Denso Cuts Profit Forecast Amid U.S. Tariffs and Rising Costs

Japan’s Denso Corp, one of the world’s largest automotive parts suppliers and a key partner to Toyota Motor Corp, has lowered its full-year operating profit forecast, citing pressure from U.S. import tariffs along with rising material and fixed costs. The revised outlook highlights the growing challenges facing global auto parts manufacturers as trade policies and cost inflation weigh on earnings.

Denso now expects operating profit for the fiscal year ending March 2026 to reach 535 billion yen (approximately $3.44 billion), a sharp 17.8% reduction from its earlier forecast of 651 billion yen. The downgrade reflects the financial impact of U.S. tariffs on imported auto components, which have added to cost burdens across the supply chain. Higher raw material prices and increased fixed expenses have further eroded margins, despite the company’s ongoing cost-control measures.

Still, Denso’s recent quarterly performance showed resilience. For the three months ended December 31, the company reported operating profit of 164.5 billion yen, marking a 9.4% increase compared with the same period a year earlier. This result was broadly in line with the average estimate from eight analysts surveyed by LSEG, signaling that the market had largely anticipated the outcome. In the comparable quarter last year, Denso posted operating profit of 150.3 billion yen.

The company said that gains from a weaker yen helped cushion the impact of higher costs and trade-related headwinds. Currency depreciation tends to benefit Japanese exporters like Denso by boosting the value of overseas earnings when repatriated. In addition, management noted that mitigation steps aimed at reducing the impact of U.S. tariffs were expected to be less severe than initially feared, providing some offset to rising expenses.

Despite the profit forecast cut, Denso remains a critical player in the global automotive industry, supplying advanced components such as powertrain systems, electrification technologies, and driver assistance solutions. However, the revised outlook underscores how geopolitical factors, cost inflation, and shifting trade dynamics continue to shape profitability across the auto parts sector, even for industry leaders.