Trend Micro’s Earnings Call: AI Growth Amid Challenges

Trend Micro Incorporated (ADR) ((TMICY)) has held its Q2 earnings call. Read on for the main highlights of the call.

Trend Micro’s recent earnings call highlighted a mixed sentiment, reflecting both advancements and challenges. The company has made significant strides in AI integration, partnerships, and platform growth. However, it faces hurdles from macroeconomic factors and currency impacts, leading to mixed financial results.

Enterprise Business Growth in Japan

The Japanese enterprise business experienced a robust 12% year-over-year growth. This was primarily driven by an increasing number of multiyear comprehensive contracts and the adoption of Trend Vision One, showcasing the company’s strong foothold in the Japanese market.

Vision One Platform Expansion

Trend Micro’s Vision One platform has seen remarkable adoption, with large enterprise annual recurring revenue (ARR) growing 94% year-over-year and small business ARR increasing by 148% in just two quarters. This expansion underscores the platform’s growing importance in the company’s portfolio.

AI Integration and Transformation

The company has been focusing on integrating AI across its operations, which has led to increased productivity. This transformation has also resulted in the launch of new AI-powered security solutions, positioning Trend Micro as a leader in AI-driven cybersecurity.

Consumer Business Beyond Device Protection Growth

The consumer segment has shown growth beyond traditional device protection, particularly in anti-scam solutions, which saw a 55% year-over-year increase in gross sales. This indicates a successful expansion of their consumer offerings.

Strategic Partnerships and New Product Launches

Trend Micro has established strategic partnerships with industry giants Dell and NVIDIA, and launched new AI security packages. These moves highlight the company’s commitment to advancing AI-driven cybersecurity solutions.

Revenue Decline and FX Impact

Despite various growth areas, Trend Micro reported a 3% decline in net sales, significantly impacted by foreign exchange losses, which resulted in a 29% decrease in ordinary income. This highlights the challenges posed by currency fluctuations.

Challenges in the Consumer Segment

The consumer segment faced a 10% year-over-year decline, attributed partly to the transition to a new credit card transaction partner and delays in PayPal integration. These operational challenges have affected consumer sales.

Macroeconomic Uncertainty and Sales Cycle Delays

Global macroeconomic uncertainty has led to delayed deals and elongated sales cycles, particularly affecting midsized enterprises and government projects. This has posed challenges to Trend Micro’s overall performance.

Vision One Platform Attach Rate Challenges

While the Vision One platform has grown, its attach rate in Japan remains lower compared to other regions, indicating potential for improvement in customer transition and adoption strategies.

Forward-Looking Guidance

Trend Micro’s guidance reflects a complex business environment influenced by macroeconomic uncertainties and currency fluctuations. Despite a 3% decrease in net sales in Q2 2025, operating income increased by 9%, and operating expenses were reduced by 6%. The company reported a significant FX loss, impacting ordinary income by 29%. However, without FX effects, growth would have been 1%. The company maintains a positive outlook, with an expected 11% increase in operating profit and a focus on AI-driven initiatives. The forecast for H2 remains cautious, with a flat net sales outlook of JPY274 billion.

In summary, Trend Micro’s earnings call revealed a mixed sentiment with significant advancements in AI and platform growth, but also challenges from macroeconomic factors and currency impacts. The company remains optimistic about its future, focusing on AI-driven initiatives and strategic partnerships to navigate the complex business environment.