Murata Manufacturing Co., Ltd./ADR (MRAAF) Q1 2027 Earnings Call Transcript

Murata Manufacturing Co., Ltd. Q1 Earnings Release Conference for the Fiscal Year Ending March 2027 July 31, 2026

Event Summary [Company Name]

Murata Manufacturing Co., Ltd.

[Company ID]

6981-QCODE

[Event Language]

JPN

[Event Type]

Earnings Announcement

[Event Name]

Q1 Earnings Release Conference for the Fiscal Year Ending March 2027

[Fiscal Period]

FY2026 Q1

[Date]

July 31, 2026

[Time]

15:30 – 16:32 (Total: 62 minutes, Presentation: 22 minutes, Q&A: 40 minutes)

[Venue]

Webcast

[Number of Speakers]

3 Norio Nakajima Masanori Minamide

President, Representative Director Executive Deputy President, Representative Director Senior Executive Vice President, Ceramic Capacitor Business Unit

Nagato Omori

[Analyst Names]*

Daiki Takayama Shoji Sato Fumihide Goto Manabu Akizuki Shingo Hirata Hideki Yasuda Ryousuke Kiyota

Goldman Sachs Morgan Stanley MUFG Securities Mizuho Securities Nomura Securities UBS Securities TOYO Research Advice Tokai Tokyo Intelligence Laboratory

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Presentation Moderator: Now it is time to begin the Q1 Earnings Release Conference for the Fiscal Year Ending March 2027 of Murata Manufacturing Co., Ltd. Let me introduce today's attendees. Norio Nakajima, President, Representative Director. Masanori Minamide, Executive Deputy President, Representative Director. Nagato Omori, Senior Executive Vice President, Ceramic Capacitor Business Unit. Today, Minamide will explain the earnings results. After the presentation, we will have a Q&A session. The materials are posted on our website in the IR Library under Investor Information. You can also view the presentation materials on the timely disclosure information browsing service. Executive Deputy President Minamide, please go ahead.

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Minamide: First l, I would like to extend my heartfelt sympathies to everyone affected by the earthquake centered in Kumamoto Prefecture. I sincerely pray for the earliest possible recovery of the affected areas. At this point, we believe the direct impact on our business is limited, but we will continue to confirm the situation, including the supply chain. Now I will explain the earnings results. I will start with from page two currently displayed. First, for this Q1, revenue was JPY502.3 billion, which was a record high on a quarterly basis. This was up 20.7% YoY, and even excluding foreign exchange effects, revenue increased 12.6%. Growth was driven mainly by a broad range of applications, including data centers and mobility, with the components business as the core. Operating profit was not a record high, but came to JPY98.5 billion, up 59.8% YoY and up 32.6%, excluding foreign exchange effects. The increase was mainly due to higher operating leverage from increased production volume and the yen depreciation effect.

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Please turn to page three. This is our full-year earnings forecast for the fiscal year ending March 2027. We have revised revenue upward by JPY150 billion from the April forecast to JPY2.11 trillion. This would update our full-year revenue to a record high. The background to this is expanding demand for data center-related components, mainly for AI servers, as well as a revision of to our foreign exchange assumptions. Up to now, our full-year assumption had been JPY150 to the US dollar, but from Q2 onward, we have revised it to JPY155. Operating profit has also been revised upward to a record high of JPY430 billion, up by JPY50 billion from the April forecast. The increase in production volume brings operating leverage and the yen depreciation effect, which are positive profit factors. However, although the increase in revenue is JPY150 billion and the increase in operating profit is JPY50 billion, which may seem somewhat modest, we have formulated the earnings forecast while considering raising material costs and higher fixed costs. Capital expenditures have been revised upward by JPY5 billion from the April forecast to JPY255 billion, a minor adjustment. This is mainly due to a slight increase in the capital investment plan for devices/module products. Finally, regarding shareholder returns, the annual dividend remains unchanged from the previously announced amount. As for share repurchases, we had not yet commenced any share repurchases under the currently announced JPY150 billion program as of the end of June. However, for the full year, we plan to carry out the repurchase in line with our initial policy.

