Fujitsu Limited

Allow me to introduce the financial results for the second quarter of this year. Please look at page 3. Overview of our financial results for the first half fiscal 2026. The top half shows service solutions of core business. Revenue for the first half was 1 trillion 129.4 billion yen, 5.9% from the prior year. Revenue from our business in Japan was up 6.8%, mainly by U-vans. Adjusted operating profit, 133.7 billion yen, up 14.1 billion yen year on year, an increase of 11.8%. We are continuing to expand the gross investment, and our operating profit margin has improved by 0.6 percentage point from the prior year. The bottom shows the overview of the consolidated results. Revenue, 1,626.3 billion yen, up 3.8% from previous year. Revenue increased in service solutions and hardware solutions. Ubiquitous Solutions, on the other hand, saw a decline in revenue because of the pullback from a demand for updating Windows software. Adjusted operating profit was 113.9 billion yen, down 7.3 billion yen year-on-year. Although profit increased in service solutions, it decreased in hardware and ubiquitous solutions. Additionally, we increased development investment in advanced technologies such as next-generation CPU and quantum computing, Page 4 shows overview of the results for each segment. Service solutions continue to have higher revenue, higher profit. Revenue in hardware solutions was up due to increased demand mainly outside of Japan as well as impact of foreign exchange rate. Profit was down, however, due to higher cost for components such as memory chips. Below that, Ubiquita Solutions recorded lower profit due to the pullback in demand from the discontinuation of support for Windows 10 of the previous year. Intersegmental nominations incorporate increased development investment in advanced technologies such as next-generation CPU, Fujitsu Monaco, and quantum computing. Page 5 shows consolidated P&L. Sales revenue and adjusted operating profit are, as I previously explained, Adjusted net profit was at the same level as the previous year due to improvement of the financial gains and loss and the lower tax burden. The adjustment items for this fiscal year was related to purchase price allocation associated with the past acquisitions. In the first half of the previous year, we recorded the gains of the sale of shares on Shinko and the general as the one-time gains, but looking at the comparison with the previous year, absence of these gains resulted in decline in profit. Page 7 shows a breakdown by segment. Page 7, I will go over service solutions. Revenue 1 trillion 129.4 billion yen, up 5.9%. Growth was mainly driven by UBANs. Revenue in enterprise subsegment was mainly driven by the manufacturing industry, while public subsegment saw revenue growth across a wide range of areas like government, defense, finance, and public racing. Adjusted operating profit, 133.7 billion yen, up 14.4 billion yen year-on-year. Adjusted operating profit margin was 11.8%, improvement of 0.6 percentage point from the previous year. Page 8 shows breakdown of the changes since last year in adjusted operating profit for service solutions. On the very left, adjusted operating profit for the first half of fiscal 25 was 119.6 billion yen. This will be the starting point of the factors on the right. First, the profit increased by 17.9 billion yen from the benefit of higher revenue. This was mainly due to stronger revenue growth from enterprise and public sub-segment. Second, profit increased by 6.9 billion yen from profitability improvement. Growth margin improved by 0.6 percentage point from the previous year. Although growth margin improvement in the first half was modest compared to previous years, this was largely due to one-time negative factors that were concentrated in the second quarter. of the year, excluding one-time factors. The pace of improvement remained unchanged, with the gross margin improving by 1.6 percentage point. One-time factors reduced improvement by 1 percentage point. I will explain the one-time factors, but they included a pullback from highly profitable large-volume software deals in the first half of previous year, lower system engineer utilization due to fewer working days, and the emergence of unprofitable projects. In the second half, all of these negative effects are expected to disappear or alternatively followed by a positive rebound. Third, profit decreased by 10.7 billion yen because of increased investment and expenses including spending to expand our AI delivery development platform and FDE and consulting capabilities. Combining these figures, profit increased by 14.1 billion yen. Adjusted operating profit in the first half of 26, the service solution was 133.7 billion yen. And as shown on the right-hand side, adjusted operating margin was 11.8%. Now I will explain about the status of orders in Japan. Total orders for first half in Japan were up 9% year-on-year. I will comment on each segment. Enterprise sub-segment overall orders were up 7%, mainly from large deals secured in the second quarter. Of these, orders in the manufacturing-related industry were up 11%, including