Fujifilm Holdings shares crashed by a record margin on Friday, after first-quarter earnings fell far short of analyst estimates.

The stock fell as much as 18%, the steepest drop on record for the company. Fujifilm is now weighing a partial spinoff of a unit that generates over a third of its sales.

Why Fujifilm’s Earnings Fell Short

Fujifilm posted operating income of 51.2 billion yen ($323 million) for the quarter ended June. That figure came in far below the average analyst estimate of 77.1 billion yen, according to Bloomberg.

Higher raw material costs and one-off expenses weighed on the result. Underlying profit also weakened in the healthcare and business innovation segments, Jefferies Japan analysts wrote in a note.

Jefferies analysts, including Masahiro Nakanomyo, told Bloomberg the numbers point to a longer road back to profitability.

“First-quarter results showed further deterioration” in the profitability of Fujifilm’s development and production business, making it “difficult to envisage a sharp recovery” toward the fiscal year ending March 2028.

The Spinoff Fujifilm Is Considering

Fujifilm confirmed it is reviewing a partial spinoff of Fujifilm Business Innovation, the unit formerly known as Fuji Xerox. The segment generates roughly 35% of consolidated sales. It announced this move at the same time as its earnings were announced.

Under the plan, Fujifilm would keep a stake just under 20%. It would distribute the rest to shareholders as an in-kind dividend, and the unit would then list on the Tokyo Stock Exchange.

Fujifilm is studying execution within two to three years, pending shareholder approval and Japan’s tax-qualified spinoff rules. If the spinoff proceeds, Fujifilm plans to keep the Fujifilm brand name on the unit.

The plan sits inside Fujifilm’s VISION2030 strategy, which prioritizes profitability and capital efficiency over raw sales growth. Fujifilm is not alone in facing pressure this earnings season. Kioxia’s stock also crashed after a guidance miss last month, though some analysts stayed bullish on its recovery.

Questions remain open as Japanese equities trade through a volatile earnings season. Whether investors will back the restructuring remains equally uncertain.

Source: BeInCrypto