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Please skip page four and turn to page five. This shows the Q1 performance. I have already covered most of what is written in the explanation, so I will omit the details, but there is one point I would like to mention. Operating profit increased by JPY36.8 billion YoY, while profit before tax increased by JPY46.9 billion, a difference of about JPY10 billion. This is due to differences in financial income and expenses because we posted foreign exchange losses in the previous fiscal year, whereas this fiscal year, we posted foreign exchange gains. As for the sensitivity to a JPY1 movement in the USD/JPY exchange rate, as shown at the lower right, the impact is JPY9 billion on revenue and JPY4.5 billion on operating profit.. Based on this assumption, the foreign exchange impact in this table is shown.

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Please turn to page six. This shows the quarterly graph of trends. On page seven, I will explain orders and sales.

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Please turn to page seven. Orders were very strong in Q1, and the main content was demand for data centers. The book-to-bill ratio for the total was 1.34 times, and if we isolate MLCCs alone, although it is not written in this table, it was 1.47 times, so strong orders continue.

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Please turn to page eight. This is segment revenue for by business. For YoY comparisons, I will explain segment profit and loss on the next page and the one after that, so I will just add a brief comment on the immediately preceding quarter. As you can see, revenue increased significantly from the immediately preceding quarter, mainly in components, including capacitors and inductors and EMI filters. Energy and power were down 13.5%. There are two reasons. First, in Q4 of the previous fiscal year, we transferred the micro battery business to Maxell, and that had an impact. Second, in Q4, sales of batteries for power tools were concentrated, so Q1 was down somewhat because of that rebound.

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Please turn to page nine. This is segment profit and loss. First is components. Revenue in Q1 increased 27.5% YoY. For capacitors, demand was strong in data centers and this time, also for mobility. Inductors and EMI filters also increased, mainly for data centers and mobility, and inductors also increased, including smartphones. As a result, operating profit was JPY113.6 billion compared with JPY71.2 billion in the same period last year, and the operating margin exceeded 30%.

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Please turn to page 10. On the other hand, for devices/modules, revenue increased 6.2%, as shown at the upper right, and I will first explain the details. High-frequency device and communications increased 5%. Resin multilayer boards increased, but highfrequency modules were down YoY. Energy and power were down 2.7%. Here too, lithium-ion batteries showed the same situation YoY as in the immediately preceding quarter I mentioned earlier. On the other hand, power supply modules increased for data center applications. Functional devices have also increased. Operating profit widened in the loss area from a loss of JPY8 billion in the previous fiscal year, to a loss of JPY12.9 billion in Q1 of this fiscal year. This includes the transfer of the micro battery business, but there is another special factor as well. We had planned a large business for power supply modules, but as announced in April, the initial project was dropped. As a result of that loss, we recorded about JPY3 billion in losses in Q1.

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Please turn to page 11. As for revenue by application, the major increase was in computer applications, both from the immediately preceding quarter and YoY. Among computers, which we have classified separately from this fiscal year, data center-related revenue increased 81% YoY and 24% from the immediately preceding quarter.

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Please turn to page 12. These are the factors behind the change in profit. Compared with operating profit of JPY61.6 billion in Q1 of the previous fiscal year, this time it was JPY98.5 billion, and I will explain the breakdown. The largest factor gains in capacity utilization. As for selling prices, although the extent of price reductions is smaller than in a normal fiscal year, we still expect a negative impact of JPY15 billion YoY this time. Foreign exchange was positive, while depreciation was a slightly negative factor. Semi-variable costs and fixed costs also increased due to higher personnel expenses and IT costs, as well as increased semi-variable costs accompanying higher operating levels. Regarding the final item related to product mix and others, as shown in the middle box, the first special factor is the impact related to the refund of US tariffs. This is a JPY4 billion positive contribution to profit, which is the difference between the refunded amount and the amount paid to or scheduled to be returned to customers. The second is the JPY3 billion negative impact from the drop in the power supply module project. I will also mention this again later in the earnings forecast. Projects for FY2026 are currently progressing smoothly, and for power supply modules, we have slightly increased the revenue forecast from the April forecast this time.

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Please turn to page 13. This is the inventory situation. Inventory at the end of June increased by JPY18.5 billion from the end of the previous quarter or by about JPY13.4 billion, excluding the impact of foreign exchange differences. In April, we said that inventory would increase by JPY17 billion in H1, but due to tight orders related to data centers, we have revised our view and now expect the increase in inventory to be smaller than that.

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Please turn to page 14. As for cash flow, the figures are generally as shown. As a supplement, in cash flow from financing activities, the previous fiscal year included share repurchases and dividends, but this fiscal year, at this point, Q1 mainly reflects dividends, while share repurchases are planned from Q2 onward.

