Renesas‘ Latest Financial Report: Industrial Sector Shows Steady and Positive Recovery!

                                                          Renesas Electronics Third Quarter 2025 Results Highlights

                                                                             Source: Renesas Electronics

01
Anticipated Auto Sector Decline, While Industrial Shows Steady Recovery

Renesas Electronics President and CEO Hidetoshi Shibata stated at the briefing that the quarter's performance was "largely in line with expectations." He noted, "Sales through our direct channel met expectations, while distributor channel sales slightly exceeded them. Due to decreasing channel inventory levels, we will focus on expanding inventory in the fourth quarter."

Regarding the outlook, Shibata pointed out: "Overall demand from channels to end customers is expected to remain flat."

Automotive Business: Sales are forecast to see a slight decline, impacted by inventory adjustments at some key customers. However, he reported smooth progress for 28nm automotive microcontrollers (MCUs) and the 4th-generation automotive SoCs, "though still on a small scale." He added that the Chinese market is undergoing adjustments due to specific factors and has not yet entered a phase of rapid growth, but will "expand steadily in the future."

Industrial Business: This sector shows more positive signs. "The outlook for Q4 has improved, and we anticipate a relatively solid recovery for the overall industrial business. With continued strong demand for AI infrastructure, the company will ramp up production capacity to respond," he said.

Consumer Electronics: This segment is still expected to experience seasonal fluctuations, but the overall trend is positive.

Additionally, Shibata addressed the integration progress of EDA vendor Altium, which was acquired in August 2024. He stated that by Q1 of fiscal year 2025, the initial cost-cutting efforts had been completed. The core metric for its subscription products, Annual Recurring Revenue (ARR), grew 15% year-on-year, demonstrating healthy organic expansion. He noted, "Realizing synergies will take time, but joint marketing initiatives targeting large customers are already underway."

                                                                                                                   Altium Business Update; Source: Renesas Electronics

The company is reportedly advancing preparations for its electronics design and lifecycle management software platform, "Renesas 365," which is scheduled to officially launch within 2025. Regarding Renesas 365, the company stated: "Just as 'Microsoft Windows' was quietly released back then and achieved a leap in evolution through continuous updates, ultimately with 'Microsoft Windows 95,' Renesas 365 will also be launched modestly and undergo a similar development process. Initially, please view it with moderate expectations."

02

Full-year performance is expected to decline.

Renesas has announced its performance forecasts for both the fourth quarter and the full year.

For the fourth quarter, the projected sales volume is 340 billion yen, representing a year-on-year increase of 16.2%. The gross profit margin is expected to rise by 2.1 percentage points to 57.0%, while the operating profit margin is projected to increase by 1.7 percentage points to 27.5%.

For the full year, the anticipated sales volume is 1,307.6 billion yen, showing a year-on-year decrease of 3.0%. The gross profit margin is forecast to climb by 1.0 percentage point year-on-year to 57.0%, whereas the operating profit margin is expected to drop by 1.0 percentage point year-on-year to 28.5%.

                                                                                Future Performance Forecasts; Source: Renesas Electronics

03
The industrial sector has performed beyond expectations due to the demand for AI and servers.

Renesas' third-quarter performance exceeded the company's expectations in revenue, gross margin, and operating profit margin, primarily due to the depreciation of the Japanese yen.

Automotive Business: Sales were largely in line with expectations, with solid sell-through performance.

Industrial, Infrastructure & IoT: Sales surpassed expectations, driven by strong demand from AI and server segments.

                                 Comparison of actual performance and expectations for each business unit; Source: Renesas Electronics

04

Q4 to Expand Inventory

In Q3, the company's own inventory increased, mainly due to the expansion of its stockpile of wafers that have completed front-end processing—known as the "Die Bank". Entering Q4, Renesas plans to continue expanding the Die Bank and prepare more finished goods inventory for shipments at the start of next year, leading to an expected further rise in overall inventory.

Regarding channel inventory, it decreased in Q3 as end-user sales (sell-through) outperformed expectations. For Q4, shipments in the automotive business are projected to align with end-user sales, keeping channel inventory stable. Meanwhile, for the industrial, infrastructure, and IoT businesses, channel inventory is expected to continue decreasing due to higher end-user sales.

In Q3, the utilization rate of the wafer front-end production lines was approximately 50%, slightly higher than the original expectation. The main reason is that the company adjusted its production plan for the end of the year and the New Year period, advancing part of the manufacturing activities to Q3. Affected by the earlier production in the previous period, the utilization rate is expected to decrease in Q4.

The capital expenditure in Q3 accounted for 5.3% of sales.

      Trends in Inventory Status Changes, Equipment Utilization Rate, and Equipment Investment Changes; Source: Renesas Electronics