Goldman Sachs: MARUWA raises AI revenue outlook as expansion and new-plant costs weigh on second-half margin guidance

Where is AI business growth coming from?

In the second quarter of the fiscal year ending March 2027, MARUWA’s AI application revenue was close to 10 billion yen, up 60% quarter on quarter. Products for 1.6T accounted for a substantial portion of the sequential increase. Sales grew in both North America and China, with higher volumes and an improved product mix together lifting revenue.
The company raised its guidance for year-on-year AI-related revenue growth in the fiscal year from nearly 110% to nearly 150%, equivalent to approximately 37 billion yen. It also raised its overall communications application revenue growth guidance from 48% to 63%.

Second-quarter automotive application revenue was 4.5 billion yen, slightly above the new quarterly baseline of approximately 4 billion yen. Strong overseas exports by major Chinese customers and gains in global market share, including among emerging Chinese customers, contributed comparably to sequential growth.
The company raised its full-year automotive revenue growth guidance from 6% to 20% year on year, but expects revenue to return to around the baseline in the third quarter and decline seasonally in the fourth quarter due to the Lunar New Year. Goldman Sachs believes the business warrants close monitoring because a high proportion of its automotive sales are to China.
Second-quarter semiconductor application revenue was 3.4 billion yen, supported by both backlog orders and the opening of a new building at the Miharu plant. The company expects third- and fourth-quarter revenue to be at least level with the second quarter and has secured capital expenditure projects scheduled for delivery in the fiscal year ending March 2028.

The second-quarter operating margin was 41%, while the company’s guidance for the second half of the fiscal year is 38%. The guidance accounts for lower non-AI communications and automotive sales in the third quarter, as well as higher depreciation and expenses from the start of operations at new plants.
Second-quarter non-AI communications sales included some sales whose recognition was delayed from the first quarter and some brought forward from the third quarter or later. The company said its second-half margin guidance takes fourth-quarter orders into account.
Supply and demand are tight for some products, and production and work-in-process inventory have increased. The company previously built inventory to meet growing demand, and second-quarter AI product sales exceeded the quarter’s production capacity; continued strategic purchases of raw materials also increased inventory.

The company maintained its original plan: Seto Plant Two will begin operations in the third quarter, shipments of CPO application products will start in the fourth quarter, and Plant Three will begin operations in the first half of the fiscal year ending March 2028. Toki Plant N3 for the automotive business is also scheduled to increase production from the third quarter, with capacity rising 50% from its previous level.
The company expects capital expenditure of 20 billion to 25 billion yen in the fiscal year ending March 2027, followed by more than 35 billion yen annually thereafter. The largest share of investment will go to the AI-focused communications business and prepare for potential demand in 2028 to 2029.
Goldman Sachs believes that, although there were no new positive catalysts after the earnings release, the outlook from the second half through the next fiscal year and the expansion and CPO timelines continue to support its view of structural AI growth. The bank reiterated its Buy rating and 12-month price target of 86,000 yen.