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Please turn to the next page. Next, I will explain the revised earnings forecast for the fiscal year ending March 2027. This is page 16. We have made slight adjustments to the demand forecast for components. First, for smartphones, we have revised our outlook down 1% from the April estimate. We do not think the impact from high-end models is that large, but we have made a modest downward revision for low to midend models. For automobiles as well, likely partly due to the Strait of Hormuz situation, we have made a slight downward adjustment, mainly for ICE.

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Please turn to page 17. These are the earnings forecast figures. As I mentioned at the beginning, we have upwardly revised revenue by JPY150 billion and operating profit by JPY50 billion. I will now explain the details and our view.

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Please turn to page 18. I will explain only the items on the right side that have changed from the April earnings forecast assumptions. First, regarding demand for data center-related components, our orders are expanding more than in the previous forecast. As for the number of sets, we have made slight downward revisions for smartphones and automobiles, but at the same time, the take-up rate for our components remains firm. In other words, some longer lead-time orders are also coming in, and we would like to keep a close eye on this over H2 and into the next fiscal year. As for product price declines, we are seeing them as somewhat more moderate than in the previous forecast. The exchange rate is as I mentioned earlier. Inventory is also as I mentioned earlier. Finally, regarding costs, at the start of the fiscal year, we said that due to the impact of a closure of the Strait of Hormuz, we expected cost increases of about JPY7 billion for raw materials and about JPY6 billion for energy costs, but the impact itself has increased by several billion yen, and we are also reflecting in this earnings forecast that prices for precious metal raw materials and raw materials, in general, have risen more than we expected in April.

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Please turn to the next page. This is the latest forecast by segment. The biggest change from April is in capacitors. We have also revised upward Energy & Power within the Devices and Modules segment, as well as Inductors.. Please compare these with the previous figures later.

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Please turn to the next page. This shows the breakdown of the increase from FY2025. This is generally as I have already explained, so I will omit the detailed explanation.

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Please turn to page 21. This is also generally what I have already said, but I will share only the figures for data center applications. Looking at data center-related demand, which is the biggest reason for this upward revision, we now see an increase of just under JPY200 billion versus FY2025 or a growth rate of 110%.

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Please turn to the next page. I will omit most of this as it is also generally what I have already explained, but I would like to add one point regarding computers and industrial and other applications. In industry and others, mainly for distributors, revenue is increasing significantly YoY, especially for capacitors.

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Please turn to page 23. These are the changes to the July earnings forecast compared to the initial forecast made in April. At the start of the fiscal year, we said operating profit would be JPY380 billion, but this time, it is JPY430 billion, an increase of JPY50 billion. We believe price reductions will be about JPY18 billion more moderate than at the start of the fiscal year. On the other hand, as written in the box, the refund and the loss in the power supply business are almost offset, but even so, the product mix difference is annualize. You may think this means the share of capacitors or even within capacitors, the share for data centers has increased, but the reason is that, as I mentioned earlier, the impact from the closure of the Strait of Hormuz and the impact on precious metals and other raw material costs are larger than we expected at the start of the fiscal year. I hope you will understand that this negative amount mainly comes from those factors. In addition, costs, such as outsourcing expenses for production lines, have increased due to higher production volume.

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Please turn to page 24. These are the changes from FY2025 to this revised forecast for FY2026. This is generally as I have already explained, but there is a large figure of JPY49.2 billion under others. The biggest factor is that impairment losses recorded in the previous fiscal year are no longer present this time.

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Please turn to page 25. These are the assumptions behind the earnings forecast. Depreciation and amortization is up, and research and development expenses have also been raised slightly. Capital expenditures isas I mentioned at the beginning. The same applies to foreign exchange.

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Please turn to page 26. Only revenue from Q2 onward is shown here by quarter. What is slightly different from a normal fiscal year is that revenue in Q4 is larger than in Q3. This reflects factors including the fact that our major customers have now been split into fall models and spring models this time. That concludes with my explanation.

