Earnings call transcript: Capcom’s Q4 2026 earnings miss EPS forecast, stock drops 11%

Capcom’s fourth-quarter 2026 earnings report revealed a mixed performance, with a significant earnings per share (EPS) miss despite strong revenue results. The company reported an EPS of 37.54 yen, falling short of the 43.99 yen forecast, resulting in a negative surprise of 14.66%. However, Capcom exceeded revenue expectations, generating 80.05 billion yen compared to the anticipated 69.55 billion yen, a positive surprise of 15.1%. Following the earnings announcement, Capcom’s stock price fell by 11.13%, closing at 3,049 yen, reflecting investor disappointment.

Capcom’s overall performance in fiscal year 2026 demonstrated robust growth in several segments, continuing its streak of consecutive years of operating profit growth. The digital content business, a core driver, saw net sales increase by 15% year-on-year, supported by strong catalog title sales and new releases. Despite this, the EPS miss indicates challenges in translating revenue growth into bottom-line profitability this quarter.

• Gross Profit Margin: An impressive 56% for the last twelve months.

• Dividend Yield: 1.6%, with the company maintaining dividend payments for 35 consecutive years according to InvestingPro Tips.

Capcom’s EPS of 37.54 yen was below the forecast of 43.99 yen, resulting in a negative surprise of 14.66%. This miss contrasts with the company’s historical trend of exceeding expectations. However, revenue performance was strong, with a 15.1% positive surprise, indicating robust sales growth.

The stock price fell by 11.13% to 3,049 yen in after-hours trading, reflecting investor concerns over the EPS miss despite strong revenue results. This decline positions the stock closer to its 52-week low, highlighting a significant negative market reaction. Yet InvestingPro data suggests the stock is now trading in oversold territory based on RSI indicators, and analysis shows the shares are currently undervalued relative to the platform’s Fair Value estimate. This could present an opportunity for investors, as Capcom appears on InvestingPro’s most undervalued stocks list. The company maintains a market capitalization of $7.6 billion and a P/E ratio of 22.

For fiscal year 2027, Capcom projects net sales of 210 billion yen, an 8% increase year-on-year, and aims for operating profit growth of 10%. The company plans to continue expanding its digital content and arcade operations while leveraging new title launches and strategic pricing to drive growth.

Capcom’s executives highlighted the success of new IP "Pragmata," which sold 2 million units in 16 days, demonstrating the company’s capability to develop successful new franchises. They emphasized continued investment in digital distribution and regional market expansion as key growth strategies.

During the earnings call, analysts inquired about strategies to improve EPS performance and plans for future title launches. Executives addressed concerns by outlining initiatives to enhance operational efficiency and expand the company’s global footprint. For deeper insights into Capcom’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available for this and 1,400+ other US equities on InvestingPro.

Satoshi Miyazaki, Executive Vice President, Capcom Co., Ltd.: We would like to thank you for joining Capcom Co., Ltd.’s financial results presentation for the fiscal year ended March 31st, 2026. We will now begin the presentation. I am Satoshi Miyazaki, Executive Vice President of Capcom. Thank you for attending Capcom’s financial results briefing today. I will go over earnings for the fiscal year ended March 2026, and the plan for the fiscal year ending March 2027. First, an overview of our earnings for the March 2026 fiscal year. Last year, net sales were JPY 195.3 billion, operating profit JPY 75.2 billion, and net profit JPY 54.5 billion, representing year-on-year sales and profit growth and beating our guidance. This was the 13th consecutive year of operating profit growth and the 11th consecutive year of operating profit growth exceeding 10%. Regarding dividends, we raised the year-end dividend to JPY 25 for an annual dividend of JPY 45.

For the fiscal year ending March 2027, we’re aiming for our 12th consecutive year of 10% or better operating profit growth. We plan for net sales of JPY 210 billion, up 8%, operating profit of JPY 83 billion, up 10%, and net profit of JPY 58 billion, up 6%. Regarding dividends, we plan for JPY 23 at midterm and JPY 23 at year-end, totaling JPY 46 for the full year. I will go over earnings for the fiscal year ended March 2026 in detail. Sales and profit grew across all business segments. In Digital Content, strong sales of major new titles and catalog titles resulted in net sales of JPY 144.2 billion, up 15%, and operating profit of JPY 70.6 billion, up 8%. The operating margin was about 48%. Total unit sales were 59.07 million units, driven especially by growth in catalog titles. By title, Resident Evil Requiem performed well.