automotive, assembly, and chemical fuels. The demand was strong. a number of digital transformation modernization project increased especially higher value-added projects incorporating AI and also we received orders for sovereign ground cloud orders in the retail and consumer industry were up three percent below that public sub-segment the overall orders were up ten percent finance industry orders were down five percent this reflected the pullback from a mission critical system project at the major bank in the previous year In the public healthcare industries, orders were up 4%. Demand was strong for local government on the standardization projects and the local transformation initiatives for academic institutions. And it was also strong in the healthcare field, including healthcare digital transformation, incorporating AI. Mission critical and national security and orders were up 43%. Orders grew significantly as we secured large projects, mainly in the defense-related industry. Demand continues to expand across a wide range of industries, mainly for digital transformation projects. Page 10 shows the revenue and the other order backlog for our business in Japan. The left side of the page shows the revenue target of ¥1,960,000,000 for full year. Against this, in the light blue colored column that is the second from the right, the total actual revenue from the first half and the backlog of orders planned for the second half of this year. is shown to be ¥1,557.2 billion. This covers 79% of the revenue, and we need ¥402.7 billion in orders to be secured and converted into sales in the second half, as shown on the right-hand side. Overall deal pipeline, we have approximately ¥700 billion in potential orders, and we have high likelihood of receiving them in the second half, and we hope to get them to achieve the plan. Page 11 shows the status of Yuvans. The figures on top shows the first half orders of 388.7 billion yen, increase of 22% year-on-year. This remarkable growth was driven by strong orders for offerings such as Yuvans for finance and Yuvans for retail we launched last year. The graph shows revenue. Revenue in the first half was 393.4 billion yen, up 27% year-on-year. and factors behind these were all the same as the one contributing to increase in orders. The pie chart shows the ratio of U-bonds increased from 29% of the previous year to 35%. The right side shows the annual plan. We have set the revenue target of 840 billion yen, increase of 18% from the previous year, but we expect a further step up in growth beyond this level. Page 12 shows modernization, which is another growth pillar. Orders in the first half were 239.9 billion yen, up 56% from the previous year, showing strong growth. The bar graph shows that the revenue was 194.1 billion yen, up 20% from the previous year. On this slide as well, the right-hand side shows the annual plan. Our revenue target for fiscal 26 is 470 billion yen, an increase of 20% from the previous year, and we are on track to achieve this. We will expand AI-driven modernization to further improve quality and shorten system migration times. And we will leverage these capabilities not only for our modernization, but also to expand modernization business. Page 13 shows the status of improvement in profitability. Improvements in profitability led to the positive effect of adjusted operating profit increasing by 6.9 billion yen, growth margin improved by 0.6 percentage point year-on-year. While we aim for sustainable growth margin improvement of 2% each year, the improvement in the first half was modest. This was largely due to the one-time negative factors concentrated in the second quarter. The graph on the left shows a breakdown, and excluding one-time factors, improvement in productivity led to gross margin improvement of 1.6 percentage point year-on-year. In addition to the benefits of ongoing delivery standardization, we are certainly seeing productivity gains from AI-driven delivery. This will be a key driver of future improvement and with a further expansion planned for the second half of the year. The one-time factors reduced gross margin by one percentage point, as shown on the right. First was the negative impact from seasonal factors. In the deal mix, highly profitable large volume software deals were concentrated in the first half of last year, but it is concentrated in the second half of this year. Another factor is that we have fewer working days due to calendar differences. which led to lower utilization of system engineers these factors had a negative impact in the first half but a positive impact in the second half another negative factor was the emergence of unprofitable projects we encountered difficulties with certain projects in both in Japan and outside of Japan so we now anticipate the delivery delays and higher cost and we recorded provisions for future costs These are disappointing, but we have now taken corrective action on all affected projects. We do not expect any further deterioration. We expect this to end in the second half. Excluding one-time factors, productivity improvement continued at the same level, and seasonal factors and unprofitable projects