SoftBank scores another profit to fuel AI shift

SoftBank reported a second straight quarter of profitability as the Japanese tech conglomerate benefits from an artificial intelligence investment boom that has buoyed prized assets like Arm Holdings.

The Tokyo-based company earned a net income of 231.1 billion yen (€1.4 billion), compared with a net loss of 57.6 billion yen in the March quarter last year. Analysts projected net income of 176.3 billion yen for the period. The Vision Fund reported a loss of 96.7 billion yen, missing estimates for a profit of 185.1 billion yen.

SoftBank is regaining its footing just as Son readies sizeable investments in artificial intelligence and semiconductors, part of a push to maximise Arm’s potential beyond mobile devices. The flagship Vision Fund quietly sold off or wrote down billions of dollars’ worth of its publicly-listed holdings in recent years as Son realigns his focus. That’s helped lift SoftBank’s cash pile to 6.2 trillion yen at the end of March.

“The Arm IPO and share price rally were notable positives,” said Satoru Kikuchi, a senior analyst at SMBC Nikko Securities, in a note ahead of the earnings. “Our focus is on strategic investments directed by SoftBank Group rather than diversified investments like Vision Fund 2.”

The dollar’s renewed strength against the Japanese yen also bodes well for SoftBank, whose assets are mostly valued in the US currency. “With 90 per cent of net asset value priced in dollars, a weak yen flatters the valuation and financial results and this has provided some additional support for Softbank Group,” Kirk Boodry, an analyst at Astris Advisory, told investors ahead of earnings.

In recent months, SoftBank has stepped up investments in AI-related hardware, taking controlling stakes in some cases. The Japanese investment firm is in talks to acquire British semiconductor start-up Graphcore. Earlier this month, SoftBank led a $1.05 billion funding round for UK self-driving start-up Wayve Technologies, investing along with Nvidia and existing backer Microsoft. In 2022, a SoftBank blank-check firm merged with robotics warehouse automation firm Symbotic Inc., and the two firms have since partnered on projects.

SoftBank’s attempts to leverage Arm technology and investing in AI services could be well-received by the market, SMBC’s Kikuchi said. To increase funds for investment, SoftBank could offload its holdings in T-Mobile, Deutsche Telekom, or Arm. In the past, SoftBank has sold off stakes in assets such as Alibaba Group Holding Ltd. to finance new forays and also shore up its balance sheet and buy back shares.

“What I want to know is their stance on investing, in addition to how strong the earnings recovery actually turns out to be,” said Tomoaki Kawasaki, a senior analyst at Iwaicosmo Securities. “After holding back on investments for a while, they’ve been hinting that they could turn active again.” – Bloomberg