Rakuten Reports Record Revenues and Growth in Earnings Call

Rakuten ((JP:4755)) has held its Q1 earnings call. Read on for the main highlights of the call.

Rakuten’s recent earnings call highlighted a strong performance with record revenues and significant growth across major segments such as Internet Services, FinTech, and Mobile. The company also showcased promising results from its AI initiatives, which are enhancing operational efficiency. However, challenges remain in the Mobile segment, particularly with churn rates and potential impacts from tariff policies.

Record High Consolidated Revenue

Rakuten achieved a record high consolidated revenue of JPY 562.7 billion for the first quarter, marking a 9.6% increase year-on-year. This milestone underscores the company’s robust growth trajectory and its ability to capitalize on market opportunities.

EBITDA Growth

The company reported an impressive 51.4% year-on-year increase in EBITDA, reaching JPY 79.9 billion. Notably, the Non-FinTech segment turned positive with an EBITDA of JPY 20 billion, highlighting improved financial performance across diverse business areas.

AI Initiatives

Rakuten’s AI initiatives are making significant strides, with over 13,000 employees utilizing Rakuten AI and more than 16,000 custom AIs developed. These technologies are delivering results in advertising, UX personalization, coding, and sales support, driving operational improvements.

Internet Services Segment Growth

The Internet Services segment saw a revenue increase to JPY 305.5 billion, a 6.9% rise year-on-year, with a 25.8% increase in non-GAAP operating income. This growth reflects the segment’s strong market position and effective strategies.

FinTech Segment Success

Rakuten’s FinTech segment reported a revenue increase to JPY 223.6 billion, a 15.6% rise year-on-year, with a 21.7% increase in non-GAAP operating income. This success is driven by robust transaction volumes and strategic initiatives.

Mobile Segment Profitability

The Mobile segment achieved a quarterly EBITDA profit of JPY 102 million, with a 10.9% increase in revenue year-on-year. This marks a significant milestone in the segment’s path to profitability.

Rakuten Mobile Subscriber Growth

Rakuten Mobile’s subscriber base grew to 8.63 million, with a net increase of approximately 300,000 in the quarter. This growth is a testament to the company’s competitive offerings and market appeal.

Mobile Segment Challenges

Despite growth, the Mobile segment faces challenges with an increased churn rate during the spring sales season, particularly in March, due to heightened competition and incentives offered by rivals.

Impact of Tariff Policies

Tariff policies have affected Rakuten’s Rewards and advertisement business, with potential impacts on fintech and stock trading noted. The company is navigating these challenges while seeking to mitigate adverse effects.

Legacy Insurance Contracts

Rakuten continues to experience non-life insurance losses due to legacy contracts, although recent online sales are performing well, indicating a potential turnaround.

Forward-Looking Guidance

Looking ahead, Rakuten remains optimistic about its financial targets, focusing on sustainable growth and high returns through strategic investments and technological integration. The company aims to enhance operational efficiency by 20% and improve customer experience across platforms, leveraging AI and other innovations.

In summary, Rakuten’s earnings call reflected a positive sentiment with record revenues and significant growth across key segments. While challenges exist, particularly in the Mobile segment, the company’s strategic initiatives and technological advancements position it well for future success.