Earnings call transcript: Trend Micro Q1 2026 beats forecasts, stock gains 1.21%

Trend Micro Inc. reported its financial results for the first quarter of 2026, surpassing both earnings and revenue forecasts. The company posted an earnings per share (EPS) of 90.14, exceeding the forecast of 87.28. Revenue reached 73.86 billion, outpacing the expected 71.88 billion. Following these results, Trend Micro’s stock price increased by 1.21%, reflecting investor optimism.

Trend Micro demonstrated strong performance in Q1 2026, with net sales growing by 9% year-over-year. This growth marks a strategic shift towards prioritizing revenue expansion over immediate profitability. Despite increased cloud infrastructure costs, the company remains committed to its long-term growth strategy, focusing on AI-driven security solutions.

Trend Micro’s Q1 2026 results exceeded expectations, with an EPS surprise of 3.28 and a revenue surprise of 2.75%. This performance is noteworthy compared to previous quarters, highlighting the company’s strong market position and effective strategic initiatives.

Following the earnings announcement, Trend Micro’s stock price rose by 1.21%, reaching a value of 5537. This increase reflects investor confidence in the company’s strategic direction, despite short-term profitability challenges.

For the remainder of 2026, Trend Micro reaffirms its guidance of 9% net sales growth and a 2% decline in operating income. The company anticipates continued investment in AI security capabilities and strategic partnerships, which are expected to drive long-term growth.

Trend Micro’s management emphasized the strategic importance of its AI-focused restructuring. "Our investments in AI-driven security solutions are crucial for maintaining our competitive edge," stated the CEO. The company is also committed to expanding its Vision One platform, which has shown significant adoption rates.

During the earnings call, analysts inquired about the impact of cloud cost increases on profitability. Management reassured that these costs are indicative of growing customer adoption. Questions also focused on the company’s strategic shift towards AI, with executives expressing confidence in the long-term benefits of these initiatives.

Akihiko Omikawa, Chief Financial Officer, Trend Micro: Before we go into the numbers, I would like to talk about our disclosure changes, mostly about my presentation slides. Disclosure is being changed because of the change in the nature of the business. What has really changed? This is something that’s been continuing from last year. Trend AI and TrendLife. 2 brands have been established. Enterprise business focus is now shifting to AI security and also for consumers, we have our digital life security market expanding. In order to cover those 2 aspects, we have established these 2 brands, and the strategy will be different, more different between the 2 going forward. The nature of the business has shifted to subscription or more. Core sales and pre-GAAP sales, we have been discussing this type of information, but we believe that ARR would make more sense to our investors.

The second point, in the era of AI, many new business opportunities will arise. Therefore, to be able to actually invest into that, we want to do incubation business. Kevin’s slides will cover some of this in greater details. We are starting incubation business and we are investing for new markets. This kind of upfront investment, of course, will impact the consolidated operating profit. Therefore, we need to provide an explanation to our investors. Also, pre-GAAP will be stopped and the explanation will be focused on ARR. Now, incubation investment, what is the size of that impact? We want to show that at the management P&L level. This is non-GAAP numbers that we’re talking about. This means that I will be focusing mostly on Kevin’s slides. Moving on to the Q1 results.

Net sales up by 9% and operating income up by 4%. Well, higher sales and a lower profit was always the plan. You may think that this is slight improvement over that. First of all, we have the impact of FX, weaker yen. As you can see at the bottom of the slide, if we exclude the impact of FX, net sales increased by 3%. The other thing is, the share price has changed. Some of the costs that are related to share price are coming back to P&L. Considering that, this is a negative 4% in terms of operating income. What is happening recently? On the left-hand side, you can see 24% against the total annual sales. This is a progress.

Operating income is at 28% of the total, which is higher than the prior year. As I said before, share price has declined, and it had impact of about JPY 1.2 billion. Combining that, operating profit was basically negative 4%. ARR. Up until last year, we were just, like, disclosing information of ARR for enterprise business, but now this is ARR for Trend AI. Basically no difference. There are some footnotes here. 99%, this is the same as what we showed before. I don’t think there is a problem comparing this to the prior year numbers. We will continue to present the numbers in this way going forward. ARR growth. Well, it was about 3% at one point, but now it’s recovering slowly.

