Three-Line Summary
First-half operating income was 438.1 billion yen, down 41.0% year-on-year. The sharp earnings decline seen in Q1 continued. Honda cut its full-year revenue forecast again to 20.7 trillion yen, down 4.6%, and lowered its operating income forecast to 550.0 billion yen, down 54.7%. Asian automobiles remain weak, and North American financial services continue to contract. It is still hard to call an earnings bottom.
Summary
Honda Motor's FY2026 second quarter, covering the first half from April to September 2025, kept the pressure on the bearish view. First-half revenue was 10,632.7 billion yen, down 1.5% year-on-year, while operating income fell 41.0% to 438.1 billion yen.
The two structural headwinds identified in Q1 remained unresolved. Asian automobile revenue fell 14.2% in the first half, and North American financial services revenue fell 10.1%. Q2 standalone operating income was roughly 194.0 billion yen, down about 25% from approximately 258.0 billion yen in the same period of the previous year.
Honda again revised its full-year forecast downward, cutting revenue to 20.7 trillion yen, down 400.0 billion yen from the previous forecast, and EPS to 75.05 yen. The annual dividend forecast stayed at 70 yen, and the interim dividend of 35 yen was paid as planned.
Overview
FY2026 first-half figures, April to September:
- Revenue: 10,632.7 billion yen
- Operating income: 438.1 billion yen
- Profit attributable to owners of the parent: 311.8 billion yen
- EPS, cumulative: 76.30 yen, compared with 103.25 yen a year earlier
- YoY trend: revenue -1.5%, operating income -41.0%
Financial Highlights
| Indicator | Result |
|---|---|
| Revenue, first half | 10,632.7 billion yen, -1.5% YoY |
| Operating income, first half | 438.1 billion yen, -41.0% YoY |
| Profit before tax | 527.4 billion yen, -28.9% YoY |
| Profit attributable to owners of the parent | 311.8 billion yen, -37.0% YoY |
| EPS, first half | 76.30 yen, versus 103.25 yen a year earlier |
| Revised full-year operating income forecast | 550.0 billion yen, -54.7% YoY |
| Factor 1 | Lower competitiveness and volume decline in Asian automobiles, -14.2% in the first half |
| Factor 2 | Weaker North American financial services revenue, -10.1% in the first half |
Revenue by Segment
| Segment | Revenue | YoY Change |
|---|---|---|
| Motorcycles | 1,920.7 billion yen | +6.1% |
| Automobiles | 6,859.4 billion yen | -1.8% |
| Financial services | 1,677.0 billion yen | -7.4% |
| Power Products and Others | 175.6 billion yen | -6.3% |
Motorcycles were the only segment to maintain revenue growth, with Japan up 21.0% and other regions up 17.9%. Automobiles, financial services, and power products all declined year-on-year, making the support from motorcycles increasingly visible.
What Happened
Volume
Asian automobile revenue fell 14.2% in the first half, from 925.3 billion yen to 793.2 billion yen. The decline narrowed from Q1's 20.5% drop, but it was still severe.
The background is intensifying competition with local EV makers in China and other Asian markets. Honda's competitive advantage is being challenged on both price and product specifications. The improvement from Q1 matters, but it is not yet enough to say the region has stabilized.
Price and Costs
In North America, automobile revenue stayed barely positive at +0.6% in the first half. Pricing discipline and a certain level of volume supported the business, but higher tariff costs pressured profitability.
Honda explained that price and cost improvements provided some support. The problem is that EV investment costs and foreign exchange outweighed those benefits.
Financial Services
Financial services revenue was 1,677.0 billion yen in the first half, down 7.4% year-on-year. North American revenue continued to contract, falling 10.1% from 1,532.2 billion yen to 1,376.7 billion yen.
The interest-rate environment appears to be weighing on auto loans and leases, continuing the trend seen in Q1. This is not a dramatic headline, but it matters because financial services usually help smooth earnings in an auto cycle.
Motorcycles Held Up
Motorcycle revenue rose 6.1%, making it the only segment with first-half revenue growth. Asia also grew 4.1%, supported by demand in emerging markets such as India and Southeast Asia.
Motorcycle earnings are becoming more important as a base for company-wide profit. Still, motorcycles cannot fully offset a deep earnings decline in the larger automobile business.
Second Full-Year Forecast Revision
At Q2, Honda lowered its full-year revenue forecast from 21.1 trillion yen to 20.7 trillion yen. The revision reflected a demand environment in Asia that deteriorated more than expected after Q1.
