Advantest raised its full-year operating profit forecast by 14% to 967 billion yen after July-September sales jumped 81.7% to a record 477.7 billion yen, as makers of artificial intelligence chips bought more of its testing machines.

The Tokyo-listed company sells almost entirely abroad: 99.4% of first-half sales went to overseas customers, according to its Oct. 28 results filing. Its sales track how much the makers of AI processors and data center memory are spending on new production, so its guidance is read across Asia as a gauge of how long the AI hardware cycle will last. Reuters described the upgrade as driven by AI spending on chip-testing equipment.

Advantest Beats Its Own Quarterly Target

Second-quarter operating income rose 146% from a year earlier to 266.8 billion yen, and was up 40.4% from the April-June quarter, according to the company's results presentation. The operating margin reached 55.9%, up 14.6 percentage points from a year earlier. Gross margin was 71.1%.

Both sales and operating profit came in well above the company's own July forecast for the quarter, which had called for 434.5 billion yen in sales and 224.5 billion yen in operating income. Net income for the quarter was 193.3 billion yen, up 142.7%.

For the six months to Sept. 30, sales rose 60.5% to 845.2 billion yen and operating income nearly doubled to 456.8 billion yen. Net income more than doubled to 368.1 billion yen, helped by about 57 billion yen of financial income, mainly gains on the value of investment securities, the company said. Sales and all three profit lines were records for a six-month period, the company said.

The test system segment, which makes the machines, grew sales 61.2% to 770.2 billion yen in the half. Advantest said tester sales for systems-on-chip (SoC), the complex processors used in AI servers, rose on higher production volumes and harder-to-test designs. Memory tester sales for DRAM and non-volatile memory also increased as data center investment grew. The services segment, which includes support contracts and test interface boards, lifted sales 53.7% to 75 billion yen.

A weak yen added to the gains. The company's average rate was 160 yen to the dollar in the half, against 146 yen a year earlier.

The New Forecast and the Yen Assumption

Advantest now expects fiscal 2026 sales, for the year to March 2027, of 1.863 trillion yen, up from 1.714 trillion yen in July. Net income guidance rose to 741.5 billion yen from 660 billion yen. The full-year operating margin forecast is 51.9%, and the company expects a second-half margin above 50%, about 3 percentage points higher than it projected three months ago.

Management said stronger SoC tester sales and a better product mix should more than offset rising component costs. It kept its calendar 2026 tester market forecast unchanged from July and said it expects strong conditions to carry into 2027, with demand across the industry still exceeding supply.

The guidance assumes 150 yen to the dollar for the second half, well stronger than the first-half average. Advantest estimates that each yen of depreciation against the dollar adds about 5.8 billion yen to annual operating income.

The company flagged two risks in its outlook. The situation in the Middle East is expected to raise some costs such as logistics, though Advantest said the direct effect on earnings should be limited for now. It also said key components, including memory chips, remain in short supply as AI investment spreads.

The read-across to the rest of the supply chain is direct. Testers are bought when chipmakers raise output, and the Advantest numbers follow record profit at SK Hynix and a stronger fourth-quarter outlook from TSMC earlier in October.

Capacity, Dividend and a 280 Billion Yen Buyback

Advantest is building more machines to keep pace. It said it can now make more than 5,000 SoC testers a year and aims to reach its 10,000-system goal well ahead of the original schedule. Memory tester output is being ramped at a similar pace. Inventories rose 120.7 billion yen in the half as it stocked up.

The board raised the interim dividend to 49 yen a share from 29 yen a year earlier. It also approved a buyback of up to 11 million shares, about 1.5% of shares outstanding excluding treasury stock, for up to 280 billion yen. The program runs from Oct. 29 through March 24, 2027.

That comes on top of 105.9 billion yen spent on share repurchases in the first half, a period in which it also raised 100 billion yen by issuing convertible bonds. Under its current mid-term plan, Advantest targets a total return ratio, dividends plus buybacks as a share of net income, of at least 50% over three years.

The company plans to file its semi-annual securities report on Nov. 13, and the interim dividend is payable Dec. 1.