Shift (3697.T): Q3 results negative - Profitability lagging despite transition to AI company

研报英文原文证据摘录

Shift (3697.T): Q3 results negative - Profitability lagging despite transition to AI company

Flash |

15 Jul 2026 08:41:21 ET │ 10 pages

Shift (3697.T)

Q3 results negative - Profitability lagging despite transition to AI

company

CITI'S TAKE Buy

Price (15 Jul 26 15:30) ¥701.9 AI revenue as a percentage of total company revenue rose to c20% from

Target price ¥800.0 Q2 (c7%), but OP significantly undershot consensus due to operating

rate declines from the AI service sales expansion push, leaving a Expected share price return 14.0%

negative impression. Due to operating rate declines accompanying new AI Expected dividend yield 0.0%

service rollout resulting in a gross margin decline (YoY -2.6ppt), Q3 OP Expected total return 14.0%

was c¥4.5bn (+16% YoY), significantly below consensus (¥5.7bn). While Market Cap ¥179,409M

we believe the market's real consensus was just under ¥5bn (our estimate US$1,112M

was ¥4.8bn), our impression is negative. The company expects substantial

profit growth (+61% YoY) in Q4, partly due to a significant fall-off in hiring

(-540 people YoY), but given the undershoot to Q3 company guidance

from the Q2 announcement of it, we believe a watchful eye is needed on Moriya KoketsuAC

the probability of guidance achievement. +81-3-6776-8304

moriya.koketsu@citi.com

Implications — The decline in the gross margin exceeded expectations, with actual

OP (c¥4.5bn) significantly undershooting the Q3 company OP guidance (¥5bn or

thereabout) provided at Q2 announcement, which is negative. While the business

model transition from software testing to AI services appears to be progressing,

operating rates have declined due to this business model transformation. Although

AI services' gross margins appear higher than traditional business, we need to see