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Question & Answer Moderator [M]: We will now move to the Q&A session. Mr. Takayama of Goldman Sachs, please go ahead. Takayama [Q]: I would like to ask a few confirmation questions regarding the capacitor’s business. First, I would like to ask about the actual and outlook for utilization rates and whether you will be able to build up inventory going forward. There was saidthat Q1 was slightly down in real terms, but how do you plan to build inventory going forward? Based on that, I have concerns about sales in Q2 and H2. On a net basis, the outlook does not seem to rise much from Q1. Is that because you cannot ship because inventory cannot be built, or is it because the lead time is getting longer and the timing of recognition is different? Is it simply that the JPY155 exchange rate assumption is a bit conservative? My impression was that the outlook for the capacitors business in Q2 and Q3 on a QoQ basis seems a little too cautious, so I would like to hear your thinking. Also, regarding pricing strategy, I think there has been quite a lot of movement over just the past two months. Your company has said that price responses are a condition when there is overflow or when costs rise, but I feel that may already be happening. I would like to ask again whether that means you are saying you will not consider it at all or whether there has been some change. Thank you. Omori [A]: First, regarding utilization rates, we have maintained a high level of utilization until now, and we are continuing operations at a level very close to 95%. As for inventory buildup, as Mr. Minamide reported earlier, we are in a situation where what we make is shipped out right away, so even though some buildup is possible in part, mainly for data center-related products, we are thinking in terms of making and shipping immediately, so inventory is not expected to increase significantly. Regarding your point that growth in Q2 and Q3 sales versus Q1 may be a little smaller, one reason is the timing of supply. We are receiving a very large number of orders. At present, we are considering balanced supply, while taking specified delivery dates into account. Finally, on pricing strategy, we recognize that prices are moving very significantly in many areas right now. Among other things, we see that the supply portfolio across the market is changing somewhat. We are also hearing information that prices are being raised in part. We also assume that this creates areas of imbalance. Our view is that various forces are at work here, and we think there may be cases where some adjustments are needed. That's all. Takayama [Q]: Just to confirm the nuance, regarding Q2 and Q3 momentum you mentioned earlier, my understanding is that AI data center-related demand comes in early, and then revenue tends to materialize more from H2 in the form of [inaudible] related items, but seasonally, I would think sales should be stronger in July to September, including other products. Omori [A]: Regarding that point, I believe it has become well-smoothed out. There may be some fluctuations in automobiles and smartphones as well, but overall, I think those will be absorbed within the total. Takayama [Q]: One more nuance on pricing, in other words, I understand you to mean that there may be cases where you raise prices in part. Is that correct?

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Omori [A]: If distortions inevitably arise there or if orders become concentrated in certain areas, that could cause the overall balance to break down, so we think such cases could arise. Takayama [Q]: Can we understand that this is not being reflected much at this point? Omori [A]: At this point, it is not reflected. Takayama [M]: I understand very well. Thank you very much. Moderator [M]: Mr. Sato of Morgan Stanley MUFG Securities, please go ahead. Sato [Q]: First, regarding sales of the capacitors business for AI data centers, in the initial plan, I understand the nuance was YoY growth of 85% to 90% and volume growth of around 40%. How has that changed based on Q1 results? Also, on capacity, you said the capacitor capital expenditure plan is unchanged this time, but how do you view the risk of being unable to supply enough? Omori [A]: Regarding growth in the capacitors business for AI data centers, in real terms, it is about 35% to 40% QoQ growth. If we annualize that, we are still expecting growth of close to 80% YoY. As for whether supply risk could arise even if our capital investment progresses, I think that is what you are asking. On that point, we are moving forward considering how to absolutely avoid any such cancellation. That said, there are some areas where demand is very difficult to read. In fact, there are cases where data center designs are frequently changed, and we believe that when such changes occur, there may be cases where that kind of situation arises in part. Sato [Q]: Just to confirm the numbers, does that mean the initial 85% to 90% growth has not changed much? Omori [A]: That hasn't really changed much. Sato [Q]: Has the Q1 result come in within that 85% to 90% range, or has it been above that? Omori [A]: The orders we are receiving right now are running a little above that. Sato [Q]: My second question is about MLCC orders in Q1, which increased 26% QoQ. Does this include things like LTAs? In a situation where procurement competition is becoming more intense, is there also a move to secure supply earlier? I would like to hear your view on how these balances against actual demand. Omori [A]: Orders from customers with whom we have had ongoing relationships are within our expected range. On the other hand, as I mentioned a little earlier, there is some of that market dynamic in orders from distributors, and we believe that some cases include orders to us in large quantities. Sato [Q]: In that case, can we understand that this will normalize by changing prices and the like? Omori [A]: Ultimately, price is one of the options, but our approach is to supply within our supply capacity in areas where that is possible. Sato [M]: Understood. Thank you very much. Moderator [M]: Mr. Goto of Mizuho Securities, please go ahead. Goto [Q]: You said sales in the automotive and mobility area were relatively good. I think this probably includes both the upside from longer lead times and the structural increase in demand from things like software-defined vehicles. I think it is difficult, but could you tell us your current sense of which is having more