In addition, promotions timed with its launch drove catalog sales growth of the Resident Evil series. Further, catalog sales of Devil May Cry 5 and Street Fighter 6 grew via pricing strategies, combined with increased IP awareness from video content and esports. In arcade operations, we opened nine new locations, including our first directly operated overseas store, Capcom Store Taipei, bringing the total number of stores to 61. Same-store sales were up 8% due to steady operations with an operating margin of about 12%. As a result, net sales rose 13% to JPY 25.6 billion, and operating profit rose 32% to JPY 3.2 billion. In amusement equipments, we released Devil May Cry 5, Stylish Tribe, and Shin Onimusha 3. Also, high-margin repeat sales of Monster Hunter Rise and Resident Evil 5 performed well. Total unit sales were 45,000 with an operating margin of about 56%.

Net sales rose 14% to JPY 17.7 billion. Operating profit rose 50% to JPY 10 billion. For other businesses, in esports, we held our official global tournament for Street Fighter 6 at Ryogoku Kokugikan Arena, attracting a large audience. In the media sub-segment, Devil May Cry was distributed on Netflix, contributing to increased IP awareness. Through collaborations and events leveraging popular IP, net sales rose 25% to JPY 7.6 billion. Operating profit rose 47% to JPY 3.6 billion. The operating margin was about 47%. This ends my presentation explanation of earnings for the fiscal year ended March 2026. Next, I will explain our plan. For the fiscal year ending March 2027, we will continue to target 10% or better operating profit growth in line with our medium-term management goal. In the Digital Contents Business, we aim to expand global earnings with new title launches and growth in catalog sales.

Pragmata" released in April this year, as an all-new IP, has received high acclaim from users and has sold 2 million units in 16 days after release. Currently, we also plan to release "Onimusha: Way of the Sword," the latest title in the series. We’re planning net sales of JPY 152.2 billion, up 6%, and operating profit of JPY 79.5 billion, up 13%. We plan total unit sales of 65 million units, representing a 10% increase, which includes both new and catalog titles. In the arcade operations business, we will continue stable operations at existing stores while expanding new store formats centered on merchandising and prize games. We plan to open nine new stores. We anticipate net sales of JPY 29.3 billion, up 14%, and operating income of JPY 3.3 billion, up 3%. In amusement equipment, we plan to introduce one new machine per quarter using popular IPs.

Following the launch of "Biohazard 3" in May, we plan to release three additional models targeting total unit sales of 53,000 units. We plan for net sales of JPY 20.9 billion, up 18%, and operating income of JPY 10.4 billion, up 4%. In other businesses, to further expand the global reach of our IPs, we will continue to develop our character sub-segment through merchandise and in-game collaborations. In esports, we will once again hold Capcom Cup 13 at Ryogoku Kokugikan Arena, and we’re also planning the release of a live-action "Street Fighter" movie in October this year. Through these initiatives, we will further promote our Single Content Multiple Usage strategy. We plan for net sales of JPY 7.6 billion and operating income of JPY 3.5 billion. This concludes my part of the presentation. President Tsujimoto will discuss the company’s medium to long-term strategy. President Tsujimoto, please begin.

Haruhiro Tsujimoto, President, Capcom Co., Ltd.: I am Haruhiro Tsujimoto, President of Capcom. Thank you very much for taking the time out of your busy schedule to join us today. I will now explain our medium to long-term strategy. Under our management philosophy of being the creator of entertainment culture that aims to develop software content that excites and stimulates the senses, we aim to realize our vision of becoming a company that captivates people around the world with our best-in-class immersive content. Based on this philosophy and vision, we have set 10% operating income growth every fiscal year as our medium-term management goal. We have achieved 10% or better growth for 11 consecutive fiscal years, we continue targeting it going forward. This is an image of our profit growth toward achieving this target. Our growth is driven by two key pillars, sales strategy and IP strategy.

Satoshi Miyazaki, Executive Vice President, Capcom Co., Ltd.: At the core is the consumer business, shown in blue, which is linked with growth in other areas through IP expansion as we work to expand earnings for the entire group. Here is the outlook for the game market of our consumer business. The market is expected to continue growing long-term and is projected to reach $227 billion or approximately ¥36 trillion by 2028. Our primary PC and console game users are estimated at around 1.5 billion peo