Japanese entertainment conglomerate KADOKAWA Corp. reported a sharp 61.5% decline in operating profit for the first quarter of fiscal 2026, as weakness in its core publishing and anime businesses overshadowed strong gaming performance.
The company posted operating profit of ¥2.32 billion ($15.7 million) on revenue of ¥64.84 billion ($438.9 million) for the April-June period, with revenues falling 1.5% year-over-year. The results underscore persistent challenges facing traditional media segments even as the company benefits from hit gaming titles.
KADOKAWA’s gaming division emerged as the clear bright spot, with revenues jumping 11.5% to ¥8.66 billion ($58.6 million) and segment profit surging 40.4% to ¥3.38 billion ($22.9 million). The performance was driven by subsidiary FromSoftware’s release of “Elden Ring Nightreign” in May, which sold 3.5 million units alongside continued sales of the original Elden Ring and its downloadable content.
However, the gaming gains couldn’t compensate for steep declines elsewhere. The publishing and intellectual property creation business swung to a ¥967 million ($6.5 million) loss from a ¥3.03 billion profit a year earlier, despite revenue of ¥34.46 billion ($233.2 million). Digital book sales weakened significantly, while previous cyberattack impacts continued to weigh on domestic operations.
The anime and live-action film division fared even worse, with segment profit plummeting 92.9% to just ¥137 million ($930,000) as revenue declined 17.7% to ¥9.90 billion ($67.0 million). The company attributed the weakness to the absence of major hit series that had driven performance in the prior year period.
KADOKAWA’s web services unit provided some relief, returning to profitability with ¥690 million ($4.7 million) in segment profit after a ¥397 million loss last year. Revenue grew 13.3% to ¥5.36 billion ($36.2 million), helped by recovery from previous cyberattack disruptions.
The education and technology business posted modest growth, with revenue rising 10.4% to ¥4.39 billion ($29.7 million) and segment profit up 3.2% to ¥858 million ($5.8 million). New campus openings and program launches supported student enrollment increases.
Despite the challenging quarter, KADOKAWA maintained its full-year guidance, projecting revenue of ¥291.9 billion ($1.97 billion) and operating profit of ¥16.7 billion ($113.0 million) for fiscal 2026. The forecast suggests management expects improvement in the anime and publishing segments during the remainder of the year.
The company’s heavy reliance on hit-driven content categories continues to create earnings volatility, with gaming success unable to fully offset weakness in traditional media businesses facing structural headwinds.
