LY Corporation Q2 FY2026 earnings call

Financial Performance & Guidance:

• Profitability continues to improve, with double-digit growth in revenue and adjusted EBITDA for three consecutive quarters.
• Upward revision made to full-year guidance: Revenue forecast raised to 2.33 trillion yen, and adjusted EBITDA to 640 billion yen.
• Adjusted EPS guidance raised from 30 to 35 yen per share.

Agent I (AI Strategy):

• Over 40 domain agents are now available, with a standalone app launching in November.
• AI usage drives higher conversion rates (1.7x) and transaction value contribution has expanded to 22%.
• B2B services launched via LINE Official Account AI mode and Agent I for Business to support store digital transformation.

Monetization Initiatives:

• Advertising monetization began in July (display ads) and August (shopping search ads).
• User subscription premium plans and commission models are planned for launch within the fiscal year.

Shareholder Returns:

• Annual dividend increased from 11 to 12 yen per share.
• New shareholder benefit program offering Yahoo Japan Shopping gift certificates established.
• Total shareholder return targeted at 3.4%.

Operational Efficiency:

• Structural profitability improvements achieved through AI integration and cost reductions, lowering SG&A ratios and increasing gross profit margins.

Media Business: Revenue grew due to account advertising and LYP Premium, offsetting an 8% decline in display ads. Adjusted EBITDA increased by 10% year-on-year, with the margin reaching 40.8%. Commerce Business: Revenue grew 9.1% year-on-year (including LINE Man). Adjusted EBITDA rose sharply by 23%, improving the margin from 15.5% to 17.2%. Strategic Business: Revenue reached 140.7 billion yen, up 28.4% year-on-year, driven by PayPay consolidation. Adjusted EBITDA surged to 39 billion yen from 23 billion yen a year earlier, with the margin climbing to 27.7%.

• Revenue forecast upwardly revised by 14.8% year-on-year to 2.33 trillion yen.
• Adjusted EBITDA forecast upwardly revised by 28.9% year-on-year to 640 billion yen.
• Adjusted EPS guidance raised from 30 yen to 35 yen per share.
• Dividend forecast increased from 11 yen to 12 yen per share.

• Display advertising revenue faces headwinds due to the sunset of 'boom tab' video ads and platform integration efficiency gains reducing client budgets.
• Overseas account advertising growth is moderating, particularly in Thailand due to regulatory frameworks and economic conditions.
• Store Digital Transformation initiatives face competition from established market systems, requiring time to build functional expertise.
• Cybersecurity costs are expected to increase due to advancing threats, though these are factored into current guidance.
• Intense competition in the AI agent space from global players like Meta may impact market positioning.

Q: UBS asked for details on the guidance revision, specifically regarding media revenue declines and commerce profit drivers.

A: CFO Sakaue explained that media revenue was revised down by 20 billion yen primarily due to an 8% shortfall in display ads caused by the sunset of 'boom tab' and platform integration efficiencies. However, media EBITDA was revised up by 5 billion yen due to better-than-expected LYP Premium performance and SoftBank synergy savings. Commerce revenue was revised up by 130 billion yen and EBITDA by 16 billion yen, as conservative initial forecasts were overtaken by strong performance from ASCO and LINE Man. Strategic business EBITDA saw a significant positive revision of 31.5 billion yen, driven by PayPay's improved take rates and lending interest income.

Q: Jefferies asked about the negative net profit comparison and the Kakaku.com acquisition status.

A: Sakaue clarified that the YoY profit drop was largely due to one-off positives last year, including a 44.3 billion yen Line Man re-measurement and a 19 billion yen tax benefit at PayPay. Regarding Kakaku.com, management described the negotiation as a 'tug of war,' noting that while EQT’s valuation seems bloated, LY recognizes the strategic value of Kakaku’s assets in the AI era, such as its restaurant network and recruitment data, which align with their long-term strategy.

Q: JP Morgan inquired about the acceleration of LYP Premium revenue and group synergies.

A: COO Hide explained that LYP growth is driven by functional benefits like LINE Points integration and free access for SoftBank users, which encourages joining and reduces churn. This creates a cross-selling ecosystem where LYP members utilize LINE, Commerce, and PayPay, thereby increasing overall group payment transactions and user engagement across the LY Corporation portfolio.

Q: Nomura asked about the robustness of Agent I against competitors like Meta’s Muse and future profitability improvements.

A: CEO Idezawa stated that LY’s strength lies in its deep vertical networks (restaurants, inns) and proprietary data, which differentiate it from generalist agents. While acknowledging fierce competition, he emphasized that leveraging these specific Japanese market assets allows LY to maintain a competitive edge. CFO Sakaue added that further profitability improvements will come from AI-driven automation in engineering and code generation, reducing reliance on outsourced development.

Q: Mizuho requested a breakdown of account ad growth and bottlenecks in Store DX.

A: CFO Sakaue noted that domestic paid account growth remains strong (+14.1%), while overseas growth is slower due to Thai regulations. For Store DX, COO Ikebata admitted they are late entrants compared to competitors with existing systems. The main bottleneck is functional capability rather than sales resources; they are currently building out features to catch up before scaling sales teams aggressively, but expect steady progress as functionality matures.