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Trend Micro Incorporated (JP:4704)
:4704
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Trend Micro (4704) AI Stock Analysis

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JP:4704

Trend Micro

(OTC:4704)

Rating:75Outperform
Price Target:
Trend Micro's strong financial performance is a key driver of its overall score, supported by robust revenue growth, profitability, and balance sheet stability. The earnings call provided positive insights into strategic growth areas but also highlighted challenges in the consumer segment. Valuation appears high, which could limit upside potential. Technical indicators suggest some caution in the short term, contributing to a balanced but positive outlook.

Trend Micro (4704) vs. iShares MSCI Japan ETF (EWJ)

Trend Micro Business Overview & Revenue Model

Company DescriptionTrend Micro Incorporated is a global cybersecurity company based in Tokyo, Japan. The company specializes in developing security software for servers, cloud computing environments, networks, and small to medium businesses. Its core products and services include antivirus, internet content security, and threat management solutions, designed to protect users from a wide range of threats such as malware, ransomware, and other cyber threats. With a strong focus on innovation, Trend Micro delivers advanced security solutions to help businesses and individuals protect their digital infrastructure.
How the Company Makes MoneyTrend Micro makes money primarily through the sale of its security software and services. The company generates revenue from licensing its software products to a wide range of customers, including individuals, small to medium businesses, and large enterprises. Its key revenue streams include subscription fees for its software as a service (SaaS) offerings, which provide ongoing protection and threat intelligence updates. Additionally, Trend Micro partners with major technology companies to integrate its security solutions into their platforms, expanding its reach and customer base. Professional services, such as cybersecurity consulting and support, also contribute to its revenue. The company's strategic partnerships and continuous innovation in threat detection and response technologies are significant factors that enhance its earnings potential.

Trend Micro Earnings Call Summary

Earnings Call Date:Aug 07, 2025
(Q2-2025)
|
% Change Since: |
Next Earnings Date:Nov 06, 2025
Earnings Call Sentiment Neutral
The earnings call reflects a company navigating through significant macroeconomic challenges, including currency impacts and elongated sales cycles, while making strategic moves towards AI integration and platform consolidation. Despite the net sales decline and consumer segment challenges, the focus on AI and the Vision One platform indicates a positive strategic direction.
Q2-2025 Updates
Positive Updates
Japanese Enterprise Business Growth
The Japanese enterprise business experienced a strong growth, with a double-digit increase of 12% year-over-year. This growth was driven by an increasing number of multiyear comprehensive contracts and a strong performance in the Trend Vision One platform.
AI-Focused Transformation
Trend Micro is heavily investing in AI, with the launch of 'Trend AI-nize' projects. This includes the introduction of new AI-powered cybersecurity solutions and a strategic partnership with NVIDIA and Dell for AI factory security. The company emphasizes AI as a key factor in driving future growth.
Vision One Platform Performance
ARR for the V1 native and cyber services grew 94% year-over-year. The Vision One platform is becoming a central part of Trend Micro's strategy, with a focus on increasing the attachment rate of existing customers to this platform.
Successful AI Integration in Operations
Trend Micro has integrated AI into its operations, resulting in increased productivity. Examples include a 43% deflection rate in commercial customer support cases and improved coding efficiency.
Consumer Business Beyond Device Protection Growth
The consumer business experienced a 55% year-over-year growth in sales related to beyond device protection, particularly in anti-scam solutions.
Negative Updates
Net Sales Decline
Net sales decreased by 3% year-over-year, influenced by macroeconomic uncertainties and a stronger yen, which impacted the company's foreign exchange evaluation.
Consumer Segment Challenges
The consumer segment faced a decline, particularly due to a 10% decrease year-over-year. Challenges included transitioning credit card processing partners and ongoing issues with PayPal transactions.
Impact of Macroeconomic Uncertainties
The company experienced elongated sales cycles and delayed projects due to global macroeconomic uncertainties, affecting both enterprise and government sectors.
FX Valuation Losses
The company reported a JPY5 billion foreign exchange valuation loss, contributing to a 29% decrease in ordinary income.
Geographical Performance Disparities
While Japan showed strong performance, other regions, particularly Europe and the Americas, faced challenges due to macroeconomic uncertainties and government budget restrictions.
Company Guidance
During the Q2 2025 earnings call, Trend Micro provided guidance amidst ongoing macroeconomic uncertainties, highlighting a 3% decline in net sales, with a 6% reduction in total operating expenses leading to a 9% increase in operating income. The stronger yen impacted revenues, with ordinary income down by 29%. Despite this, enterprise sales saw a 12% year-over-year growth in Japan. The company emphasized the strategic shift towards AI-driven solutions, reporting an annual recurring revenue (ARR) of USD 1.6 billion, with a notable 94% year-over-year growth in their Vision One platform. The focus on AI security and the Vision One platform is expected to drive future growth, with a 140% net revenue retention rate on the Vision One platform. Operating margins were maintained around 20%, despite adjustments due to currency fluctuations. The company also announced initiatives to transition all customers to their Vision One SaaS platform by the end of 2025, underscoring their commitment to AI-enhanced cybersecurity solutions.

