Tokyo Electron expects operating profit to rise 87.1% to 1.169 trillion yen in the year ending March 2027, the Japanese chip-equipment maker said Friday, as spending on factories for artificial-intelligence chips lifted its first-half results past its own targets.

The forecast is the company's first full-year guidance for the period; it had previously left the figure undetermined. For investors in Asia it is a read on how much the region's chipmakers plan to spend: Tokyo Electron sells most of its etching, deposition and coating tools to fabs in China, South Korea and Taiwan, so its order book reflects the capital budgets of TSMC, Samsung Electronics, SK hynix and Chinese producers before those budgets show up in their own results.

The company projected sales of 3.7 trillion yen for the full year, up 51.4%, and net income of 865 billion yen, up 50.6%. Reuters, which reported the forecast came in above expectations, put the operating profit figure at about $7.41 billion.

Tokyo Electron Beats Its Own First-Half Targets

For the six months to Sept. 30, net sales rose 41.3% from a year earlier to 1.667 trillion yen and operating income climbed 67.2% to 506.8 billion yen, according to the company's filing. Both beat the forecasts it gave in July, by 2.9% on sales and 10.6% on operating income. Net income attributable to shareholders rose 56% to 376.9 billion yen.

The second quarter was stronger still. July to September sales reached 935.0 billion yen, up 48.4% from a year earlier and 27.7% from the previous quarter. Operating income for the quarter rose 86.4% from a year earlier to 295.3 billion yen, and the operating margin widened to 31.6% from 25.1%. Gross margin improved to 47.8%.

The company said in its filing that investment in chips for AI servers in data centers had risen sharply from a year earlier. Chief Financial Officer Hiroshi Kawamoto said customer interest remained strong. "At present, there are no signs that this is slowing down," he said, according to Reuters.

Another sign of demand sat on the balance sheet. Advances received from customers, which are payments made before tools ship, rose by 84.4 billion yen during the half.

China Sales Jump to 36% of the Total

The regional split shows where the money came from. Sales to China rose to 339.9 billion yen in the second quarter from 222.9 billion yen in the first, lifting the country's share of revenue to 36.4%, according to the company's presentation. A year earlier, China had brought in 254.1 billion yen.

South Korea, home to the two largest memory makers, contributed 190.7 billion yen, up from 152.4 billion yen in the April to June quarter. Taiwan slipped slightly to 180.4 billion yen from 186.1 billion yen.

That mix matters for the stock. A heavy reliance on Chinese customers leaves the company exposed to any tightening of U.S. and Japanese export rules on advanced chipmaking tools, a risk that has weighed on the sector before. For now, Chinese chipmakers are buying, and memory producers in Korea are adding capacity as prices climb. SK hynix, one of Tokyo Electron's customers, reported two days earlier that it posted record operating profit of 83 trillion won on AI memory demand.

The guidance also sets a high bar. Hitting the full-year operating profit target implies about 662 billion yen in the second half, roughly 31% more than the 506.8 billion yen earned in the first six months, and second-half sales of about 2.03 trillion yen.

Dividend Raised, Buyback of Up to 150 Billion Yen

Shareholders get more cash under a policy that ties payouts to earnings. The board raised the interim dividend to 415 yen a share from the 384 yen it forecast in July, against 264 yen a year earlier. On a pre-split basis, the full-year dividend would total 955 yen, up from 628 yen last year. The company targets a payout ratio of about 50% of net income.

Tokyo Electron split each share into five on Oct. 1, so the year-end dividend forecast of 108 yen a share is stated on the new basis. The interim payment will be made on Nov. 27.

The board also approved repurchases of up to 25 million shares, or about 1.1% of shares outstanding excluding treasury stock, for as much as 150 billion yen. Purchases on the Tokyo Stock Exchange can run from Nov. 1 to March 31, the company said, adding that it may buy back only part of that amount or none at all. It already spent about 150 billion yen on its own shares during the first half.

The results arrived during a nervous stretch for chip stocks. Tokyo Electron shares closed down 5% on Friday before the results were released, Reuters reported, after Alphabet, Amazon and Intel fell overnight on concerns about heavy capital spending. The Nikkei 225 had already lost 5.2% in October as that selloff hit Kioxia and other chip names.

The next marker is the third-quarter report for October to December, which will show whether orders keep pace with the 662 billion yen of second-half operating profit the company now needs.