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effect and how each is contributing? Since the numbers show increased sales of sensors and the like, I also felt that level two and above may be changing more and that SDV trends are emerging. Does that sound right? Depending on that, I think the way we think about demand from H2 through next fiscal year will also change, so please tell us your current thinking. Nakajima [A]: In terms of the ratio, we have not been able to separate it out sufficiently, but with the overall vehicle volume declining to about 90 million units worldwide, the fact that sales are relatively strong reflects, as you mentioned, a technological acceleration in autonomous driving efforts. Our inertial sensors are also particularly strong in terms of their characteristics, and that is strongly demanded in SDV, which is the biggest driver. On the other hand, EV and hybrid vehicles are not really decreasing, so the demand for MLCCs and inductors for powertrains is also increasing, so we have not been able to break down the percentages very precisely. Goto [Q]: What about this? With the Strait of Hormuz situation as well, my understanding is that it is not just that customers are building inventory. Nakajima [A]: We have heard that there is almost no movement in products for the Middle East, but given that SDV and EV production is being driven by China, and more than 20% of that is going to exports, domestic demand in China is somewhat sluggish, but the Chinese customers we see are performing very strongly, supported by exports. Goto [Q]: Given that the data center business is very strong, would the securing supply for automotive MLCCs become more difficult than before? Omori [A]: For MLCCs, the areas used in automotive applications and the areas used in data center applications are relatively different, so we are not particularly concerned about that. Goto [M]: I see. Understood. Thank you very much. Moderator [M]: Mr. Akizuki of Nomura Securities, please go ahead. Akizuki [Q]: I would like to start with the numbers. My impression was that SG&A expenses increased quite a lot. Outwardly, it seems as though this is being driven by higher fixed costs and weaker profitability in the devices/module business and maybe by personnel expenses, but could you explain the background behind the increase in SG&A expenses and what level we should use in our models going forward? That is my first question. Related to that, I had not expected the deterioration in profitability in the devices/module business, so I would appreciate more detail on that. Minamide [A]: I will explain SG&A expenses. I understand your question as relating to the negative JPY87 billion versus FY2025 and the negative JPY17 billion versus the initial forecast in semi-variable costs and fixed costs. More than half or about half of this increase is due to higher semi-variable costs accompanying higher operating levels. Of the remainder, the biggest factor is higher personnel expenses, which are higher versus the previous fiscal year rather than the initial forecast. As for IT costs, they have increased over the previous fiscal year due to our intention to improve AI and security. They also increased slightly versus the initial forecast. On the other hand, not in the semi-variable cost and fixed cost category, but rather in product mix and others, as I mentioned earlier, higher material costs and increases in labor costs on production lines and outsourcing expenses for manufacturing have had a significant impact both versus the initial forecast and versus the previous fiscal year. Nakajima [A]: Regarding profitability in the devices/module business, there are both good and bad items in it, but power supply modules centered on data centers and batteries for battery backup units are moving in

