FY2026 Corporate Earnings Forecast: 'Revenue and Profit Growth' at 23.9%, Down for 3rd Consecutive Year; Downward Risks 'Crude Oil & Material Prices' Surge Due to Middle East Concerns

Teikoku Databank, Ltd. conducted a questionnaire survey on the 'FY2026 Corporate Earnings Forecast' targeting 23,349 companies nationwide. This awareness survey of companies regarding earnings forecasts has been conducted annually since March 2009, making this the 18th iteration.

SUMMARY

For the FY2026 earnings forecast, the percentage of companies expecting an increase in revenue and profit was 23.9%, decreasing for the third consecutive year, while those expecting a decrease in revenue and profit increased to 22.6%, rising for the third consecutive year. The key factors influencing the earnings outlook are the situation in the Middle East and price trends. If the deterioration of the Middle East situation is prolonged, adverse effects on performance, such as cost increases due to rising raw material and energy prices, and supply chain disruptions due to supply shortages, will be inevitable, heightening the risk of significantly pushing down corporate earnings. Therefore, an early resolution of the situation is desired.

Survey Period: March 17 to March 31, 2026 (Internet survey)
Survey Target: 23,349 companies nationwide; number of valid responding companies was 10,312 (Response rate: 44.2%)

In FY2026, only 23.9% of companies expect 'increased revenue and profit'

When asked about their earnings forecast (sales and ordinary profit) for FY2026 (financial terms ending April 2026 to March 2027), the percentage of companies expecting an 'increase in revenue and profit' was 23.9%, a drop of 0.7 percentage points from the previous survey (FY2025 forecast), marking a decrease for the third consecutive year. On the other hand, 'decreased revenue and profit' rose by 1.4 points to 22.6%, increasing for the third consecutive year. Additionally, 'on par with the previous year' slightly decreased by 0.2 points to 21.9%.

When comparing the 'earnings forecast' with the 'actual earnings' asked about in the following year, although the percentage of 'increased revenue and profit' in actual earnings for FY2019 fell below the forecast, for the six years from FY2020 to FY2025 following the COVID-19 pandemic, 'actual' exceeded 'forecast'. During this period, in addition to the pandemic, there were multiple factors increasing uncertainty in forecasting performance, such as heightened geopolitical risks including the Russia-Ukraine war and the deteriorating Middle East situation, as well as the expansion of protectionism represented by Trump tariffs. However, in addition to companies becoming more cautious in their outlooks due to rising uncertainty, many companies successfully passed on prices in an inflationary environment to secure profits, which caused 'actual' to exceed 'forecast'. In 2026 as well, following military strikes by the US and Israel on Iran starting February 28, tensions in the Middle East continue, such as the blockade of the Strait of Hormuz. Given this situation, companies may be viewing their FY2026 earnings forecasts even more cautiously.

Looking closely by industry, 'finance' (35.7%) was the highest for 'increased revenue and profit'. The outlook for the financial industry is relatively bright due to tailwinds from improved profit margins caused by rising interest rates and a booming financial market, such as stocks where capital inflow continues. This was followed by 'precision machinery, medical machinery and equipment manufacturing' (35.6%), 'information services' and 'food and beverage/feed manufacturing' (both 30.9%), and 'electrical machinery manufacturing' and 'food and beverage retail' (both 30.0%) in the 30% range. For 'precision machinery...', and 'electrical machinery...', forward-looking outlooks are apparent due to an improving order environment for materials, equipment, and parts manufacturers following the progress of related investments by TSMC's Kumamoto plant and Rapidus. 'Information services' is supported by structural demand expansion, as full-scale utilization of AI and stable demand for digitalization investments from both the public and private sectors are expected.

On the other hand, for 'decreased revenue and profit', 'telecommunications' (42.9%) was the only one in the 40% range and the highest, followed by 'various commodity retail' (36.8%) including general supermarkets, 'home appliances and information equipment retail' (34.8%), 'pharmaceuticals and daily goods retail' (34.0%), and 'specialty commodity retail' (31.6%) including gas stations. It is particularly noteworthy that retail businesses lined up in 6 of the top 10 industries for 'decreased revenue and profit'.

Voices from companies indicated that due to the instability of crude oil supply, prices have soared and sales volume has decreased, such as 'Import of crude oil stopped due to the worsening Middle East situation, and abnormal price increases in petroleum caused consumers to hold back on buying at stores' (Specialty commodity retail, Shizuoka Prefecture). Furthermore, product shortages are already occurring at retail stores, as noted: 'The delay in product arrivals is very serious; even though items are selling, we cannot convert them into cash, and delivery times are unknown. We cannot even schedule our work, creating a severe situation' (Home appliances and information equipment retail, Niigata Prefecture). Also, while companies are passing on prices to cope with soaring costs for fuel, raw materials, and labor, consumers are becoming sensitive to repeated price hikes, raising concerns about adverse effects on sales.

Top upward material is 'recovery of personal consumption', top downward material is 'trends in crude oil and material prices'

When asked about materials that would push up the earnings forecast for FY2026, 'recovery of personal consumption' was cited by 32.0%, ranking first for the fourth consecutive year.