Fujikura's AI Rally Unravels: 40% Drop Spurs Executive Pay Reform Despite Record Earnings

The dizzying ascent of Fujikura's shares came to a brutal halt last week as the stock shed 40% of its value in just four trading sessions, evaporating roughly ¥5.6 trillion in market capitalisation from the all-time high of 7,855 yen set on May 14. The sell-off, triggered by a guidance that fell far short of the sky-high expectations baked into the AI infrastructure narrative, has now prompted the company to restructure its executive pay in a bid to better align management interests with those of shellshocked shareholders.

On May 20, Fujikura unveiled a comprehensive overhaul of its board compensation, shifting decisively toward equity-linked rewards. Two existing stock delivery trusts are being topped up: a trust for directors will acquire 23,600 common shares worth around 110.8 million yen, while a trust for senior managers will purchase 362,300 shares for approximately 1.7 billion yen. Both transactions are slated for June 4 and will be funded by issuing treasury shares. Separately, a new restricted stock plan for certain directors – capped at 500 million yen and up to 212,000 shares per year – will replace the current model once approved at the annual general meeting on June 26.

The governance move comes against a backdrop of otherwise stellar financial results. For the fiscal year ended March 2026, Fujikura posted record revenue of 1.18 trillion yen, up nearly 21% year-on-year. Operating profit jumped 39% to 188.7 billion yen, while net profit surged 72.5% to 157.2 billion yen. Shareholders are being rewarded with an annual dividend of 225 yen per share – more than double the previous year's 100 yen – with a final payout of 130 yen. The payout ratio has been raised to 40% from 30%.

Should investors sell immediately? Or is it worth buying Fujikura?

Yet the market's focus has already shifted to the near-term horizon, and the picture there is sobering. Management forecasts first-half revenue growth of just 6.3% and a mere 2% increase in operating profit – figures that stand in stark contrast to the triple-digit growth rates analysts had pencilled in for a company widely regarded as a key beneficiary of the AI infrastructure buildout. The disappointment was compounded two days later when Fujikura unveiled its medium-term plan through 2036. The operating profit target of 315 billion yen for the fiscal year ending March 2029 was deemed too modest by institutional investors to justify the valuation that had been priced in during the rally. The company's own internal projections are even more ambitious further out: 264 billion yen for fiscal 2028 and 580 billion yen by 2036, but those longer-term numbers did little to assuage immediate concerns over capacity constraints and rising procurement costs for external optical fibre, which currently accounts for 15-20% of annual needs.

Operationally, the expansion continues apace. Fujikura plans to triple its production capacity for high-density fibre optic products. A new 40-billion-yen plant in Chiba is scheduled to come online in December 2030, while a US subsidiary will be established in Delaware in June 2026 to tap directly into American infrastructure spending. Total capital expenditure for the fibre optic division is capped at 300 billion yen, with a broader envelope of 260 billion yen earmarked for Japan and the US. Over the 2027-2029 period, the company expects to generate 620 billion yen in operating cash flow, allocating 530 billion yen to growth investments and 220 billion yen to shareholder returns.

Whether the combination of a dividend hike, a beefed-up equity compensation scheme, and a long-term vision of ¥580 billion in operating profit will be enough to win back investors who bet on triple-digit growth remains an open question. The answer will begin to take shape with the half-year results this autumn and, sooner still, at the June 26 shareholders' meeting, where the new compensation structure – and the board's credibility – hangs in the balance.

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