Games, Internet, Services: Summary of 4Q FY2025 results and subsequent key points

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Games, Internet, Services: Summary of 4Q FY2025 results and subsequent key points

he first and second

years of the hardware cycle and operating profit reached a peak in the third year. We need

to continue monitoring semiconductor prices, but we believe Nintendo can achieve

sustained profit growth.

• Recruit Holdings: The company has been among the first in the global internet sector

to achieve sales growth and improved profitability through the introduction of AI. Recruit

has a two-sided business model. Recruit utilizes AI to provide matching services to both

users and enterprises, driving cyclical growth that includes an increase in US ARPJ (US

average revenue per job posting). The company targets an adjusted EBITDA margin of

over 50% for the HR technology business in the medium term, but this target appears

conservative, given that AI has made it possible to avoid large-scale headcount

expansion. For FY2026-28, we forecast an operating profit CAGR of 23.9% for Recruit,

roughly double the sector average. In the short term, we think operating profit is likely

to continue growing rapidly, by 30-40% YoY. Our valuation for Recruit is based on a DCF

model, but we believe a P/E multiple of over 30x based on our FY2026 estimates is viable

(note).

• Mercari: We highlight Mercari as one of the leading stocks in AI adoption, after Recruit.

Growth in the company's GMV was previously driven mainly by the entertainment and

hobbies segment, centering on the secondary market for trading cards and other items

with a strong speculative aspect. We therefore had concerns about the sustainability of

this growth and maintained a Neutral rating. In fact, Mercari’s share price has been

somewhat weak recently, reflecting concerns about the sustainability of GMV growth for