held back the overall improvement. Right-hand side of this slide shows the condition of our AI-driven delivery, which is helping to accelerate productivity improvement. We have largely completed the expansion of AI adoption across the organization, and we are now focused upon driving deeper utilization. We are utilizing level 1 AI utilization, which focuses on optimization of individual tasks, to level 2, which uses AI agent to automate process, and beyond that to level 3, where multi-AI agents consolidate and automate multiple processes. We select large-scale projects expected to deliver significant benefits as top-gun projects and concentrate personnel with advanced AI expertise on these projects. We aim to sustainably achieve these productivity gains by advancing to higher levels of AI utilization in the second half of the year and into the next fiscal year. Page 14 shows the status of the sub-segment of service solutions. First is enterprise. Revenue in sub-segment was 439.9 billion yen, up 7.3% year-on-year. In Japan, there were widespread growth, particularly in the manufacturing industry, including and the automotive assembly and chemical fields, the positive effects of integration of BrainPad and GK software also contributed. In terms of profit, despite the effects of higher revenue, the concentration of highly profitable business deals in the second half of the fiscal year and increasing gross investment led to only slight increase in sub-segments operating profit. Revenue in public sub-segment, 689.4 billion yen, up 5.1% year-on-year. Revenue in Japan grew 8.8%. There was growth in areas including government agencies, local government, defense, finance, and public raising. In terms of profit, in addition to the effects of higher revenue, there were also improvement in profitability and adjusted operating profit for sub-segment increased by 16%.

Page 15 shows the adjusted operating profit for the first half of the fiscal year, starting from our previous mid-term management plan. As steady growth continues, the adjusted operating profit for the first half of fiscal 2026 was 133.7 billion yen. This is an increase of 14.1 billion yen year-on-year, 31% rate of progress toward our plan for the full year. As usual, profit is skewed toward the second half. Although the progress made toward the adjusted operating profit plan in the first half has improved little by little, it fell slightly flat for fiscal 26. We will steadily work to reaping profits in the second half including concentration of revenue at the end of the fiscal year and increased effects of AI-driven delivery. page 16. From here, I will speak about other segments besides service solutions. First is hardware solutions. Revenue was 449.1 billion yen, up 5.7% from prior year. Adjusted operating profit was 4.5 billion yen, down 8 billion yen year on year. In system products, revenue increased by 5.4%. Revenue grew due to higher demand, mainly from outside of Japan, and movements in foreign exchange. On the other hand, in terms of profitability, there was a decrease in adjusted operating profits due to negative impact from increasing cost of components such as memory chips. 80% of sale in the first half of fiscal 26 were for projects that were contracted on the prior fiscal year. We were unable to fully pass on the cost increase that occurred after the contracts were signed. For orders from this fiscal year, our contracts allow us to set selling prices based on the latest cost changes, so this negative impact will disappear. In the second half, we expect that 87% of our contracts will be new from this fiscal year. Revenue in network products increased by 7.2%, mainly from base stations in Japan. Revenue from the photonics business is good toward the second half of the year. Page 17. The top part shows Ubiquitas Solutions. Revenue was down by 20.6%. Adjusted operating profit was 13.4 billion yen and the adjusted operating profit margin was 14.9%, a decrease in profit of 8.3 billion yen year on year, resulting from pullback from Windows 10 update related demand from the previous year. On the bottom half of the page, in intersegment elimination on corporate, an operating loss of 37.7 billion yen was recorded. This represented a 5.1 billion yen increase in expenses. Investment for the development of cutting-edge technologies such as Fujitsu Monaka, next-generation CPU, quantum computers, and physical AI are progressing according to plan. Next, cash flows and balance sheet. Page 19 shows cash flows. excluding one-time cash flow inflows or outflows core free cash flow was 94.9 billion yen decreasing inflows was 69.3 billion yen year-on-year due to increase in strategic inventory such as memory chips and CPU to meet the demand in the second half in addition we also increased investment in cutting-edge technology development both in expenditures as well as in equipment investment Toward the bottom of the table, free cash flow, including one-time inflow or outflow, was 87.1 billion yen, a decrease in inflow of 339.5 billion yen year on year due to the sale of business such as Shinko Electric Industries and General Inc. in the prior year. Page 20 shows