Tokyo Electron forecast operating income of 1.169 trillion yen for the year ending March 2027, up 87% from the prior year and above 1 trillion yen for the first time, after record quarterly sales to makers of chips for artificial intelligence servers.

The Oct. 30 outlook from Japan's largest chipmaking equipment supplier was stronger than expected, Reuters reported. Its order books are a read on what memory and foundry giants in South Korea, Taiwan and China plan to spend, and the guidance arrived as investors in Tokyo and across the region questioned the returns on AI spending. The stock closed down 5% on Oct. 30 before the results, according to Reuters.

Tokyo Electron Quarterly Sales Jump 48%

Net sales in the July-September quarter rose 48.4% from a year earlier to 935 billion yen, and were up 27.7% from the April-June quarter, according to the company's results presentation. Operating income climbed 86.4% to 295.3 billion yen. The operating margin widened to 31.6% from 25.1% a year earlier, and the gross margin reached 47.8%.

For the six months to September, sales rose 41.3% to 1.667 trillion yen and net income rose 56% to 376.9 billion yen. Both beat the company's own first-half targets of 1.62 trillion yen and 349 billion yen. Operating income of 506.8 billion yen was 10.6% above the 458 billion yen plan.

Memory drove the quarter. Sales of new equipment to DRAM makers rose 45% from the previous quarter and made up 34% of new equipment sales, the company said in its briefing. Logic, foundry and other non-memory customers accounted for 56%, and NAND flash makers 10%.

China was the largest market by far. Sales there rose to 339.9 billion yen, or 36.4% of the quarterly total, up 6 percentage points from the April-June quarter on active investment by major customers. South Korea contributed 190.7 billion yen and Taiwan 180.4 billion yen. The company repeated that it expects China to account for a share in the low 30% range for the full year.

A First Full-Year Forecast, and a Bigger Market

The company had previously given guidance only for the first half. Its new full-year forecast calls for net sales of 3.7 trillion yen, up 51.4%, and net income of 865 billion yen, up 50.6%. That implies second-half sales of about 2.03 trillion yen, another record. New equipment sales are projected at 1.56 trillion yen in the second half, bringing growth for the year to 59%.

Customers are asking to bring forward delivery dates and to buy additional systems, the company told analysts, adding that it has secured enough production capacity to support that level of sales. Chief Financial Officer Hiroshi Kawamoto told the briefing that he saw "no signs that this is slowing down," according to Reuters.

Tokyo Electron also lifted its estimate of the global wafer fab equipment market, the industry's total spending on chipmaking tools. It now expects about $160 billion in calendar 2026 and more than $210 billion in 2027, roughly 30% growth in each year, up from guidance it gave at the end of July. The company tied the increase to agentic AI, which multiplies the number of tokens processed and so raises demand for high-bandwidth memory, conventional DRAM, server processors and NAND storage, not only for AI accelerators.

The read-through fits with results from Japanese peers. Test equipment maker Advantest raised its operating profit forecast 14% to 967 billion yen two days earlier on record sales of AI chip testers. Chip stocks had come under pressure in October, when the Nikkei 225 lost 5.2% as an AI selloff hit Kioxia and other semiconductor names.

Spending, Dividends and Buybacks

Tokyo Electron plans research and development spending of 335 billion yen this fiscal year, up from 277.8 billion yen. First-half capital expenditure fell by about half from a year earlier to 72.3 billion yen, after heavy investment in new production capacity in the prior year.

The company split its shares 5 for 1 on Oct. 1. It forecast a full-year dividend of 191 yen a share on a post-split basis, a record, in line with its policy of paying out 50% of net income. The interim dividend is 415 yen per pre-split share, up from 264 yen, payable from Nov. 27.

It also set up a buyback of up to 25 million shares, equal to 1.1% of shares outstanding excluding treasury stock, for as much as 150 billion yen. Purchases run from Nov. 1 to March 31, 2027. Tokyo Electron spent 150 billion yen buying back its own stock in the first half, according to its results filing, and operating cash flow nearly doubled to 469.9 billion yen.

On the company's own forecast, operating income in the second half would reach about 662 billion yen, more than it earned in all of the previous fiscal year.