Revenue Hits Record High, but Toyota's Car-Selling Profit Falls 21%

On August 4, Toyota Motor Corp. released its financial results for the first quarter of fiscal year 2027 (April to June 2026).

The company’s quarterly sales reached 13.53 trillion yen, a year-on-year increase of 10.4%, setting a new record for quarterly revenue. Net profit attributable to parent company shareholders was 1.48 trillion yen, up approximately 76% year-on-year, slightly below the median analyst forecast of 1.11 trillion yen from an LSEG survey.

However, operating profit stood at 1.06 trillion yen, down 8.8% year-on-year and slightly below the market estimate of around 1.07 trillion yen. The divergence between net profit and operating profit trends emerged as the most prominent feature of this quarter’s financial report.

The surge in net profit was not primarily driven by car sales.

According to the financial data, the “other income” category jumped from 86 billion yen in the same period last year to approximately 900.3 billion yen, an increase of over 810 billion yen, with exchange rates and other factors providing significant support. During the same period, operating profit from the automotive business fell 21.0% year-on-year, and the operating profit margin dropped from 9.5% to 7.9%. This indicates that the growth in net profit did not translate synchronously to the core car-selling business.

The yen exchange rate is a key variable in understanding this financial report.

Over the past four years, the yen has depreciated by approximately 15% against the US dollar. Based on this, Toyota adjusted its full-year exchange rate assumption from 150 yen per US dollar to 160 yen. According to the company’s estimates, the weak yen will contribute approximately 480 billion yen to full-year operating profit.

This is also one of the important reasons for the company raising its full-year operating profit forecast.

Breaking down by business segment, performance varied significantly. Operating profit from the financial services business grew 24% year-on-year, profits from other businesses surged 118%, while operating profit from the core automotive business declined 21% year-on-year.

By region, revenue in North America and Europe grew by 14.9% and 20.4% respectively, with both regions achieving year-on-year profit growth.

Operating profit in the Asia segment decreased by 3.4%, and the Chinese market remains under pressure.

The situation in the Middle East is another important variable affecting performance.

Toyota had previously warned in May that supply chain disruptions caused by the Middle East situation were expected to impact full-year profits by approximately 670 billion yen. The company has begun establishing alternative logistics routes. In addition, the impact of the 2026 Kumamoto earthquake is still being assessed and has not yet been included in the full-year forecast.

Hybrid vehicles remain Toyota’s pillar, with the company expecting hybrid sales in the 2026 calendar year to exceed 5 million units for the first time.

In the US market, consumer demand for pure electric vehicles is weakening, giving Toyota’s hybrid-focused product strategy a current advantage. The company is also advancing capacity expansion in the US, planning to invest up to $10 billion over the next five years, including spending $3.6 billion to shift Tacoma pickup truck production from Mexico to the US mainland to cope with tariff pressures.

Toyota also announced a stock buyback plan of up to 1 trillion yen (approximately $6.3 billion) and plans to cancel 200 million treasury shares. However, its stock price still fell about 1.9% in the Tokyo market on the day, bringing the year-to-date cumulative decline to approximately 13%.

The company raised its full-year operating profit forecast for fiscal 2027 from 3.0 trillion yen to 3.4 trillion yen, its net profit forecast from 3.0 trillion yen to 3.25 trillion yen, and its revenue forecast from 51 trillion yen to 54 trillion yen.

However, even after the upward revision, the net profit forecast of 3.25 trillion yen remains lower than the 3.848 trillion yen recorded in the previous fiscal year, implying that Toyota expects its net profit to decline for the third consecutive year. The operating profit forecast of 3.4 trillion yen is also below the average analyst prediction of approximately 3.9 trillion yen, indicating that management’s outlook remains conservative.

Overall, the strong growth in Toyota’s book profits this quarter stemmed more from exchange rate factors and contributions from the financial services business, while the profitability of the core automotive business did not improve in tandem. Declining operating profit, slowing sales growth, pressure in the Chinese market, and geopolitical risks remain the actual challenges Toyota needs to face.