SHIFT (3697) 3Q results: Gross margin below our estimate; want to wait a little longer to see the results of the shift to AI native

研报英文原文证据摘录

SHIFT (3697) 3Q results: Gross margin below our estimate; want to wait a little longer to see the results of the shift to AI native

J P M O R G A N Asia Pacific Equity Research

15 July 2026

SHIFT (3697)

3Q results: Gross margin below our estimate; want Overweight

to wait a little longer to see the results of the shift to 3697.T, 3697 JP

AI native Price (15 Jul 26):¥702

Price Target (Dec-26):¥800

Slightly negative: 3Q operating profit of ¥4.5 billion was below our ¥4.8 billion Japan Equity Research

estimate and the Bloomberg consensus estimate of ¥4.9 billion. The software

IT Services and Telecoms

testing services gross margin worsened further than we expected, with a decline in

small projects apparently impacting the utilization rate temporarily (as the Matthew Henderson AC

company shifts emphasis to large projects). The company commented that the (81-3) 6736-8831

matthew.henderson@jpmorgan.com

utilization rate has recovered to flat YoY from July, but our impression is that there JPMorgan Securities Japan Co., Ltd.

were no particularly positive catalysts. Management left FY8/26 adjusted

operating profit guidance unchanged at ¥20 billion while its expectation that

FY8/27 will mark the bottom for earnings also aligns with our estimates.

• 3Q earnings: SHIFT reported 3Q sales of ¥43.8 billion (+30% YoY; our

estimate: ¥43.4 billion), a gross margin of 32.5% (-2.6ppt; 34.1%), SG&A

expenses of ¥9.8 billion (+¥1.8 billion; ¥10.0 billion), and operating profit of

¥4.5 billion (+16%; ¥4.8 billion). 3Q operating profit was below the company’s

earlier outlook (¥5 billion), but management says it was in line with

expectations. Divergence from our estimate was mainly because of a shortfall

in gross profit (result: ¥14.3 billion, our estimate: ¥14.8 billion), primarily