Japan's technology sector has experienced a remarkably strong earnings season, powered by the artificial intelligence revolution that has sparked unprecedented demand for data centers and semiconductor equipment. The surge has prompted leading chipmakers and their suppliers to significantly upgrade their financial forecasts.
Record-Breaking Performance Across Tech Index
With most companies in the MSCI Japan Information Technology Index having reported their results, an impressive more than three-quarters exceeded analyst expectations, representing one of the highest outperformance rates in the broader Japanese market. According to Bloomberg-compiled data, profits across the technology index surged by an extraordinary 35%, with testing equipment specialist Advantest Corporation emerging as one of the most significant contributors to this growth.
The earnings season has revealed a clear division within the global semiconductor landscape. While AI-driven demand continues to propel profits to new heights, suppliers focused on the automotive industry face ongoing challenges and slower recovery patterns.
Leading Companies Boost Forecasts
Tokyo Electron Ltd. has raised its full-year operating profit forecast, with industry analysts predicting that robust demand for chip production equipment will persist throughout next year. This optimism stems from substantial capital investments being made by semiconductor manufacturers worldwide.
The outlook for 2026 appears even more promising. Berenberg analyst Tammy Qiu noted that the company anticipates wafer fabrication equipment spending to reach unprecedented levels as investments in DRAM and NAND technologies accelerate. Bloomberg Intelligence analysts Masahiro Wakasugi and Takumi Okano emphasized that increasing chip complexity should further drive demand for Tokyo Electron's specialized equipment.
The company maintains a dominant 90% market share in tools for photoresist coating and development of chip wafers, positioning it perfectly to capitalize on the current industry expansion.
Advantest Corporation delivered even more dramatic results, increasing its full-year operating profit forecast by 25% to ¥374 billion. The growing adoption of high-bandwidth memory chips continues to fuel strong demand for the company's advanced chip testing equipment.
According to an April statement, Advantest's global share of the $1.9 billion memory chip testing market expanded by 7 percentage points to reach 63% in its latest fiscal year compared to the previous period.
AI Expansion Beyond Specialty Chips
The artificial intelligence boom is now spreading beyond specialized high-bandwidth memory chips to mainstream DRAM and NAND markets, creating increased demand for related materials and manufacturing equipment. Bloomberg Intelligence's Wakasugi confirmed in an interview that appetite for AI GPUs remains exceptionally strong and could intensify further through 2026.
Advantest Chief Executive Officer Douglas Lefever stated that the company's upgraded midterm plan reflects "robust AI-related demand, enhanced supply capabilities and market-share expansion." This optimistic assessment was echoed by Iwai Cosmo Securities senior analyst Kazuyoshi Saito, who noted that Advantest's management expressed confidence about exceeding ¥1 trillion in sales next fiscal year.
"The era of AI has arrived," declared Tokyo Electron CEO Toshiki Kawai during an earnings call. He emphasized that strong AI-server demand and chip innovation essential for AI servers will serve as "powerful drivers of continued, dramatic growth of investment for leading-edge semiconductors, with double-digit growth expected to continue beyond next year."
Investors have responded enthusiastically to these developments. Advantest shares surged 22% following its earnings report, marking the largest gain in the company's history, while Tokyo Electron shares climbed as much as 8.9%.
Government Support Strengthens Momentum
Substantial government backing combined with sustained AI investment is reinforcing optimism throughout Japan's technology sector. According to the Ministry of Economy, Trade and Industry, Japan has allocated approximately ¥5.7 trillion since 2021 to revitalize its semiconductor industry. Lawmakers are working to secure around ¥1 trillion annually to maintain support for both chip and AI development initiatives.
Yasuyuki Fukuda, chief portfolio manager of Nomura Asset Management's Japanese Information Electronics Equity Fund, believes AI stocks are not experiencing a bubble and have potential for additional gains. He characterized the current market phase as "just entering its second act."
Automotive Sector Contrast
While AI-focused companies thrive, the automotive semiconductor segment continues to struggle. Renesas Electronics Corporation shares dropped as much as 8%, representing the steepest decline in four months, after reporting results indicating slower recovery and mounting competition from cheaper power chips.
Rohm Company also declined after forecasting full-year operating profit of ¥5 billion, less than half of analyst estimates and suggesting a second-half loss. Resonac Holdings Corporation posted a quarterly operating loss for the first time since 2023, affected by weaker demand from the sluggish automobile market.
Rohm President Katsumi Azuma acknowledged that automotive-related revenue from customers is expected to decline in the final quarter of the fiscal year, though the company anticipates market recovery in the next fiscal year.
