QAs from earnings release meetings and others

February 6, 2026：3Q25 Financial Results Briefing (Online)

(*)This is a summary of questions and answers took place at the Briefing.
Abbreviations: FY25 stands for a fiscal year ending March 31, 2026, 3Q25 stands for the third quarter of FY25, 1Q26 stands for the first quarter of FY26, NW Services stands for Network Services, SI stands for Systems Integration, and YoY stands for Year over Year.

Question: In your disclosure material, you state that “revenue exceeded the plan, while operating profit was below it.” Could you explain the factors behind this?

Answer: With respect to revenue, although the accumulation of NW service revenue has been weaker-than-expected, this has been more than offset by stronger-than-expected growth in SI, resulting in overall revenue modestly exceeding the expectation. Operating profit, on the other hand, has been slightly below the expectation due to a strong initial-phase SI construction demand and the continuation of broad inflationary cost increases.

Question: Could you explain the factors behind the YoY increase in NW service costs?

Answer: NW services costs have been increasing YoY mainly along with the continued expansion of NW infrastructure. Outsourcing-related costs have been increasing, driven by increased data connectivity and voice procurement expenses associated with the expansion of mobile subscriptions, as well as higher outsourced personnel costs for service development and operations. Other costs have been increasing due to higher license fees in line with revenue growth and increased procurement of mobile devices.

Question: Could you explain your outlook for improving the gross margin of NW services?

Answer: NW service costs consist largely of common costs related to NW infrastructure that do not directly correlate with revenue, and therefore have a cost structure that allows for the realization of economies of scale through the accumulation of monthly NW service revenues. Meanwhile, NW service costs have recently shown a general upward trend due to inflationary pressures and the depreciation of the Japanese yen. With respect to NW service revenue, we will continue to strengthen revenue growth by increasing the contribution of NW service revenue transitioning from large-scale Service Integration projects, as well as by steadily accumulating revenue from general NW services. In terms of pricing, while we recognize that price improvement in the corporate telecommunications market has not progressed to the same extent as in the consumer market, we will respond appropriately while monitoring market pricing trends, with the aim of achieving a sustainable improvement in gross margin over the medium to long term.

Question: Could you explain the potential for improving the gross margin of SI?

Answer: SI has a relatively higher proportion of variable costs, making it difficult to realize the same level of profit-related economies of scale as those seen in NW services. On the other hand, this cost structure allows for greater flexibility in responding to cost fluctuations. We expect a modest improvement in the gross margin by the accumulation of SI operation and maintenance revenue following system construction projects continues to progress, and the overall revenue growth from construction projects leads to an increase in total gross profit. In addition, we anticipate growing demand in high value-added areas, such as cybersecurity measures, going forward.

Question: Could you explain IIJ’s approach to utilizing AI?

Answer: Our use of AI has two aspects: delivering value to customers and improving internal productivity. For customer-facing initiatives, we will pursue approaches such as providing closed AI systems in combination with secure network and system infrastructures. With respect to internal use, we are promoting AI adoption across a wide range of areas, such as the automation of coding-related work, data analysis, network operations, customer support, and overall business operations, where we see significant potential for productivity improvement. We will provide further details on our specific AI initiatives at an appropriate time.

Question: Optage Inc. has announced its entry into the full MVNO market. Could you comment on this development?

Answer: We recognize that an increase in the number of full MVNO operators contributes to greater vitality in the market.