Trend Micro Financial Statement Overview

Summary
Trend Micro exhibits strong financial performance with consistent revenue and profit growth. The company's healthy profit margins and solid balance sheet with no debt underscore its financial stability. Strong cash flow management further enhances its growth potential, though there is room for improvement in net profit margins.
Income Statement
85
Very Positive
Trend Micro demonstrates strong financial performance with consistent revenue growth, evident from a 9.64% increase in 2024 compared to 2023. The company maintains healthy profit margins, with a gross profit margin of 76.18% and a net profit margin of 12.60% for 2024. The EBIT margin stands at 17.65%, indicating efficient operational management. These metrics highlight the company's robust profitability and growth trajectory, although the net profit margin suggests room for improvement in cost management.
Balance Sheet
90
Very Positive
The company maintains a solid balance sheet with no debt, showcasing financial discipline and stability. The equity ratio of 29.84% indicates a strong equity base relative to total assets. Return on Equity (ROE) is healthy at 28.76%, reflecting efficient use of shareholders' equity to generate profits. The absence of debt reduces financial risk, providing a stable foundation for future growth.
Cash Flow
88
Very Positive
Trend Micro has strong cash flow generation capabilities, with a free cash flow increase of 47.63% from 2023 to 2024, highlighting effective cash management and potential for reinvestment. The operating cash flow to net income ratio of 1.36 suggests robust cash flow relative to reported earnings. The company's ability to generate free cash flow consistently reinforces its financial flexibility and operational efficiency.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue272.01B272.64B248.69B223.79B190.36B174.06B
Gross Profit207.60B207.66B185.03B169.50B148.34B135.90B
EBITDA72.34B77.03B60.30B67.13B73.28B62.14B
Net Income30.80B34.36B10.73B29.84B38.37B26.90B
Balance Sheet
Total Assets375.13B400.32B492.63B470.80B420.46B376.70B
Cash, Cash Equivalents and Short-Term Investments211.54B210.90B299.03B242.85B256.80B212.27B
Total Debt0.000.000.000.000.000.00
Total Liabilities262.45B280.87B278.21B242.12B199.03B187.34B
Stockholders Equity112.01B119.44B214.39B228.66B220.64B188.53B
Cash Flow
Free Cash Flow52.98B45.56B30.87B35.92B36.48B42.47B
Operating Cash Flow54.13B46.78B57.23B56.90B55.27B54.31B
Investing Cash Flow-2.90B5.04B31.00B-67.72B2.58B-5.78B
Financing Cash Flow-14.99B-130.90B-43.43B-30.44B-16.45B-21.14B

Trend Micro Technical Analysis

Technical Analysis Sentiment
Negative
Last Price7851.00
Price Trends
50DMA
9078.52
Negative
100DMA
9724.60
Negative
200DMA
9446.33
Negative
Market Momentum
MACD
-384.15
Negative
RSI
28.92
Positive
STOCH
33.56
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:4704, the sentiment is Negative. The current price of 7851 is below the 20-day moving average (MA) of 8323.20, below the 50-day MA of 9078.52, and below the 200-day MA of 9446.33, indicating a bearish trend. The MACD of -384.15 indicates Negative momentum. The RSI at 28.92 is Positive, neither overbought nor oversold. The STOCH value of 33.56 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for JP:4704.

Trend Micro Peers Comparison

Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
78
Outperform
¥18.56B34.10
0.16%28.56%-13.56%
75
Outperform
$1.03T33.4229.23%2.34%3.16%88.15%
61
Neutral
$35.43B7.71-10.08%1.88%8.71%-9.18%
$174.21M15.3714.71%
73
Outperform
¥51.88B48.46
0.62%25.30%28.37%
66
Neutral
¥16.78B45.17
3.19%-29.94%
53
Neutral
¥120.14B46.75
0.13%45.51%292.77%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
JP:4704
Trend Micro
7,851.00
-832.33
-9.59%
SYKKF
Soliton Systems KK
9.41
2.31
32.54%
JP:3778
SAKURA Internet Inc.
3,005.00
-761.15
-20.21%
JP:3914
JIG-SAW INC.
2,536.00
-2,099.00
-45.29%
JP:4417
Global Security Experts Inc.
3,390.00
248.00
7.89%
JP:4493
Cyber Security Cloud, Inc.
1,831.00
-295.48
-13.90%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Apr 25, 2025