(Bloomberg) — SoftBank Group Corp. reported its second consecutive quarter of profit as Japanese tech investors benefited from an artificial intelligence investment boom that boosted assets such as Arm Holdings.
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The Tokyo-based company posted a better-than-expected net profit of 231.1 billion yen ($1.5 billion) in the March quarter, with a net loss of 57.6 billion yen, supported by investment gains from holding companies and derivative contracts. For the full year, SoftBank reported a net loss of 227.7 billion yen, exceeding expectations and narrowing its deficit.
Vision Fund reported an unexpected loss of 96.7 billion yen due to a series of valuation downgrades on the second Vision Fund's portfolio of hundreds of unlisted startup companies. Of this amount, realized and unrealized losses of JD Logistics Inc., Better Holdco Inc., DingDong Ltd., AutoStore Holdings Ltd., etc. amounted to approximately 54 billion yen.
“Arm's IPO and stock price rise were notable positive factors,” Satoru Kikuchi, a senior analyst at SMBC Nikko Securities, said in a note ahead of the earnings announcement. “We are focusing on strategic investments led by SoftBank Group, rather than diversified investments like Vision Fund 2.”
SoftBank is looking to regain its footing as Son considers major investments in artificial intelligence and semiconductors as part of an effort to maximize Arm's potential beyond mobile devices. The Vision Fund has steadily sold or written off billions of dollars worth of publicly traded holdings in recent years as Mr. Son readjusted his focus. As a result, SoftBank's cash and deposits reached 6.2 trillion yen as of the end of March.
SoftBank sells Vision Fund assets as Son shifts focus to AI and chips
SoftBank has ramped up investment in AI-related hardware in recent months, and in some cases has taken control of it. A Japanese investment firm is in talks to acquire British semiconductor startup Graphcore, Bloomberg reports. Earlier this month, SoftBank led a $1.05 billion funding round in British self-driving startup Wave Technologies, investing alongside Nvidia and existing backer Microsoft. In 2022, SoftBank's blank check company merged with robotic warehouse automation company Symbotic. , the two companies have been partnering on the project ever since.
The company, heavily in debt, is also grappling with the prospect of rising interest rates. At the group level, SoftBank booked foreign currency borrowings of 982.2 billion yen in the March quarter.
SMBC's Kikuchi said SoftBank's attempt to leverage Arm technology and invest in AI services may be welcomed by the market. To increase investment capital, SoftBank may sell its holdings in T-Mobile, Deutsche Telekom and Arm. SoftBank has previously sold stakes in assets such as Alibaba Group Holding to raise funds for new expansions, strengthen its balance sheet and buy back its own stock.
Tomoaki Kawasaki, senior analyst at Iwa Cosmo Securities, said, “In addition to knowing how strong the recovery in earnings is actually, we also want to know their investment stance.'' “They have been holding back on investment for a while, but they are hinting that they may become active again.”
–Thanks to Momoka Yokoyama for her assistance.
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