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SCREEN Holdings (TSE:7735) Stock Hit By Margin Squeeze After Profit Drop

Simply Wall St · 1d ago

SCREEN Holdings stock goes into this earnings day under pressure. The shares are down about 29% over the past month and roughly flat over the past week, even after closing at ¥11,730 on July 29. The headline from the new results is not the revenue line or earnings per share. It is the squeeze on profitability at a time when investors are already questioning the valuation.

Trailing net margin has slipped to 14.5% from 15.6% while the stock still trades on a P/E of 25.9x. In the short term, that combination can sting. In the longer term, it forces a sharper look at how durable SCREEN Holdings profit profile really is.

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Q1 2027 Earnings Summary

  • Revenue (Q1 2027 vs. Q1 2026): ¥121,775 million vs. ¥135,785 million (down about 10.3%)
  • Net Income (Excl. Extra Items, Q1 2027 vs. Q1 2026): ¥10,490 million vs. ¥16,687 million (down about 37.1%)
  • Basic EPS (Q1 2027 vs. Q1 2026): ¥55.47 per share vs. ¥88.26 per share (down about 37.1%)
  • Trailing Twelve Month Net Margin (FY2026 vs. Prior Year): 14.5% vs. 15.6% (margin declined year over year)

Prefer clear charts instead of another wall of earnings tables and ratios? View SCREEN Holdings' full financial picture with a visual overview of its recent earnings and valuation trends in the company report for SCREEN Holdings.

TSE:7735 Trailing 12-Month Revenue & Expenses Breakdown as at Jul 2026
TSE:7735 Trailing 12-Month Revenue & Expenses Breakdown as at Jul 2026

SCREEN Holdings: AI Equipment Story Meets Real Orders

Bulls argue that SCREEN Holdings is set to ride AI and high performance memory as a long multiyear growth engine. The latest results offer some clear proof points, but also show that this is still early in the cycle. FY2026 revenue of ¥605.7b fell year on year, yet the semiconductor production equipment segment held an operating margin of about 25.2%, which backs the claim that core tools in areas like single wafer cleaning can support premium profitability even in a softer year.

The stronger evidence for the bullish AI and memory story sits in forward looking markers. Q4 delivered record orders and management now guides FY2027 SPE sales of ¥600b with an operating margin near 25.5%. Management also calls out DRAM and high bandwidth memory demand, plus a fully utilized new R&D site in Albany, as key supports for next generation process and packaging share ambitions.

Compare SCREEN Holdings internal targets on orders, margins and AI exposure with what the street is pricing in. See the consensus price target analysis for SCREEN Holdings to check how analyst targets stack up against the current ¥11,730 share price.

SCREEN Holdings Bear Case: Concentration Risks Still Unresolved

The bearish view on SCREEN Holdings centers on heavy exposure to a few key customers and China, rising competitive pressure from local Chinese tool makers and uneven recovery in non core segments. The latest results do not put those worries to bed. China still accounts for a large share of sales, with management flagging China as more flattish and Taiwan plus China at about 60% of revenue. That leaves the concentration concern intact.

Bears also worry that SCREEN lacks the scale to keep investing enough in R&D to defend its position. Management is lifting fixed costs by about ¥32b year on year, largely R&D, depreciation and hiring. That is supportive for technology, but it also tests margins just as FY2026 operating income fell faster than revenue. Finally, FT guidance points to lower FY2027 sales after losing a very profitable customer, so diversification is progressing more slowly than hoped.

After SCREEN Holdings recent loss of a very profitable customer and rising fixed costs, review our independent risk analysis for SCREEN Holdings which shows 1 important warning sign to identify any deeper structural vulnerabilities.

Take Control Of Your Next Move

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.