NTT Forecasts 5% Profit Drop Amid Data Center Sale Rebound

Key facts

• NTT projects a 5% decrease in consolidated net profit for the fiscal year ending March 2027.
• The company expects net profit to reach 980 billion yen for the fiscal year ending March 2027.
• This profit forecast falls below the market consensus of 1.0612 trillion yen.
• NTT announced a share buyback program of up to 200 billion yen.
• The buyback will cover up to 1.72% of outstanding shares.
• The company plans to increase its dividend by 0.10 yen to 5.40 yen per share.
• For the fiscal year ending March 2026, a 4% increase in net profit to 1.037 trillion yen.

NTT Projects Profit Decline Despite Revenue Growth

Nippon Telegraph and Telephone (NTT) has forecast a 5% year-on-year decline in consolidated net profit for the fiscal year ending March 2027, projecting it to reach 980 billion yen. This anticipated decrease is largely attributed to the rebound effect from the sale of data centers recorded in the previous fiscal period. The company's net profit outlook falls short of the average market expectation, which stood at 1.0612 trillion yen. Despite the projected dip in net profit, NTT anticipates a 5% increase in operating revenue, forecasting it to reach 15.06 trillion yen. Operating profit is also expected to see a slight rise to 1.71 trillion yen. These figures suggest underlying growth in the company's core operations, even as one-off events impact the bottom line. The company's announcement on March 8th also detailed plans for enhanced shareholder returns, signaling a commitment to balancing growth with investor rewards.

Shareholder Returns: Buybacks and Dividend Hikes

In parallel with its financial outlook, NTT revealed a significant share buyback program, intending to repurchase up to 200 billion yen worth of its own stock. This initiative is set to acquire a maximum of 1.4 billion shares, representing 1.72% of its total outstanding shares, excluding treasury stock. The buyback period is scheduled to run from March 11th through to March 31st, 2027. Furthermore, NTT plans to raise its dividend payout. The annual dividend per share will be increased by 0.10 yen, bringing the total to 5.40 yen. This modest increase underscores the company's strategy to gradually enhance returns to its shareholders. These measures reflect NTT's approach to managing its capital and rewarding investors, even as it navigates a period influenced by prior asset sales.

Fiscal Year 2026 Results Show Resilience

For the fiscal year ending March 2026, a solid financial performance. Operating revenue saw a 5% increase compared to the previous year, reaching 14.4091 trillion yen. Net profit also climbed by 4%, totaling 1.037 trillion yen. This positive outcome for the fiscal year ending March 2026 contrasted with earlier projections of a net profit decrease. The better-than-expected results were primarily driven by a smaller-than-anticipated decline in the integrated ICT business, which is largely spearheaded by NTT Docomo. The company's ability to achieve profit growth in the preceding fiscal year highlights the strength of its core telecommunications and information technology services.

Market Expectations Missed

NTT's projected net profit of 980 billion yen for the fiscal year ending March 2027 significantly undershot the consensus estimate among market analysts. The average forecast compiled by QUICK, a financial data provider, had placed the figure at 1.0612 trillion yen. This divergence suggests that investors and analysts may have anticipated a less pronounced impact from the data center sale's rebound effect or perhaps factored in stronger performance from other business segments. The shortfall in meeting market expectations could influence investor sentiment in the short term, although the company's forward-looking shareholder return policies may offer some mitigation.

Strategic Context: Data Center Sales and ICT Investments

The current financial projections are intrinsically linked to NTT's strategic decisions regarding its assets. The sale of data center assets in the previous fiscal year provided a significant boost to profits, creating a high base against which the current year's results are measured. This accounting effect, known as a 'rebound drop,' is a common phenomenon following substantial asset disposals. Simultaneously, NTT continues to invest heavily in its core Information and Communications Technology (ICT) infrastructure. The company's focus on areas like 5G, cloud services, and digital transformation initiatives remains a key driver of its long-term strategy. The resilience shown by the integrated ICT business, particularly NTT Docomo's performance, points to the ongoing strength and importance of these services. Navigating the balance between realizing gains from asset sales and reinvesting in future growth areas is a critical challenge for large telecommunications firms like NTT.

Looking Ahead: Future Growth and Challenges

As NTT moves forward, the company faces the ongoing task of sustaining growth in a competitive global market. The projected decline in net profit, while explained by accounting factors, highlights the need for consistent operational performance across all its business units. The company's commitment to shareholder returns through buybacks and dividends signals confidence in its future cash flow generation. However, the market will be closely watching the execution of its strategic investments in areas such as AI-driven services and advanced network technologies. Future performance will depend on NTT's ability to innovate, adapt to evolving technological landscapes, and effectively manage its diverse portfolio of businesses, from telecommunications to potentially new ventures like drone-based infrastructure inspection.

The bottom line

• NTT anticipates a 5% decrease in net profit for the fiscal year ending March 2027, primarily due to the prior sale of data centers.
• The company's net profit forecast of 980 billion yen falls below market expectations.
• NTT plans to return capital to shareholders through a 200 billion yen share buyback and a slight dividend increase.
• The fiscal year ending March 2026 saw a 4% increase in net profit, demonstrating underlying business strength.
• Strategic asset sales and continued investment in ICT are key factors influencing NTT's financial trajectory.
• The company faces the challenge of maintaining growth amidst market competition and technological shifts.