Japanese artificial intelligence developer HEROZ reported a sharp decline in profitability for fiscal 2025 despite strong revenue growth, as aggressive spending on new software-as-a-service products weighed on margins.
The Tokyo-based company, known for its Shogi Wars gaming app, posted revenue of ¥5.93 billion ($40.6 million), up 22.5% from the previous year. However, operating profit plunged 32.1% to ¥306 million ($2.1 million), while the company swung to a net loss of ¥177 million ($1.2 million).
The deteriorating profitability stemmed from heavy marketing spending and personnel costs related to new SaaS offerings including “HEROZ ASK” and “JOINT.” The company also recorded ¥96 million ($0.66 million) in impairment losses as extraordinary expenses.
HEROZ’s gaming business continued expanding, benefiting from sustained interest in traditional board games and network effects. Meanwhile, its AI security subsidiary Vario Secure achieved modest 1% growth, though profitability declined due to increased hiring and marketing expenses.
Management projects a recovery in fiscal 2026, forecasting revenue of ¥6.7 billion ($45.9 million) and operating profit of ¥800 million ($5.5 million), representing a 161% jump. The company expects its recent investments to begin generating returns as the SaaS products gain traction.
Whether HEROZ can successfully monetize its upfront spending remains to be seen as competition intensifies in Japan’s crowded AI services market.
