Serverworks Co., Ltd. (4434) AI Stock Analysis

• Market Cap: ¥16.24B
• Dividend Yield: N/A
• Average Volume (3M): 49.51K
• Price to Earnings (P/E): ―
• Beta (1Y): 1.48
• Revenue Growth: N/A
• EPS Growth: N/A
• Country: JP
• Employees: 370
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Infrastructure
• EPS (TTM): 51.34
• Shares Outstanding: 7,936,261
• 10 Day Avg. Volume: 29,330
• 30 Day Avg. Volume: 49,506
• PEG Ratio: 5.06
• Price to Book (P/B): 1.63
• Price to Sales (P/S): 0.52
• P/FCF Ratio: 22.31
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): 130.1
• Revenue Forecast (FY): ¥46.90B

• Rating: 61 Neutral
• Price Target: ¥2,175.00 ▲(19.64% Upside)
• Action: N/A Date: 01/04/26
• Date: Action: N/A 01/04/26

The score is primarily supported by a very strong, low-leverage balance sheet and generally positive cash generation, but is held back by clear profitability/margin compression and only neutral-to-weak technical positioning (below key longer-term moving averages). Valuation signals are also less supportive due to a negative P/E and no dividend yield data.

Positive Factors

Low-leverage balance sheet

Minimal debt and steadily expanding equity materially reduce financial risk and preserve strategic optionality. Over a multi-month horizon this supports resilience through downturns, funds for cloud investments or M&A, and lowers refinancing pressure versus leveraged peers.

Consistent revenue growth and scale expansion

Sustained top-line growth and a recent step-up in scale indicate durable market demand for AWS implementation and managed services. This underpins long-term market position and provides a platform to realize operating leverage as services and recurring contracts mature.

High free-cash-flow conversion

Consistently high FCF-to-net-income conversion improves earnings quality and funds reinvestment without new debt. Over months this enhances flexibility to invest in product development, service delivery, or customer support that sustain long-term AWS service competitiveness.

Negative Factors

Material margin compression

Declining gross and net margins point to structural pressure on pricing, cost of services, or higher operating costs. Persistent margin compression erodes reinvestment capacity and long-term profitability, limiting the company's ability to scale profitably even with revenue growth.

Volatile operating and free-cash flows

Large swings in operating cash flow and FCF reduce predictability for capex and working-capital planning. This volatility can constrain sustainable investment in service delivery, hamper long-term contracting, and raise execution risk for multi-quarter initiatives.

Modest returns on equity

Mid-single-digit ROE indicates modest capital efficiency versus peers. Persistently low returns constrain the company's ability to generate attractive shareholder value and signal limited margin of safety if revenue or cash flow growth slows.

Serverworks Co., Ltd. Business Overview & Revenue Model

Company Description

Serverworks Co.,Ltd. operates as a cloud integrator that provides integration business and service specialized for Amazon Web Services (AWS). The company is involved in planning, development, and operation of systems utilizing cloud computing; and offers AWS implementation/migration support, managed, and re-sale services. It also offers Cloud Automator, a tool for AWS operation management. The company was incorporated in 2000 and is headquartered in Tokyo, Japan.

How the Company Makes Money

Serverworks Co., Ltd. Financial Statement Overview

Summary

Strong balance sheet (minimal leverage, steadily growing equity) supports resilience, but income statement shows material margin compression (gross margin down to ~11% and net margin ~1.9% in 2025). Cash flow is positive with solid FCF-to-net-income conversion, though operating/FCF volatility reduces consistency.

Income Statement

Revenue has grown consistently over the period, with a step-up in scale in recent years, supporting a solid growth profile. However, profitability has compressed materially: gross margin has trended down (about 16% in 2020–2022 to ~11% in 2025), and net margin has fallen from roughly 5–6% to ~1.9% in 2025. While the company remains profitable, the latest year shows meaningfully weaker margins, which tempers the otherwise steady top-line trajectory.