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a positive direction in terms of profit and loss. Also, if you look at power supplies on their own, in all honesty, if the first project had launched well, we had expected full-year profitability, but the next project, although production has started, will not contribute to sales until H2, so I think it will be somewhere around breakeven or maybe slightly below. What is still tough from a profitability standpoint is communications-related devices and modules. We are not capturing the share we originally assumed, and in the two major receive-side modules and the larger transmitside module, if we can firmly secure the transmit side this time, profitability will come into view, but that has not been achieved, and we remain at a minority share. We are looking to turn that around next year and beyond, and in considering the overall devices/module business this fiscal year, I think we will be operating at roughly break-even going forward. Akizuki [Q]: My second question is about the capacitors business. What is confusing right now is that, looking at the statistics, distributors and OEM-related players in Asia, especially Hong Kong, China, and Shenzhen, seem to be having a lot of trouble, and I imagine your company is also receiving a lot of help requests. At the same time, the mix does not seem that good, and if your capacity is absorbed by that, I think there is also the issue of how that affects other customers. In that situation, I believe the strategy for pricing, supply, and allocation to distributors, and the more important automotive OEM contracts for next year, is even more important for your company. Since OEM contract pricing for next year will likely start around November, how are you thinking about that now? Could you share your thoughts? Omori [A]: First, regarding the situation you pointed out concerning distributors in Asia, we recognize that this is happening. As you said, the mix is by no means a good one and within our company, we are currently allocating supply while prioritizing the customers with whom we have had ongoing relationships, and we plan to continue doing so. As for negotiations for automotive OEMs from this autumn onward and for next fiscal year onward, as I mentioned earlier, we plan to respond with the highest priority placed on the trust we have built over the years. Akizuki [Q]: Costs are also rising, so would your stance be something like, at least consider raising prices by that amount, regardless of whether it becomes a price increase? Omori [A]: Yes. We will look at future conditions regarding cost and price and look for a mutually beneficial arrangement that works for both sides. Akizuki [Q]: For distributors, the idea is to avoid causing too much inconvenience to existing customers, but if additional work is required, there may be some price increase involved. In other words, if this is something extra or if it is being done as a new project, would the pricing would reflect that? Omori [A]: Yes, based on our past relationship with them, we have that kind of thinking, but if we receive a larger amount through various market dynamics, we will consider such a response. Akizuki [Q]: On the capacitors’ business, regarding AI servers, as Mr. Omori mentioned earlier, design changes really seem to be significant, with things like sudden changes in power methods happening frequently. A change in power also means that a project is being pushed out in the first place, and at the same time, there seem to be unreasonable requests to bring things in urgently. It seems like that kind of situation. Given that there are quite a number of somewhat risky projects included, and there is also the risk that a pushout will reduce the scale of the customer's project, would it be better to hedge that with things like LTAs, or do you think free supply is also a service, and even if customers change somewhat, you can absorb that and still supply as a service? In other words, how do you intend to follow these changes?

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Omori [A]: Design changes do seem to occur frequently when we look at the level of requests we are receiving. As for the risk there, there are also changes made with the aim of minimizing that risk, so frankly, we are not able to answer from our side whether that means a pushout or not. As for LTAs, while giving priority to the existing relationship and supporting them in part, I think there are cases that lead to a contract and cases that do not. On that point, while judging the relationship, we would like to consider contracts that create a positive outcome for both sides. Akizuki [Q]: Understood. Thank you very much. Moderator [M]: Mr. Hirata of UBS Securities, please go ahead. Hirata [Q]: In your full-year outlook this time, I think you raised your forecast for sales to data centers from JPY325 billion to JPY370.6 billion. Could you explain the details of this once again? I assume power-related products are also up, so I would appreciate any qualitative explanation for each. Minamide [A]: As for the breakdown of this increase, MLCCs are, as expected, the largest component. The biggest part of this increase is MLCCs. In that sense, earlier in the Q&A session, there was also some discussion about MLCC sales for data centers increasing by 80% or so, but in reality, for the Murata group as a whole, we are expecting growth of more than 100% on a full-year basis, and for MLCCs specifically, we think the full year will be slightly above 100%. For Q1 alone, the YoY increase is around the high-70% range. The second biggest item is power supplies. This is not only for data centers, but for the overall business. In the initial assumption, we said power supply business sales would increase by JPY25 billion versus FY2025, but in this latest outlook, we have factored in JPY38 billion. You can understand most of this as data centerrelated. In addition, the inductors and EMI filters business has also been slightly increased for data center applications. Finally, in a broad sense, I think this is also data center-related, but actuators for hard disk drives and the like have also been revised upward. That's all. Hirata [Q]: Just to add a follow-up on data centers, for MLCCs for data centers, if we look at it quarterly, should we think of it as flat from Q1 to Q2 and then jumping sharply in H2, or should we have that kind of image? Minamide [A]: We do not actually have the exact number for MLCCs only for data centers in front of us, but for example, if we look at MLCCs for data centers from Q4 of last fiscal year to Q1 of this fiscal year, it is up about 35% to 40%. If we look at Q1 from last year to Q1 of this year, it is up 75% to 80%. On a full-year basis, it is above 100% growth, so it is probably fine to understand it as it is increasing gradually. Hirata [Q]: My second question concerns your view of capacity. You also mentioned the risk of not being able to supply enough. Once again, could you share your view of capacity heading into next fiscal year and beyond, including how you are thinking about new factories? I also think there may be some capacity conversion, so if you can, please tell us how much capacity is being converted for AI use. Omori [A]: We do not think there has been much capacity conversion. This AI data center area is a very highcapacity and compact area, and since it has not been supplied much in the general market until now, we view it as pure incremental capacity within our company. We are thinking about the investment plan while watching customer demand, but we do recognize that there may be a gap versus the pace, so one thing we plan to do is fully utilize the additional capacity we have built up quantitatively each year until now. In addition, for the next two to three years, we would like to carefully discuss that part and consider our response.

