Last Update 10 Dec 25

Fair value Increased 1.23%

6702: AI Collaboration And Tender Offer Outlook Will Support Margins After List Removal

Analysts have modestly raised their price target on Fujitsu by roughly ¥55 per share, reflecting a slightly higher fair value and profit margin outlook, even as the stock was recently removed from a regional conviction list. They view this change as a recalibration of conviction rather than a reversal of the fundamental thesis.

Analyst Commentary

Recent research updates on Fujitsu highlight a more nuanced stance on the stock, with conviction levels adjusted even as the underlying investment case remains largely intact. The removal from a regional conviction list is being interpreted as a recalibration of risk reward rather than a wholesale downgrade of fundamentals.

Bullish Takeaways

Bullish analysts point to continued resilience in Fujitsu's core IT services and solutions business, which supports a steady earnings base and justifies a slightly higher fair value range.
Improving margins in higher value segments, such as digital transformation and cloud related services, are seen as catalysts that could drive upside surprise to medium term profit growth.
The company’s disciplined capital allocation and focus on shareholder returns are viewed as supportive of valuation, particularly if free cash flow conversion remains robust.
Positive sentiment around the broader technology spending cycle in Asia is cited as an additional tailwind that could sustain revenue growth above current conservative assumptions.

Bearish Takeaways

Bearish analysts highlight that the removal from a conviction list signals reduced confidence in near term outperformance, even if the longer term thesis is unchanged.
There is concern that execution risk in large scale transformation projects could limit margin expansion, placing a cap on valuation re rating potential.
Some see the current share price as already discounting much of the anticipated profit improvement, leaving less room for multiple expansion if growth slows.
Macro and policy uncertainties in key Asia Pacific markets are viewed as potential headwinds to IT spending, which could pressure Fujitsu’s growth trajectory versus prior expectations.

What's in the News

Developed a multi AI agent collaboration technology to securely coordinate AI from multiple vendors across supply chains, with field trials at Rohto Pharmaceutical and Science Tokyo starting January 2026 and expansion into Dynamic Supply Chain services targeted by end fiscal 2026 (Key Developments)
Board to consider a tender offer and execute a Business Integration Agreement and Tender Offer Agreements with prospective tendering shareholders at the November 28, 2025 board meeting (Key Developments)
RIKEN to use new NVIDIA GPU based supercomputers as proxy systems for codesigning FugakuNEXT, the next generation supercomputer jointly developed with Fujitsu. It is expected to deliver roughly 100x application performance versus existing CPU based systems (Key Developments)
Expanded strategic collaboration with NVIDIA to create full stack AI infrastructure. This integrates FUJITSU MONAKA CPUs with NVIDIA GPUs via NVLink Fusion and aims to deploy industry specific AI agents across sectors such as healthcare, manufacturing, and robotics (Key Developments)
Completed share repurchase of 5,654,000 shares, about 0.32 percent of outstanding, for ¥20,521.3 million under the buyback program announced April 24, 2025 (Key Developments)

Valuation Changes

The fair value estimate has risen slightly from approximately ¥4,422.73 to ¥4,477.27 per share, reflecting a modestly higher intrinsic value.
The discount rate edged up marginally from about 7.10 percent to 7.11 percent, implying a slightly higher required return on equity.
The revenue growth assumption eased slightly from around 4.00 percent to 3.97 percent, indicating a marginally more conservative topline outlook.
The net profit margin increased modestly from roughly 9.05 percent to 9.07 percent, signaling a small improvement in expected profitability.
The future P/E multiple has risen slightly from about 26.36x to 26.66x, suggesting a modestly higher valuation multiple applied to forward earnings.

Successful pivot toward high-margin, recurring IT services, AI, and next-generation solutions is strengthening earnings and supporting long-term growth.
Operational efficiency improvements and business model restructuring are enhancing profitability and margin resilience across the company.
Overreliance on domestic markets, declining international performance, and slow adoption of emerging technologies threaten Fujitsu's long-term revenue growth and competitive positioning.

Catalysts

About Fujitsu

Engages in providing digital services in Japan, Europe, Americas, Asia Pacific, East Asia, and internationally.What are the underlying business or industry changes driving this perspective?

Strong acceleration in demand for digital transformation and modernization, particularly in Japan (revenue up 6% YoY, order backlog up 13%, and pipeline expected to expand >15%), positions Fujitsu to capture sustained multi-year growth as more enterprises and government sectors upgrade infrastructure-supporting top-line expansion over the medium to long term.
Substantial growth in modernization and Uvance businesses (modernization revenue up 44% YoY, Uvance revenue up 52% YoY, Uvance now 29% of segment sales), reflects successful transition away from legacy hardware towards high-margin, recurring cloud, consulting, and advanced IT services, which should structurally lift net margins.
Implementation of AI and automation, both for internal operational efficiency (e.g., automation and AI tools made available to 30,000 engineers) and as core offerings to clients, is driving productivity gains (profitability improvements added ¥7.6B in profit, gross margin up 1.5ppt), enabling further operating margin expansion and higher long-term earnings.
Global sustainability and ESG themes are underpinning robust demand for Fujitsu's next-generation IT solutions and data center services (data center-related multiyear contracts up, especially in Europe), widening the addressable market and supporting steady revenue growth from both public and private sector clients.
Ongoing business model optimization, including structural reform in APAC, carve-outs of low-margin segments, and cost rationalization, is boosting profitability across all segments even as specific regions or hardware segments face revenue headwinds, indicating an ongoing positive structural trend for earnings and margin resilience.

Fujitsu Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Fujitsu's revenue will grow by 2.6% annually over the next 3 years.
Analysts assume that profit margins will increase from 5.9% today to 8.9% in 3 years time.
Analysts expect earnings to reach ¥339.8 billion (and earnings per share of ¥199.25) by about September 2028, up from ¥210.4 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting ¥396.0 billion in earnings, and the most bearish expecting ¥295.8 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.6x on those 2028 earnings, down from 29.4x today. This future PE is greater than the current PE for the JP IT industry at 17.4x.
Analysts expect the number of shares outstanding to decline by 2.89% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.01%, as per the Simply Wall St company report.

Fujitsu Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Ongoing declines in international revenue, especially in key regions like Europe and APAC due to exchange rate fluctuations and structural reforms, may signal persistent weakness or inability to compete globally, posing a risk to sustaining long-term revenue growth.
Heavy dependence on the Japanese market for digital transformation and modernization contracts leaves Fujitsu exposed to demographic risks such as an aging and declining population, which may ultimately limit domestic demand and impact future revenue and earnings expansion.
Reliance on large-scale, multi-year public sector and enterprise contracts in Japan and internationally introduces volatility and lumpiness in quarterly performance, increasing the risk of earnings unpredictability as government and corporate IT budgets plateau or shrink over time.
Declining revenue in hardware and sluggish growth in network products, combined with a shift in reporting standards, may reflect an accelerating industry-wide move away from traditional IT infrastructure-potentially eroding a core source of margin and hurting long-term profitability.
While initial AI-driven productivity initiatives are underway, the text highlights that the scope and impact of generative AI in delivery remain limited; slow adoption or under-investment in AI and emerging technologies compared to competitors risks sustained margin pressure and missed opportunities for earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of ¥3847.273 for Fujitsu based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ¥4300.0, and the most bearish reporting a price target of just ¥2000.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ¥3829.0 billion, earnings will come to ¥339.8 billion, and it would be trading on a PE ratio of 22.6x, assuming you use a discount rate of 7.0%.
Given the current share price of ¥3475.0, the analyst price target of ¥3847.27 is 9.7% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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