Hitachi Raises FY2026 Guidance on Power Grid Momentum, Merges GlobalLogic and HDS Into "Hitachi Digital" and Calls Fiscal 2026 a "Reset" Year for Overseas IT
October 28, 2026 – Second-quarter FY2026 earnings call and Hitachi Digital launch
Overseas IT is reorganized, and growth is deliberately sacrificed this year
The most strategically significant news was not in the numbers. Hitachi announced that GlobalLogic and Hitachi Digital Services (HDS) will operate as a single company under the name Hitachi Digital, with Anand Birje as global CEO, and a brand campaign starts the day after the call. Birje joined in August after senior roles at HCL Technologies and Encora, a direct GlobalLogic competitor, and earlier in industrial controls at Emerson. He pitched the combination as covering "everything from engineering and build to transform and operate." GlobalLogic brings product, platform and data engineering, while HDS brings enterprise platforms such as ServiceNow, Salesforce, SAP and Oracle, along with IoT, MES, PLM and CloudOps.
The near-term financial picture is less flattering. On a stand-alone basis, overseas IT revenue was flat year-on-year in the first half. CFO Tomomi Kato attributed this to a "severe" market for digital engineering and a decision to take orders with a focus on profitability. Including synergy revenue from other Hitachi sectors, mainly Energy and Mobility, the business grew 28%, and synergy revenue alone rose 46%. Guidance for the engineering services business calls for only about 3% revenue growth this year, and Kato said GlobalLogic is narrowing its verticals and pursuing structural reform. Birje was direct: "We really look at this year as a year of reset and accelerate." He declined to give next-year numbers, but he said Hitachi Digital's top 200 customers, which generate about 80% of revenue, grew only in the single digits over the past year. He expects "higher double-digit growth opportunities" as vendor consolidation favors end-to-end providers. The strategy centers on 7 verticals, 4 service lines (cloud and CloudOps, data and insights, enterprise and agentic platforms, and IoT for physical AI), and 11 ecosystem partners. It also leaves room for acquisitions.
Birje was notably skeptical about the AI cycle. "A lot of POCs created, a lot of interesting opportunities explored," he said of the past 3 years, adding that enterprises now face security, governance and cost-overrun risks, and "most enterprises are not ready for it." Hitachi's pitch is that deploying AI across its own regulated energy, mobility and industrial businesses has produced reusable frameworks, including agent registries and security protocols spanning IT and OT. This is a credible differentiator, but management gave no revenue figures for it, and it did not size cybersecurity demand either. Executives said only that inquiries from critical-infrastructure customers are rising.
Guidance raised again, led by Energy margins
Hitachi raised its full-year revenue forecast by JPY 300 billion, mainly in DSS and CI, and adjusted EBITDA by JPY 40 billion, mainly in Energy and CI. This is the second upward revision this year. The company now expects revenue growth of 13% (11% excluding foreign exchange, restructuring and one-offs) and an adjusted EBITDA margin of 13%, or 13.6% on the underlying basis. Management also expects net income to rise about JPY 120 billion despite last year's restructuring, core free cash flow to rise about JPY 90 billion excluding last year's large advance payments, and cash conversion to hold at 100%. First-half revenue grew 7% reported and 10% underlying, with the underlying adjusted EBITDA margin up 110 basis points to 12.8%.
The Energy revision deserves attention because it comes from cost rather than volume. The revenue forecast was left unchanged, with growth of 21% for the year, while adjusted EBITDA was raised by JPY 33 billion. Masashi Hatakeyama credited ERP and AI-driven productivity gains, and he noted that contingency reserves for large projects have not been consumed as expected: "Loss cost was not as high as expected originally." He added that backlog pricing is still improving and that he sees room for further margin gains.
Power grid orders surge, though growth is expected to moderate
Q2 power grid orders rose 47%, driven by several large HVDC projects in Europe and US data center work on top of strong transmission demand. Data centers account for slightly more than 10% of Energy revenue, but backlog and orders in the segment are growing at around 10% or more. Responding to a question on credit risk in AI infrastructure, Hatakeyama said there have been no delays or payment issues on current projects. He cautioned that Q2 data center orders will not turn into revenue until next fiscal year.
Kato conceded that the rate of growth will slow as the base expands, though he expects absolute growth to hold up as capital spending from the past 2 to 3 years comes online. He said delivery times cannot be shortened dramatically given the order flow. Hatakeyama cited cost overruns and project delays on very large contracts as the main downside risk. On inflation, Kato said long-term contracts include indexation: "Otherwise, we cannot accept a long-term contract."
Semiconductor and rail demand strengthen; DSS takes a one-off hit
In Connective Industries, Q2 orders for measurement and analysis systems rose 77%, and the first-half increase was 66%, on semiconductor manufacturing equipment and metrology and inspection tools. Mobility orders jumped 69% in Q2 on large European rail vehicle and signaling contracts. Together these sectors provide much of the backlog support for the raised outlook.
DSS was the weak spot in quality terms. A JPY 9 billion one-time cost overrun on a single social infrastructure SI project weighed on Q2, and EBITDA guidance was held flat after absorbing it even as the revenue forecast rose JPY 70 billion. Kato said the project is winding down and he does not expect further impact. Asked whether the roughly 17% underlying margin guidance is conservative, he said it reflects project mix and he is staying neutral. He pointed to AI-driven productivity in SI development, which reached 10% by last fiscal year-end against a target of 20% this year and 30% in FY2027, as the gradual margin driver. Japan IT revenue rose 7%, with insurance-led financial infrastructure up 19%.
HMAX targets reset under a stricter definition
HMAX, the digital services offering within the Lumada umbrella, has a full-year revenue target of JPY 510 billion, and the first half reached 47% of it. An analyst noted the target is up about 70% year-on-year, and Hatakeyama explained that HMAX is now defined more tightly around digitalized assets, data utilization and AI enablers, and recurring digital services. Some existing revenue was reclassified, but he asked investors to treat most of the figure as new business. Lumada represented 44% of consolidated first-half revenue. The shifting definitions make it hard to separate organic growth from relabeling, and the company did not provide a breakdown.
Capital returns, portfolio moves and external risks
The interim dividend will rise 36% year-on-year, above the initial plan, and first-half buybacks of JPY 290 billion represent half of the full-year plan. Hitachi also spent JPY 90 billion on acquisitions and increased capital expenditure for power grids and AI and HMAX development. Portfolio pruning continues, with the Hitachi Construction Machinery share transfer, a partial sale of Astemo, a minority-stake ATM joint venture, and a planned sale of the home appliances business by the end of next fiscal year.
On external risks, Kato said rare earth magnet and motor procurement in CI and Mobility has seen delivery-time variability. The impact is currently limited, but he said Hitachi is watching its strategic inventory closely and declined to say which products are most exposed. Management also flagged rising interest rates and geopolitical tension as potential drags on customer demand, which is a reminder that the raised guidance rests heavily on Energy execution and semiconductor capital spending.