Growth Multiplier from Initial Engagement : Looking at the top 10 clients by LTV, the value has grown by dozens to thousands of times (up to 6,585x) from the initial transaction amount, clearly indicating that the AI solutions introduced are being deployed cross-departmentally (cross-selling) within the client companies.

Throughout the fiscal year ending December 2026, the company continues its efforts to further deepen relationships with these key clients and increase annual sales by several times compared to current levels through the cross-selling of Build-up and AI software.

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5. Mid-to-Long-Term Growth Strategy and Business Updates: AI Agents and Alliances

Moving forward, in addition to maximizing the LTV of existing clients, the company is fully committing to the development and sales of packaged software centered on "AI Agents" that solve common industry challenges , as well as non-linear growth through M&A and partnerships .

① Horizontal Expansion of AI Agent Packages

The company is standardizing technical modules cultivated in individual projects (image generation, data prediction, LLMs, etc.) and evolving them into general-purpose solutions (SaaS/packages) , such as AI agents for document processing, call centers, and sales support. This establishes a structure for accumulating high-margin recurring revenue while keeping development man-hours low.

② Promotion of Strong Partnerships (BA Intelligence, Otsuka Corp, etc.)

• Establishment of a Joint Venture with Bellsystem24 Holdings (BA Intelligence) : Commenced the development and provision of large-scale AI agents in the BPO (Business Process Outsourcing) domain, directly contributing to call center project wins and an increase in large-scale contracts.
• Strengthening Collaboration with Otsuka Corporation : The partnership has progressed to the practical application and deployment phase for multiple AI agents, with alliances including the expansion of the corporate ChatGPT service "ChatMee" proceeding smoothly.

③ Rich Track Record of Social Implementation

The company is steadily accumulating impactful operational case studies, such as "AI x Drone Circulating Water Pipe Inspection" at power plant thermal power stations and "Automating Estimation Work by Codifying Expert Intuition" for major manufacturers (reducing lead time from a minimum of 1 day to under 30 seconds), serving as proof of their technical capabilities.

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6. Comprehensive Analysis and Future Outlook

A comprehensive analysis of AVILEN's FY2026 Q2 earnings can be summarized in the following three points:

1. Strong Performance Momentum : By achieving record quarterly sales (958 million yen) and a V-shaped recovery in the core AI Software Unit in Q2, the company has built a solid foundation for its full-year targets.
2. High Strategic Reproducibility : As evidenced by the near-doubling of clients with an LTV of 30 million yen or more (40 companies), the business model of increasing unit prices and extending client lifespans through an end-to-end model is functioning perfectly.
3. Expectations for Improved Profitability : From H2 onwards, as the investments in personnel and development partners made in H1 conclude, the profit structure is set to see further margin improvements due to an increased ratio of internal development.

Against the backdrop of a severe talent shortage in the AI industry, the company has secured both "acquisition of high-level talent via DS-Hub" and "cultivation of the client side via Build-up." It is expected that the company will continue to increase its market presence while balancing stable high growth with high profitability.