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Hirata [M]: Thank you. Moderator [M]: Mr. Yasuda of TOYO SECURITIES, please go ahead. Yasuda [Q]: First, regarding capacity expansion next year, it may be a little early, but how are you thinking about it now? In the past, I believe you mentioned continuing with around 15% MLCC capacity expansion. Why I ask is that capital expenditure by hyperscalers has been increasing rapidly, and I think the combined amount for the five companies is already around JPY120 trillion. If this continues to rise next fiscal year at the pace you have described, I would like to know how you are seeing whether that capacity expansion will be enough. Omori [A]: First, how to make use of the remaining capacity we already have, second, improving productivity there, this is a very difficult area, and not only operating rates, but also productivity improvements, have a very effective impact. We are considering these together. If that still is not enough, we will consider additional expansion measures. As the growth curve for next year and beyond is becoming much clearer, we would like to move those discussions forward as well. Yasuda [Q]: Could you also tell us what your current view is on the fact that hyperscaler investment is increasing, from Mr. Nakajima's perspective? Nakajima [A]: Basically, I guess I should not say bubble, but I think it is getting overheated. The reason is that electronics parts are not the bottleneck now, rather power, hardware related to data centers, and buildings, are the bottlenecks. I think that will continue going forward, so there will be a gap with actual demand, but I do not think total CapEx will fall that much. There are various investment plans right now, and I think some revisions or delays will happen, so I would like to track actual demand through what indicators. There are quite a few indicators that can help us gauge data center investment, such as turbines for power generation and fiber-optic networks, so we want to make sure that actual demand and our production capacity are closely aligned. Yasuda [Q]: For my second point, it seems that smartphones and PCs are being crowded out by demand from AI data centers. Should we assume that this situation will continue next year as well? Nakajima [A]: I think it is mainly memory. I think that is because HBM has higher added value. In that area, I think memory production volumes will catch up to some extent, and the low-end models will remain somewhat tough. This time, there are also adjustments in set prices themselves, so I think how the market develops there will be the major factor. Yasuda [Q]: I believe there was a gathering in Tokyo the other day. Could you tell us your impression? Nakajima [A]: I went there with Mr. Omori. It seems that MLCC supply is also a major issue for them that has been escalated. We received a lot of requests. Yasuda [M]: Thank you. Moderator [M]: Mr. Kiyota of Tokai Tokyo Intelligence Laboratory, please go ahead. Kiyota [Q]: I have just one question. Could you please explain the others item in the profit increase and decrease section on page 23 of the materials? If sales for data centers increase mainly in MLCCs, I think the product mix item should improve, but it has been reduced from the previous plan. Could you explain the background in a little more detail? Minamide [A]: You mean the product mix difference? I may be repeating myself a little, but mainly, we have once again reviewed higher material costs and increases in outsourcing expenses for manufacturing on

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production lines, from the initial assumption. In fact, the impact is still large, especially for precious metals. This also includes another review of products derived from naphtha related to the Strait of Hormuz. That's all from me. Kiyota [Q]: I am sorry if I misunderstood, but does that mean those costs are included not only in semi-variable costs, but also here? Minamide [A]: In our classification, they go into others. Semi-variable costs is a term we use because those items are mainly fixed costs, such as SG&A and R&D expenses and manufacturing fixed costs, but many of them increase in a semi-variable way. The materials I mentioned earlier are classified under others. Kiyota [M]: Understood. Thank you very much. Moderator [M]: As we have reached the scheduled time, this concludes the Q1 Earnings Release Conference for the Fiscal Year Ending March 2027 of Murata Manufacturing Co., Ltd. Thank you very much for attending today despite your busy schedules. [END]

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