Last Update 06 Feb 26

Fair value Decreased 1.04%

9432: Higher Margins And Quantum Partnership Will Support Future Re Rating

Analysts have trimmed their fair value estimate for NTT from ¥179.14 to ¥177.29, citing updated assumptions around discount rates, revenue growth and future P/E, even as projected profit margins remain slightly higher in their models.

Analyst Commentary

Recent research commentary points to a more cautious stance on NTT even as analysts keep profit margin assumptions slightly higher in their models. The trimming of fair value to ¥177.29 reflects a mix of constructive and more guarded views on how the company can execute against its assumptions for discount rates, revenue trajectory and future P/E.

Bullish Takeaways

Bullish analysts see the slightly higher margin assumptions as a sign that NTT could still support a reasonable earnings profile, even with tighter views on revenue and valuation inputs.
Some expect that if NTT delivers in line with current profitability assumptions, the revised fair value range still leaves room for the market to reassess the stock’s P/E over time.
Supporters highlight that the modest adjustment in fair value, from ¥179.14 to ¥177.29, keeps the overall thesis intact around NTT’s ability to convert its revenue base into earnings.
There is a view that tighter discount rate assumptions simply bring the model closer to current market conditions without implying a breakdown in NTT’s execution story.

Bearish Takeaways

Bearish analysts are focusing on the downgrade as a signal that the risk or return profile has become less attractive at previous valuation levels, even if the absolute cut to fair value is small.
They are cautious that reliance on slightly higher margin assumptions, alongside more conservative revenue inputs, could leave little room for disappointment if execution falls short.
The reduced fair value tied to updated discount rates and future P/E suggests some concern that investors may not be willing to pay as much for NTT’s earnings as previously assumed.
More cautious views stress that with a lower fair value and adjusted model inputs, upside may be more limited unless NTT can show clear delivery against these profitability expectations.

What's in the News

NTT reported completion of a share repurchase program announced on May 9, 2025, buying back a total of 989,292,600 shares, or 1.2% of shares, for ¥153,838.87 million. This included 764,340,700 shares, or 0.93%, for ¥117,993.27 million between October 1, 2025 and December 31, 2025 (Key Developments).
NTT, Inc. and OptQC Corp. signed a collaboration agreement aimed at realizing a 1 million qubit optical quantum computer by 2030, using NTT’s IOWN related optical communications and quantum error correction technologies alongside OptQC’s optical quantum computer platform (Key Developments).
The collaboration with OptQC covers four focus areas, including multiplexing and error correction technologies, use case and software development, building an optical quantum computing supply chain, and promoting real world adoption of optical quantum solutions (Key Developments).
NTT highlighted its optical and quantum research at the 2025 R&D Forum in Tokyo, presenting work on the IOWN Initiative and a general purpose optical quantum computing platform developed with partners such as RIKEN, the University of Tokyo and others (Key Developments).

Valuation Changes

The fair value estimate was reduced slightly from ¥179.14 to ¥177.29 per share, reflecting a modest adjustment in the model.
The discount rate was raised from 4.72% to about 7.80%, indicating a higher required return in the updated assumptions.
Revenue growth was trimmed from about 3.28% to about 2.97% in the forecast, pointing to a more cautious top-line outlook.
The net profit margin was nudged up from about 8.13% to about 8.36%, signaling slightly stronger profitability assumptions.
The future P/E was adjusted marginally from about 13.31x to about 13.42x, suggesting a nearly flat view on valuation multiples in the model.

Expanding global data centers and proprietary tech investments position NTT for sustained high-margin growth as digitalization, cloud, and AI demand accelerate.
Shifting to managed services, efficient integration, and next-gen network upgrades supports profitability, scale, and reduces exposure to slow legacy telecom.
Declining legacy revenues, competitive pressures, rising costs, and organizational inefficiencies threaten profitability and growth despite heavy investment in digital infrastructure and global expansion.