Leading up to the second half of the year, we expect this growth rate to go higher. This is ARR by region. Excluding Americas, in all the regions we see growth in ARR. There are different factors for Americas. I’m sure that Kevin’s presentation will cover this. We are seeing some improvements compared to before, but still in the negative territory in this quarter. Cash flow. Growth rate looks high, but well, in the fourth quarter, there was a big sale, so we are collecting ARR, as you can see. Now, headcount. There was slight decline last year, but going forward it will be flat or it will slightly increase because we’re hiring. We expect the headcount to increase somewhat. Moving on to the cost changes. Well, FX impact is announced.

JPY 3.8 billion cost and about half of that is FX. The cloud cost is also increasing, as you can see. Impacted partly by FX, but cloud usage is increasing over time. This is not just negative factors because we have Vision One platform that we provide and customers start to use more and more features related to AI. Which means that this is how we can deliver value from Trend Micro, which is used by our customers. That means that cloud cost will continue to increase, but this is in line with our user base expansion. This is the evidence that our user base is using our cloud functions. This is a positive factor, and this pushes up the net sales. This is a summary for the Q1 highlight.

We had the highest ever quarterly net sales. If we look at just Q1, over time, this was the highest Q1 operating income and net income. Moving on to the full year forecast, this hasn’t really changed. 9% growth in net sales and the -2% in operating income. That’s all from me. I would like to ask Eva Chen to take over because there’s a very topical, theme that should be covered. Back to you.

Eva Chen, Executive (AI Strategy Lead), Trend Micro: Okay. I think, for any company now, the most important question to ask is what is your AI strategy in this new AI era? I’d like to take a few minutes to explain how Trend Micro are dealing with AI attack and also how we utilize AI to defense against the new threats. Next page, please. Last month when Anthropic announced that they have this Mythos, very powerful model and can find a lot of zero-day vulnerability, it send a storm across all the cybersecurity industry. People are asking, "How are we going to deal with this AI-powered security? Also, what is cybersecurity companies want to protect our own business?" I’d like to say actually vulnerability, finding vulnerability of course is a very important part, but defense against all this vulnerability is not stop at just finding it.

The more important thing is how to help customer mitigate against all of this vulnerability, against the hackers, the bad guys attacking it. As you can see in this chart, the red line is the total vulnerability, all the vulnerability that has been found. The most alerting part is the yellow line down below there. That is the capability of customer to deploy the patch and mitigate against all this vulnerability. This gap between the red line and the yellow line is where cybersecurity company need to do. It’s not just finding the vulnerability. The process in between finding vulnerability, creating protection before customer can deploy their patch is the most important process in cybersecurity. Next page, please.

This is between customer being disclosed and they know there’s vulnerability and the vendors issue the patches and customer can really apply all these patches onto their environment to defense against these attacks that actually take a long time. Next, please. Even I think, 2 years ago, we talk about this vulnerability called the Log4j. Until now, Log4j and there’s patches several times, but until now there’s still millions of server that cannot be patched because there’s so many applications in that upon it, and it’s so many compatibility problem that cannot be patched. This timeline show you between the customer applied patch and the real protection is already in place to protect against the or this possible attack. There’s a need for providing what we call virtual patch.

Virtual patch means that cybersecurity company will analyze all this vulnerability, and then we simulate what is a possible attack attacker will do, and then using virtual patch in front of those vulnerable system to protect against all those actual attack. That is what cybersecurity company need to do.

That is also why after Mythos, Anthropic immediately come to cybersecurity company like Trend Micro and work with Trend Micro to focus on how do we apply all this process of announcing the vulnerability to the software vendor and develop the simulated exploits, develop the virtual patch, and deploy those virtual patch onto the cybersecuri