Main Q&A at Earnings Investor Briefing
for Q1 FY2026

Operating income for the first quarter improved by mid-tens of billions of yen compared with our initial expectations. Approximately half of this improvement came from outperformance in the Financial and Media & EC segments, as reflected in the earnings results announced by PayPay Corporation and LY Corporation. In the Consumer segment, profits from the sale of used devices were higher than initially expected, contributing approximately ¥10 billion of upside. At the beginning of the fiscal year, we had conservatively estimated profits from the sale of used devices in light of factors including the geopolitical developments involving Iran. In addition, Company-wide cost improvement initiatives contributed to the results, although there was also some impact from expenses being shifted to the second quarter and beyond. Overall, all segments performed better than initially expected.

We consider the upside from profits on the sale of used devices to be a one-time factor. "Other" also includes approximately ¥10 billion of one-time development expenses.

Against an acquisition price of US$1.0 billion, the base transfer price is US$1.5 billion. If the equity interest were sold under these terms, the gain on sale would be US$0.5 billion before taxes and other deductions. The final amount will be determined based on the valuation calculated by an independent third-party valuation firm, reflecting the price adjustments stipulated in the equity transfer agreement. The finalized gain on sale will be reflected in net income in the Company's consolidated statement of income. The underlying business itself is also performing better than initially expected. Taking the gain on sale into consideration as well, we will consider revising our earnings forecast upward when we announce our second-quarter results.

The gain on sale could boost net income, but it is important to take into account that this would be a one-time gain. We will consider the appropriate level of shareholder returns comprehensively, taking into account future growth investments, financial soundness, and the sustainability of dividends.

There has been no significant change from our initial forecast regarding the amortization of capitalized sales commissions. These costs are being amortized according to a predetermined schedule. Regarding the expenses for the device purchase support program, as mentioned earlier, profits from the sale of used devices were higher than initially expected in the first quarter, resulting in an improvement compared with our initial forecast. As this expense fluctuates depending on factors such as foreign exchange rates, market prices for used devices, and the exercise rate of rights to waive remaining device installment payments, we have not significantly changed our outlook from the second quarter onward. We intend to continue reviewing the outlook based on developments.

In Q1, "amortization expenses of capitalized sales commissions" accounted for most of "CAC (mainly deferred cost)" shown on page 15 of the Investor Briefing materials. "Expenses for the device purchase support program" are included in "Promotion expenses, etc." and contributed to the ¥6.9 billion year-on-year increase. Without the improvement in used device prices, the increase would have been larger. In Q2, both expenses are expected to increase year on year. The increase in "amortization expenses of capitalized sales commissions" is expected to be similar to Q1, while the increase in "expenses for the device purchase support program" is expected to be larger due to a special factor in Q2 FY2025.

We expect the year-on-year increase in the "amortization of capitalized sales commissions" to continue throughout this fiscal year. We also expect the increase in "expenses for the device purchase support program" to run its course during this fiscal year.

The decrease reflects our shift in acquisition strategy toward focusing on customers with a higher likelihood of long-term usage. While the July price plan revision has had some impact on churn, we believe it has generally been accepted by customers, and we have not seen any significant impact on churn at this point.

The price plan revision had almost no impact in the first quarter, while increased penetration of the existing "Pay-toku" plan contributed to the increase in ARPU. From the second quarter onward, the impact of the price plan revision, including on existing customers, will begin to be fully reflected, and we expect ARPU to increase by approximately ¥200 year on year. We expect a similar level of year-on-year improvement to continue until the impact of the price plan revision has fully run its course.

Currently, the business is mainly being developed in areas where "NURO Hikari" is available, with services provided in metropolitan areas. Telecommunications facilities such as dark fiber are estimated based on relatively long lease periods. As a result, the amount recognized as right-of-use assets on the consolidated statement of financial position is relatively large.

The fourth quarter of FY2025 included one-time disposals and other factors, making depreciation and amortization expenses appear lower in the first quarter of FY2026. Recurring depreciation and amortization expenses are currently on an upward trend.

We will refrain from commenting on specific counterparties. Revenue from the provision of AI computing infrastructure was already generated in Q1 and drove the revenue increase in "Cloud & AI." Regarding when the project mentioned in your question will begin contributing to revenue, your understanding is correct.

We expect the overall gross margin for "Cloud & AI" to be in the 30-40% range. Since the gross margins differ between the provision of AI computing infrastructure and housing services at AI data centers, we would like you to view the gross margin on an overall "Cloud & AI" basis.

As an operating company, we intend to take the lead in developing the neocloud business. We have long been looking to advance our "Beyond Japan" strategy and saw this as a good opportunity to do so. As we do not have an existing business base in the United States, we decided to launch the business through a joint venture with our parent company, SoftBank Group Corp., leveraging its infrastructure, personnel, and other resources.

As a business partner supporting Seven & i Holdings' AX and DX initiatives, we will provide solutions and technologies in areas such as AI, robotics, GX, and security. We expect to translate these initiatives into earnings as they progress, while also creating synergies with the Consumer segment through collaboration in areas such as point programs.

As this is an ongoing matter, we will refrain from commenting.

We will continue developing "Sarashina" as our proprietary commercial model. Accordingly, the related R&D expenses will continue to be recorded in "Other."