Canon Stock Drops Over 5% as Medical Division Crisis Worsens

Shares of Canon Inc. (TYO:7751) slid 5.4% to ¥4,638 on Wednesday after the company cut its full-year financial outlook, citing a deepening crisis in its medical equipment business. The negative forecast completely overshadowed an otherwise solid third-quarter earnings report released late Tuesday.

Guidance Cut Overshadows Strong Q3 Results

The sell-off occurred even as Canon reported a 10.3% year-over-year increase in third-quarter operating profit and a 4.9% rise in net sales. Those results were aided by a weaker yen, which boosts the value of overseas revenue.

However, the market's reaction was driven entirely by the company's decision to lower its full-year targets. This indicates that investors are more concerned about future performance and unresolved operational issues than the firm's recent profitability.

Medical Division Woes Deepen

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The primary driver for the guidance cut is escalating problems within Canon’s Medical Business Unit. The company disclosed that severe supply chain disruptions have worsened, forcing it to delay its timeline for production normalization from September 2026 into 2027.

Reflecting the severity of the delays, Canon doubled its estimate for the negative revenue impact from these issues to approximately ¥90 billion. The company also flagged growing supply constraints for printed circuit boards and electronic components, attributing the shortage to surging demand from the artificial intelligence industry.

Market Context

Canon's sharp decline was a significant outlier in Wednesday's session on the Tokyo Stock Exchange. The broader Nikkei 225 index surged, driven by strong buying in semiconductor-related stocks, highlighting the company-specific nature of the investor concerns weighing on Canon's shares.