Appirits Inc. swung to losses across all profit metrics during the second quarter despite achieving double-digit revenue growth, as rising outsourcing expenses for unprofitable projects eroded margins at the Japanese technology services provider.
The Tokyo-based company reported revenue of ¥5.16 billion ($35.1 million) for the six months through July, marking a 22.2% increase from the previous year. However, operating income turned negative at ¥18 million ($122,000), reversing from a ¥13 million profit in the same period last year.
The results reflect broader challenges facing Japanese IT services companies as they navigate rising operational costs and increased reliance on external contractors. Japan’s IT services market, valued at $70.22 billion in 2023, has experienced significant growth but faces pressure from complex IT systems and escalating outsourcing expenses.
Appirits’ web solutions division, while generating ¥1.95 billion ($13.3 million) in revenue with 30.7% growth, saw segment profit increase only 25.5% to ¥231 million ($1.6 million) due to higher external contractor costs. The company’s digital human resources unit contributed ¥920 million ($6.3 million) in revenue, up 23.7%, though profit declined 35.4% following the acquisition of JUTJOY.
The gaming and culture segment produced ¥2.33 billion ($15.9 million) in sales, driven by anniversary events for mobile titles including “Kemono Friends 3” and “UNI’S ON AIR.”
Net losses widened to ¥35 million ($238,000) from ¥16 million the previous year. The company had already revised its full-year guidance downward on September 5th, projecting annual operating profit between ¥103 million and ¥172 million ($700,000-$1.2 million).
