Rakuten shares drop 9% on mobile unit losses, heavy investment

Shares of Rakuten Group Inc. fell as much as 9% on Thursday after the Japanese tech conglomerate reported widening losses in its mobile unit and increased investment, clouding its financial outlook.

The Tokyo-based company, which operates in e-commerce, fintech, and telecommunications, cited higher capital expenditure and operational costs as key drivers of its mobile division’s losses. Rakuten Mobile, launched in 2020, has faced intense competition in Japan’s crowded telecom market, pressuring margins and delaying profitability.

Rakuten’s management acknowledged that the mobile unit’s losses deepened in the latest quarter, despite subscriber growth. The company has accelerated network expansion and customer acquisition efforts, but these initiatives have weighed on earnings. Analysts noted that the heavy investment phase, while necessary for long-term growth, has weighed on near-term financial performance.

The broader Rakuten Group also faces challenges in its fintech and e-commerce segments, where competition remains fierce. While its online marketplace and digital payment services maintain strong user bases, profitability has been uneven amid rising costs and regulatory scrutiny.

Investors reacted to the downbeat outlook by trimming exposure, with the stock extending declines from earlier in the week. The selloff reflects concerns over Rakuten’s ability to balance aggressive expansion with sustainable profitability in a high-cost operating environment.

Rakuten did not provide updated financial guidance in its latest update, leaving analysts to reassess earnings forecasts. The company is expected to detail its strategy for improving margins and reducing losses in its next earnings report, scheduled for late October.