Morgan Stanley has singled out three Japanese IT and software companies as overweight opportunities, citing strong earnings momentum and scope for margin improvement tied to AI-led development and infrastructure reforms. The bank assigned price targets of
Summary of Morgan Stanley calls
The investment bank emphasized three common themes across its coverage: earnings momentum, margin expansion potential, and conservative elements embedded in current fiscal-year guidance. Morgan Stanley flags that the degree of possible upside revision for guidance varies by company. The bank stresses that where near-term guidance already assumes supply-chain or geopolitical risk, the absence of those risks could leave room for upward guidance adjustments.
NEC (6701) - Overweight, price target
Morgan Stanley regards NEC as having conservative current-year guidance against the backdrop of an ambitious mid-term profit plan. The bank suggests that if anticipated risks fail to materialize, there is substantial scope for upward revisions to earnings forecasts. Earnings growth is expected to be supported by both IT services and social infrastructure, while sales assumptions in the mid-term plan are characterized as conservative to realistic. Morgan Stanley also notes a technical lift from CSG joining the group, and it highlights that short-term earnings momentum is relatively strong.
Notable corporate developments for NEC cited by the bank include the company reporting a record non-GAAP operating profit for the fiscal year ending March 31, 2026, and the completion of its acquisition of CSG Systems International.
Fujitsu (6702) - Overweight, price target
Morgan Stanley finds Fujitsu's mid-term blueprint credible, calling it a 10-year plan with explicit EPS growth and margin improvement targets. The firm views ongoing margin enhancement as a realistic outcome, driven in part by deeper adoption of AI-driven development. While the market may need time to fully appreciate the sovereign AI growth narrative, the bank describes Fujitsu's existing guidance as containing conservative elements, particularly within hardware-related businesses, which could permit upward revisions during the fiscal year.
The bank highlights that Fujitsu has already demonstrated margin improvement and that expanded use of AI development techniques should support profit growth. Over the mid term, Morgan Stanley suggests Fujitsu could become a central participant in sovereign AI by integrating IT capabilities with sovereign technology assets, including semiconductors and quantum computing. The firm also notes recent company disclosures showing strong profitability improvements in fiscal year 2025 despite a minor revenue decline, and it references Fujitsu's strategic partnership with Anthropic to deploy its Claude AI technology.
Nomura Research Institute (NRI, 4307) - Overweight, price target
Morgan Stanley describes NRI as an advanced practitioner of AI-driven development with notable cybersecurity support capabilities. The bank cautions that overseas business exposure requires monitoring, and it describes NRI's mid-term management plan as conservative. The market may look for an update to that plan in the near term. While margin expansion from AI initiatives is seen as significant, the firm sees relatively limited room for upward revision to current-year guidance during the year.
On corporate developments, the bank notes that Nomura Research Institute recorded impairment charges of 96.9 billion yen related to its overseas units. The article also references that Goldman Sachs has maintained a Buy rating on NRI, citing progress in the company's artificial intelligence initiatives.
Analyst view and implications
Morgan Stanley's overweight calls rest on the premise that AI-driven development and infrastructure modernization will support both profit and margin trajectories across the selected names. The bank emphasizes that guidance issued by these companies contains conservative entries, especially around hardware and overseas exposure, and that the absence of assumed downside risks could lead to upward revisions.
Key takeaways
- All three companies - NEC, Fujitsu and NRI - were rated Overweight by Morgan Stanley, with price targets set at
- AI-driven development is identified as a key driver of margin improvement and profit growth across the coverage universe.
- Conservative near-term guidance, particularly in hardware and overseas operations, creates scope for potential upward revisions if assumed risks do not materialize.
Risks and uncertainties
- Component supply and geopolitical risks - Morgan Stanley notes that some current-year guidance already factors in these risks, which could constrain near-term upside if they persist, impacting IT services and infrastructure-related sectors.
- Overseas business execution - NRI's overseas units remain a focal risk following significant impairment charges, and further restructuring or underperformance abroad could affect margins and returns.
- Market adoption timing - The sovereign AI narrative, particularly for Fujitsu, may take time to be fully understood by the market, which could delay re-rating even if fundamentals improve.
These observations form Morgan Stanley's basis for overweight ratings on the three names, reflecting a view that earnings momentum, margin upside from AI initiatives, and specific company developments could support positive reappraisals of current guidance if downside risks abate.