The operating income forecast was also cut sharply, from 700.0 billion yen to 550.0 billion yen. Two downward revisions from Q1 to Q2 are difficult for the market to ignore. They make investors question whether management has fully captured the downside.
Structural Versus Temporary Factors
The 41.0% decline in first-half operating income was before the large EV-related loss disclosed in March. It should therefore be read as the result of weaker fundamental competitiveness in automobiles, cost pressure, and foreign-exchange pressure.
Separate from the one-time EV impairment, Honda's underlying earnings have also deteriorated significantly. That is the uncomfortable part of this report.
Latest Materials
November 7, 2025: Q2 first-half results
Honda revised its full-year forecast again when it announced first-half results. The revised forecast of 20.7 trillion yen in revenue, 550.0 billion yen in operating income, and EPS of 75.05 yen implies an operating income level about 55% below the previous year's result of 1,213.5 billion yen.
The interim dividend was paid as planned at 35 yen. Together with the planned year-end dividend of 35 yen, Honda maintained its annual dividend forecast of 70 yen.
Business Structure
The first half confirmed a clear split in Honda's business structure. Motorcycles continued to grow in both volume and revenue, centered on emerging markets, and functioned as a stable earnings source for the company.
Automobiles faced a double headwind from the sharp slowdown in Asia and North American tariff pressure. Financial services also continued to contract in North America, adding another layer of earnings pressure.
Power Products and Others also declined 6.3%, leaving motorcycles as the only segment with year-on-year revenue growth.
Quantitative Assessment
| Indicator | Latest First-Half Figure | Comparison | Interpretation |
|---|---|---|---|
| EPS, cumulative | 76.30 yen | 103.25 yen a year earlier, -26% | Shows a major decline in profit level |
| Full-year EPS forecast | 75.05 yen | 178.93 yen in the previous year | Nearly 60% profit decline expected for the full year |
| Motorcycle revenue growth | +6.1% | Accelerated from +1.5% in Q1 | Only segment with revenue growth |
| Asia automobile revenue | -14.2% | Improved from -20.5% in Q1 | Still severe, but the worst may have passed |
| Dividend | Interim dividend of 35 yen | Previous interim dividend was 34 yen | Dividend increase trend maintained |
Implications for the Share Price
Two consecutive downward revisions, in Q1 and Q2, make it difficult for investors to judge where earnings will bottom. At the same time, motorcycle strength and the maintained dividend provided a minimum level of support.
There is some room for a less negative interpretation because the decline in Asian automobiles narrowed from -20.5% in Q1 to -14.2% in the first half. However, with a large full-year profit decline still unavoidable, it was difficult for the market to assign a more aggressive valuation. The burden of proof had shifted back to Honda.
Scenario Analysis
Bullish: 15%
The improvement in Asian automobiles continues, North American financial services bottoms, and motorcycle strength continues throughout the year. In this case, an earnings recovery path could start to appear from Q3 onward.
Neutral: 45%
Motorcycles remain solid, but Asian automobiles and financial services continue to weigh on earnings. Operating income lands around the full-year forecast of 550.0 billion yen, and the dividend is maintained.
Bearish: 40%
Competition in Asian automobiles worsens further, and tariff costs continue to rise. The decline in earnings continues from Q3 onward, making the full-year forecast difficult to achieve.
Risks
| Risk | Description |
|---|---|
| Asian competition | Local EV makers in Asia may continue taking share |
| Tariffs | Higher U.S. tariffs could further hurt North American profitability |
| Financial services weakness | Interest-rate and loan-market conditions in North America may continue to pressure revenue |
| Full-year miss risk | The revised 550.0 billion yen operating income forecast could still be missed |
| Foreign exchange | Yen appreciation could continue to reduce reported profit |
Summary
In the first half of FY2026, the sharp slowdown in Asian automobiles and the contraction in North American financial services pushed underlying profit down by more than 40% year-on-year. The only clear bright spot was 6% growth in motorcycle revenue, but its impact on company-wide profit was limited.
Honda's two full-year forecast cuts from Q1 to Q2 made it hard to identify an earnings bottom. At the time of this note, the next focus was Q3, scheduled for February 2026: whether Asian automobiles would continue improving, and how much tariffs and EV investment costs would continue to erode profit.
This article is not investment advice. Any investment decision should be based on the latest disclosures, valuation, risk tolerance, and portfolio context.