the status of assets, liabilities, and equity. I will omit explanation for this page. From here, I will talk about the business highlights from the first half and recent announcements. First is cyber security. Recently, cyber security incidents that significantly impact not only business activities but society as a whole have been occurring one after another. Fujitsu's advantage is the ability to provide comprehensive solutions from R&D to consulting, system development, operation monitoring to incident response based on the knowledge accumulated by serving as customer zero. Based on this practical knowledge and cutting-edge technology, in August, Fujitsu announced its cybersecurity strategy to achieve cyber defense lifecycle. Then we also recently announced that we will provide a solution that supports strengthening corporate cyber defense capabilities. We have received an extremely large number of inquiries about this solution. Not only will it detect and respond to cybersecurity incidents, but also contribute to continuously strengthening customers' cyber defense capabilities and resilience. Next, progress on Fujitsu Monaka. Fujitsu Monaka is a high-performance, energy-efficient CPU that supports digital sovereignty in the age of AI. Its confidential computing capabilities allow it to serve as a reliable computing platform from the hardware level up. We began providing test servers to be used in field trials in August, and we are working on early field trials with 45 companies in and outside of Japan. Its official release is scheduled for November. Fujitsu Monaco will be offered as a standalone product and equipped on Fujitsu Monaco servers. It will be launched both in Japanese markets and globally in the US, Europe and APAC markets. We have also made a roadmap toward Fujitsu Monaka's successes, Monaka X and Monaka XX. We will utilize our proprietary technologies to provide processors that achieve an even higher cost performance ratio that takes into account future AI models and support the evolution of sovereign platforms. Physical AI. Physical AI expands the effectiveness of AI beyond the digital world to the real world. In July, we announced collaboration with FANUC, Yasukawa Electric, and Kawasaki Heavy Industries toward the early societal implementation of physical AI, and we are reviewing business opportunities. In addition, we are also working on trial implementation of an AI factory through a prototype of Fujitsu Kozuchi physical OS, a multi-robot collaborative control platform at our Kasashima plant, where we are also producing the Fujitsu Monaca service that I just mentioned. By implementing physical AI and managing the entire process from development to production, we will provide a sovereign AI platform. The practical knowledge gained from the prototype at Kasashima plant will be leveraged for the implementation of Fujitsu Kozuchi physical OS and version 1.0 will be implemented in model projects at partner companies this fiscal year. After receiving feedback from the demonstration, we plan to release version 2 in fiscal 2027. Next, quantum computing. We are working to develop a hybrid computing platform through combining quantum computing, HPC, and AI through multiple quantum computing methods. For the superconducting approach, following our development of the first made-in-Japan commercial-use 256-qubit superconducting quantum computer, we plan to deploy one of the world's largest 1024-qubit quantum computers this year. In addition, we have developed a prototype for the diamond spin method and also working on a neutral atom model. Along with the open source release of our software, we're also developing technology that is not limited to a specific method of quantum computing and accelerating initiatives to speed up the societal implementation of quantum computing. Going forward, we will provide a sovereign and secure computing platform to a wide variety of industries, including finance, drug discovery, materials and defense. These four highlights that I shared with you are not what will happen in the distant future. We are now at a phase where this will directly impact tomorrow's business. We will combine these technologies with applications to achieve sovereign orchestration, provide reliable value to society, and tie them into sustainable growth for Fujitsu. I will now talk about our financial forecast for fiscal 2026 from page 26. Page 27 shows our adjusted financial forecast. Our forecast remains unchanged from our prior announcement. We will continue to work hard to ensure that we can achieve another fiscal year of record high profits. The figures from page 28 also remain unchanged from our prior announcement. The projections for our business segments and cash flows also remain unchanged, so I will omit explanation. This concludes our financial results and financial forecast. In closing, I would like to make one final announcement. We published Fujitsu's Integrated Report 2026 and Sustainability Data Book 2026 on our website. These documents showcase Fujitsu's general initiatives for value creation, so we would like to invite you to take a look at them. This concludes my presentation.