Catalysts

About NTT

Operates as a telecommunications company in Japan and internationally.What are the underlying business or industry changes driving this perspective?

Ongoing rapid growth in data center demand, fueled by rising enterprise digitalization, AI adoption, and cloud migration, is driving NTT's global data center expansion. The acceleration of the investment cycle through the SGX-listed REIT structure allows NTT to more quickly recycle capital, maintain financial leverage, and capture high-margin, recurring revenue growth-positively impacting both near
and long-term consolidated revenue and net margin.
NTT's investment in proprietary technologies (e.g., IOWN, advanced LLMs like tsuzumi 2, and photonics) positions it to benefit from surging connectivity and low-latency compute requirements driven by the global rollout of 5G/6G and edge computing. These developments underpin sustainable earnings growth and an expanded addressable market for high-value services, supporting future margin and EBIT expansion.
Increasing complexity and pace of digital transformation across industries is spurring demand for NTT's managed services, cybersecurity, and enterprise IT solutions. Steady growth in these higher-margin businesses boosts group-wide profitability and reduces reliance on slower-growing, legacy telecom revenues-creating a structural tailwind for earnings.
The integration and centralization of decision-making within NTT DATA and related subsidiaries accelerates execution on global ICT and cloud opportunities, enhances operational agility, and supports faster cross-selling and synergy realization, which should drive improvements in scale, efficiency, and group operating margins.
The ongoing migration of legacy fixed-line services to fiber optic and wireless solutions strengthens NTT's network competitiveness and supports continued ARPU stability while reducing legacy infrastructure costs, aligning long-term capex with secular shifts to scalable, high-bandwidth networks-improving free cash flow and long-run return on invested capital.

NTT Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming NTT's revenue will grow by 3.3% annually over the next 3 years.
Analysts assume that profit margins will increase from 7.2% today to 8.2% in 3 years time.
Analysts expect earnings to reach ¥1245.9 billion (and earnings per share of ¥15.55) by about September 2028, up from ¥985.6 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ¥1118.4 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.0x on those 2028 earnings, down from 13.2x today. This future PE is lower than the current PE for the JP Telecom industry at 13.2x.
Analysts expect the number of shares outstanding to decline by 1.32% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 4.72%, as per the Simply Wall St company report.

NTT Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent decline in mobile communication service revenues, particularly at DOCOMO, continues to weigh on NTT's operating profit, with significant marketing and sales costs required to maintain market share in an increasingly competitive environment, which puts ongoing pressure on net margins and overall earnings.
Structural decline of legacy and fixed-line communication services remains a drag, as acknowledged by the need to transition copper-based services to fiber and wireless by 2035, indicating that a portion of NTT's high-margin revenue stream is in long-term contraction, negatively affecting future revenue and profit growth.
Overseas business, especially NTT DATA's SI operations in North America and Central Europe, faces ongoing challenges with sluggish order growth, regional sector exposure (e.g., automotive in Europe), and FX headwinds, leading to inconsistent international revenue performance and risk of further net margin compression.
High and likely rising capital expenditures required for long-term growth in data center and next-generation network investments, coupled with flat or only slightly increasing CapEx guidance for some segments despite robust demand, could strain free cash flow and may limit NTT's ability to sustain dividend growth and earnings per share.
Organizational complexity and historical inefficiencies across subsidiaries (e.g., need to accelerate integration and agile decision-making, slow pace of execution in global markets) create risk of delayed synergy realization and continued redundant costs, which may depress operating margins and hinder long-term profitability.

Valuation

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

The analysts have a consensus price target of ¥177.0 for NTT 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 ¥215.0, and the most bearish reporting a price target of just ¥150.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ¥15111.0 billion, earnings will come to ¥1245.9 billion, and it would be trading on a PE ratio of 13.0x, assuming you use a discount rate of 4.7%.
Given the current share price of ¥157.5, the analyst price target of ¥177.0 is 11.0% 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.

Global Data Center Expansion Will Fuel Digital Transformation