Balance Sheet

The balance sheet is a clear strength: debt is minimal to none across most years (debt-to-equity near 0), and equity has steadily expanded alongside asset growth. Returns on equity are positive and relatively steady in the mid-single-digits recently, indicating the company is profitable without relying on leverage. The main limitation is that returns are not particularly high versus earlier peaks, but overall financial risk from leverage appears low.

Cash Flow

Cash generation is positive, with free cash flow generally strong versus net income (around ~80–97% in several years and ~92% in 2025), which supports earnings quality. That said, cash flow has been volatile: operating cash flow was very weak in 2023 and stepped up sharply in 2024 before dropping again in 2025, creating less predictability. Free cash flow growth also shows large swings, suggesting working-capital or investment timing effects that investors should monitor.

Breakdown	TTM	Feb 2025	Feb 2024	Feb 2023	Feb 2022	Feb 2021
Income Statement
Total Revenue	36.30B	35.72B	27.51B	17.30B	10.92B	8.03B
Gross Profit	3.91B	4.10B	3.54B	2.30B	1.75B	1.22B
EBITDA	871.32M	1.15B	1.05B	724.71M	707.02M	724.69M
Net Income	513.63M	677.33M	638.36M	453.58M	442.35M	482.27M
Balance Sheet
Total Assets	20.66B	20.49B	18.06B	14.74B	11.67B	10.72B
Cash, Cash Equivalents and Short-Term Investments	6.24B	6.64B	6.89B	5.65B	6.80B	7.43B
Total Debt	0.00	0.00	100.00M	0.00	0.00	0.00
Total Liabilities	9.31B	9.03B	7.39B	5.06B	2.58B	1.86B
Stockholders Equity	11.35B	11.46B	10.66B	9.66B	9.04B	8.86B
Cash Flow
Free Cash Flow	0.00	836.35M	1.67B	8.52M	280.87M	447.53M
Operating Cash Flow	0.00	906.59M	1.73B	81.52M	337.95M	529.87M
Investing Cash Flow	0.00	-1.00B	-439.40M	-799.59M	-1.07B	159.59M
Financing Cash Flow	0.00	-677.27M	121.44M	-437.33M	101.05M	5.16B

Serverworks Co., Ltd. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
3741	75 Outperform	¥40.90B	28.38	―	1.74%	21.97%	15.89%
3040	73 Outperform	¥35.54B	16.09	19.71%	3.09%	3.44%	79.35%
3915	68 Neutral	¥22.02B	15.13	―	―	17.93%	91.21%
4475	68 Neutral	¥32.40B	24.33	―	0.39%	30.59%	65.14%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
4434	61 Neutral	¥16.24B	-46.23	―	―	―	―
3778	52 Neutral	¥121.54B	162.31	―	0.14%	36.42%	28.23%

Serverworks Co., Ltd. Corporate Events

Serverworks Grows Revenue but Swings to Loss and Cuts Profit Outlook While Planning Dividend Resumption

Serverworks reported consolidated net sales of ¥29.1 billion for the nine months ended November 30, 2025, an 11.0% year-on-year increase, but operating profit fell 55.9% to ¥363 million and ordinary profit declined 42.8% to ¥485 million, resulting in a net loss attributable to owners of the parent of ¥506 million and negative basic earnings per share of ¥65.74. The company’s equity ratio decreased to 50.2% from 55.9% as net assets fell, while it revised its full-year forecast to anticipate higher sales of ¥39.6 billion but significantly lower profits and a full-year net loss of ¥705 million; despite this earnings deterioration, Serverworks plans to resume shareholder returns with a forecast annual dividend of ¥25 per share for the year ending February 28, 2026, and recorded changes in consolidation scope and accounting policies that also affect its reported figures.

The most recent analyst rating on (JP:4434) stock is a Hold with a Yen1927.00 price target. To see the full list of analyst forecasts on Serverworks Co., Ltd. stock, see the JP:4434 Stock Forecast page.