SoftBank Group reports Q1 profit of $2.87 billion, beating forecasts

SoftBank Group is back in the green, and in a big way. On Thursday, the Japanese tech conglomerate reported a fiscal first-quarter profit that soared past market expectations, fueled primarily by a significant rebound in its Vision Fund investment arm.

The investment firm posted a net profit of 421.8 billion yen ($2.87 billion) for April-June. This result easily topped analysts’ 127.6 billion yen profit forecast in the LSEG consensus.

It marks SoftBank’s second consecutive quarter of profitability, a strong recovery from the 174.28 billion yen loss recorded in the same quarter last year. The rebound is a sign that the firm’s high-stakes investments, especially in artificial intelligence and tech, may finally be turning the corner.

At the heart of this performance is SoftBank’s Vision Fund. The fund, which invests in cutting-edge technology firms around the globe, saw its assets rise by $4.8 billion in the quarter. When accounting for costs and other factors, the Vision Fund posted a segment profit of 451.4 billion yen, reversing losses seen a year ago.

SoftBank reaps early gains from AI bets

Most of the recent gains at SoftBank are riding on its aggressive bet on the usefulness of artificial intelligence. This was driven by improved public and private market valuations in the fund’s holdings. The firm’s top investment in 2020 was ride-hailing giant Grab and Indian food delivery leader Swiggy. These gains were also helped by some of its private Indian tech investments.

In addition to expanding its portfolio, the investment firm has made waves with some big bets on AI. The organization took on the lead of a $40 billion OpenAI developer, ChatGPT. It has also agreed to buy U.S. chipmaker Ampere Computing for $6.5 billion.

The market has its eyes on both of these moves. Because of all the volatility and setbacks, it surprised investors in June when SoftBank carved out an even greater impact in the world of AI than it had already poured billions upon billions into.

SoftBank is also getting ambitious in non-IT sectors, an example of which is its participation in a $500 billion Stargate infrastructure project in the U.S. The goal is to create large-scale, high-performance data centers and AI infrastructure. While the company has confirmed its participation, it has yet to sketch out how it would pay for this monumental undertaking, a key question for shareholders and analysts alike.

SoftBank sells major holdings to rebalance portfolio

Despite the strong quarter overall, not all parts of SoftBank’s portfolio delivered gains. The company reported a 256.55 billion yen investment loss related to its non-Vision Fund holdings. These losses were mainly tied to the sale of shares in T-Mobile and Alibaba, two companies that have been longtime staples in SoftBank’s investment strategy.

Still, the investment firm partially offset those losses through profits from its holdings in semiconductor leader Nvidia, whose shares have surged amid the global AI boom.

In August, SoftBank also cleared some of its portfolio, announcing it sold around 13 million T-Mobile shares for almost $3 billion to help fund future activities.

Arm Holdings, the British chip design business in which SoftBank owns a majority stake, recorded a loss of ¥8.66bn. The drop was tied to the research and development costs that exceeded revenue growth. In the income statement, the company said that Arm is increasing the scale of its innovation capabilities, but this does require period-investment.

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