By Agence France-Presse
The company's president Akio Toyoda said the industry was facing "profound change" and pledged to transform the auto giant into "a mobility company."
Japan's leading carmaker said net profit jumped 36.2 percent to 2.49 trillion yen ($23 billion) in April-March, but for the current year it expects that to fall 15 percent to 2.12 trillion yen.
The boost was driven by a weaker yen and cost-cutting measures, but also US tax cuts, which have pushed up profits for other automakers in recent months.
"Toyota quickly recovered thanks to the US tax cuts and a weak yen for the last fiscal year," Satoru Takada, an analyst at TIW, a Tokyo-based research and consulting firm, told AFP ahead of the Wednesday earnings report.
Toyota said sales rose 6.5 percent to a record 29.3 trillion yen despite a 0.1 percent decline in vehicle sales by unit, and operating profit was up 20.3 percent.
It said it expected the market in developing countries to stay steady, with the market in emerging economies expanding gradually.
But it also warned of "profound transformation" in the industry as a whole because of "increasing, serious environmental issues and other social challenges, (and) technological innovation such as automated driving".
Toyoda said the company was facing a "once-in-a-century" challenge, "as our rivals change, as well as the rules of the competition."
He said the company now faced rivals that include IT companies with massive capital and the ability to adapt swiftly and that Toyota would invest in new technology and look for alliances to create novel products and services. He gave no further specifics.
"I have decided to transform Toyota from a car manufacturer to a mobility company," he said.
That would entail becoming a firm that "provides various services involving movement of people around the world," he added, without providing more detail.
The company expects a strong yen for the current fiscal year, with sales forecast to slip 1.3 percent to 29 trillion yen.
A higher yen makes Japanese carmakers less competitive in foreign markets and deflates profits when repatriated.
"It is hard for the company to draw up a positive scenario for the current fiscal year as positive factors can't be seen," said analyst Takada.
Shares in Toyota surged 3.75 percent to close at 7,424 yen after its earnings announcement.