Japanese e-commerce and telecom conglomerate Rakuten has returned to profitability for the first time in more than four years, a milestone driven by stronger growth in its mobile network and steady momentum in its fintech operations.
In the quarter ended June 30, Rakuten reported attributable net income of 7.71 billion yen (about $52 million), reversing a loss of 51 billion yen in the same period a year earlier. Revenue climbed 11.6% year over year to 665.5 billion yen.
The result marks the company's first quarterly profit since the second quarter of 2020, ending a long stretch of red ink that had weighed on the stock and raised questions about its aggressive push into the mobile carrier business.
Mobile business finally gaining scale
Rakuten's mobile division has been the main drag on earnings for years. The company spent heavily to build out its own network and attract subscribers, often offering aggressive pricing to compete with established carriers like NTT Docomo, KDDI, and SoftBank.
That strategy is now showing signs of paying off. Mobile revenue rose 8.3% to 121.4 billion yen in the quarter, while subscriptions jumped by 1.78 million to reach 10.8 million by the end of June. The larger subscriber base gives Rakuten more scale to spread its fixed network costs over, which is a key step toward sustainable profitability.
Analysts have long said that Rakuten's mobile business needed to reach a critical mass of users to become profitable. The latest numbers suggest it is getting closer to that threshold, though the company still faces intense competition and the need to keep investing in network quality.
Fintech keeps adding
Alongside mobile, Rakuten's fintech arm—which includes banking, credit cards, securities, and insurance—continued to grow. The company did not break out segment-level profit in the brief, but the overall fintech business has been a reliable contributor, benefiting from the group's large ecosystem of e-commerce and loyalty users.
Rakuten's strategy has long been to cross-sell financial services to the millions of shoppers who use its marketplace and other services. That approach has helped the fintech division become one of the company's most valuable assets, even as the mobile business burned cash.
What it means for investors
For everyday investors, Rakuten's return to profit is a positive sign that the company's long turnaround effort is gaining traction. The stock has been volatile over the past few years, partly because of the heavy losses from mobile. A sustained period of profitability could help rebuild confidence.
However, it's important to keep expectations in check. One quarter of profit does not guarantee a lasting recovery. Rakuten still operates in highly competitive markets, and its mobile business will need to keep growing subscribers and improving margins to justify the billions spent on network buildout.
Investors should also watch how the company manages its debt, which has risen as it funded the mobile expansion. A return to profit could ease some of those concerns, but the company's balance sheet remains a key risk.
For those who own Rakuten shares or are considering them, the key metrics to track are subscriber growth, mobile revenue per user, and whether the fintech division can keep expanding. The company's ability to convert its large user base into profitable financial services will be crucial.
Rakuten's results come as other companies in the region also report earnings. For example, Westpac's profit edged up but mortgage demand cooled, while Ma'aden's quarterly profit jumped on strong aluminum and gold prices. These reports highlight the mixed global economic backdrop.
In the tech sector, Datadog's Q2 growth accelerated to 35.6% as OpenAI renewed, and Etsy's Q2 growth was its best since 2021. These show that growth stories remain, but investors should always consider the specific drivers and risks of each company.
Rakuten's next earnings report will be closely watched to see if the company can build on this momentum. For now, the return to profit is a meaningful step, but the journey is far from over.
