In this Research Note, we examine the Canon video surveillance businesses, incorporating Canon and Axis Communications network cameras, Milestone video management software, Arcules cloud services and BriefCam video analytics software. This analysis is based on the parent company 2022 financial results, investor presentations, Corporate Strategy conference 6th March 2023, Axis 2022 Sustainability Report, 29th March 2023 and Milestone Systems 2022 Annual Report.

In 2022, Canon reported 293.8 billion yen (around $2.2 billion), +33.3% sales growth in the Network Cameras & Others line of business versus the prior year.

In 2022, the network camera market returned to its original growth track as restrictions on economic activity were eased. Under this situation, by working to secure components that continued to be in short supply, Canon increased unit sales from the second quarter, which led to significant revenue growth. This record-high net sales result was due to significant growth in Axis Communications' revenue.

Canon Growth Strategy

The network camera industry has grown rapidly as a result of rising security concerns worldwide. The market is expected to grow by double-digits in the coming years as the focus expands from security to imaging solutions aimed at improving productivity and eliminating labour shortages in production, education, medical, retail, and other fields.

With Axis' broad product range and global sales network together with Canon's optical imaging technology, coupled with the video management software and analytics technology of Milestone, the business is intended to expand to cover the imaging solutions area in addition to network cameras, achieving growth that outpaces that of the market, maintaining their No. 1 global market share. They also aim to expand usage beyond the security field into other vertical markets, such as the analysis of visitor behaviour in the retail sector and medical facilities or analysing production status in factories.

Axis Communications is the major contributor to Canon’s video surveillance business, accounting for over 70% of its revenues.

Boosted by a large order backlog, the fourth quarter closed at an all-time high level, concluding 2022 with SEK 15.9 billion ($1.6 billion) revenues and 20% currency adjusted growth.

Strong sales, a healthy gross margin and clever OPEX-investments resulted in an operating margin of SEK 1.9 billion, corresponding to 12.1% of sales.

Offering products and services for video surveillance and analytics, access control, intercom and audio systems, Axis has around 4,210 employees in over 50 countries. Axis applies an indirect, go-to-market business model based on long-term close collaboration with partners in 179 countries, a global market presence with strong local ties, and continual development of products and solutions. Americas is their largest market accounting for 58% of 2022 revenues, followed by EMEA, 30% and Asia Pacific, 12%.

Milestone Systems headquartered in Brøndby, Denmark, is a provider of video management software. Milestone enables a platform community that drives collaboration in the development and use of network video technology. Acquired by the Canon Group in 2014, Milestone operates as a stand-alone company, present in 25 countries and employing aound 1,300 people. In 2022, turnover reached 1,488 million Danish kroner (around $215 million), an increase of 30% over the prior year.

Acquired by the Canon Group in 2018, BriefCam is a US-based provider of video analytics software, with 130 employees on LinkedIn. Their VIDEO SYNOPSIS proprietary technology provides insights for accelerating investigations, increasing situational awareness and enhancing operational intelligence through summarizing hours of events into a “brief” to extract maximum value from video for safety, security and productivity.

Acquired by the Canon Group in 2018, Arcules, based in Irvine, California, provides a cloud-based Video Surveillance as a Service (VSaaS), with 95 employees on LinkedIn. The company reported a strong quarter in September 2022, with growth driven by enhanced services, partnerships and customer wins. Arcules’ investments in technology and personnel followed a strong year in which the company extended its presence globally and secured significant deals across the public sector, retail, healthcare, manufacturing, and education industries. It added strategic sales leaders in EMEA and APAC, and expanded its collaboration with Canon Marketing Japan (Canon MJ) to distribute the Arcules VSaaS solution to thousands of multi-site customers in Japan.

As for 2023 even though the global economy is expected to slow down, Canon expects the network camera market to continue to grow, as the need for safety and security remains the same. Canon aims to achieve annual growth of around 12.5% in the network cameras business, with projected revenues of 330.5 billion yen (around $2.5 billion) in 2023.

This puts Canon on track to achieve its 2021 target of doubling its video surveillance sales between 2021 and 2025, forecasting to reach more than $3 billion in revenue by 2025.

This article was written by Daphne Tomlinson, Senior Research Associate at Memoori.