Bernstein: Murata’s second-quarter profit beats expectations: AI capacitor demand drives capacity expansion and higher full-year guidance

Where did second-quarter results exceed expectations most?

In the second quarter of fiscal 2026, Murata reported revenue of 588.5 billion yen, up 20.9% year over year and 5.1% above market consensus; operating profit was 147.5 billion yen, up 42.4% year over year and 12.5% above market consensus.
Profit grew faster than revenue, primarily because of the capacitor business: its revenue rose 36% year over year, and its operating margin increased from 27.5% a year earlier to 34.3%. Higher capacity utilization, a greater share of high-end multilayer ceramic capacitors (MLCCs), and price negotiations for mass-production MLCCs together drove the improvement.

Demand for MLCCs from AI data centers drove capacitor growth; server demand also lifted revenue from inductors and electromagnetic interference filters by approximately 20% year over year. Data center-related applications accounted for 16.2% of company revenue, up from 8.9% a year earlier.
Growth was uneven: weak smartphone demand caused revenue from high-frequency devices and communication modules to fall 6.7% year over year. Overall revenue from devices and modules grew only about 1%, but the business returned to profitability after the one-time cost of a power-supply module project cancellation in the previous quarter had passed.

Total orders rose 55% year over year in the second quarter, and the capacitor order backlog reached 527 billion yen. However, the capacitor order-to-revenue ratio fell from 1.47 in the previous quarter to 1.39; Bernstein attributed the decline to seasonal factors and new capacity gradually catching up with demand.
Using fiscal 2025 as the baseline, management aims to more than double MLCC sales by fiscal 2030. The company plans to invest 1 trillion yen over five years, including 350 billion to strengthen production capacity at two overseas sites and three new production buildings in Japan, and 650 billion for new equipment.
The pace of capacity expansion affects revenue growth: Bernstein cautions that revenue growth could fall short of expectations if capacity fails to keep up with demand; slowing data center demand and intensifying competition in high-end MLCCs could also affect growth and pricing.

The company raised its fiscal 2026 revenue guidance from 2.11 trillion yen to 2.26 trillion yen and lifted its operating profit guidance by 20.9% to 520 billion yen, reflecting strong demand for components from AI servers. The company also expects to begin recognizing revenue from a new vertical power-supply module in the fourth quarter.
Bernstein raised its operating profit forecasts for the next few years by approximately 5% to 9%, mainly reflecting margin gains from an improved capacitor product mix. The firm maintained its Outperform rating and raised its price target from 10000 yen to 10500 yen; the two-year blended forward earnings per share used in its valuation increased from 350 yen to 367 yen, while its assumed price-to-earnings multiple fell from 30 times to 28 times.