SoftBank Takes Another Profit to Drive Arm-Centric AI Shift

(Bloomberg) — SoftBank Group Corp. reported a second consecutive quarter of profitability as the Japanese technology conglomerate benefits from an investment boom in artificial intelligence that has boosted valuable assets such as Arm Holdings Plc.

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The Tokyo-based company made a net profit of ¥231.1 billion ($1.5 billion), compared with a net loss of ¥57.6 billion in the March quarter last year. Analysts projected net profit of ¥176.3 billion for the period. The Vision Fund reported a loss of ¥96.7 billion, missing estimates for a profit of ¥185.1 billion.

SoftBank is rallying as Son prepares sizable investments in artificial intelligence and semiconductors, part of an effort to maximize Arm’s potential beyond mobile devices. The flagship Vision Fund has quietly sold or written down billions of dollars of its publicly listed holdings in recent years as Son realigns his focus. That helped boost SoftBank’s cash holdings to 6.2 trillion yen at the end of March.

SoftBank Sells Vision Fund Assets as Son Pivots to AI, Chips

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

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

In recent months, SoftBank has stepped up investments in AI-related hardware, taking a controlling stake in some cases. The Japanese investment firm is in talks to acquire British semiconductor startup Graphcore Ltd., Bloomberg reported. Earlier this month, SoftBank led a $1.05 billion funding round for U.K. autonomous startup Wayve Technologies Ltd., investing alongside Nvidia and current backer Microsoft Corp. In 2022, a SoftBank blank check company merged with robotic warehouse automation company Symbotic Inc., and the two companies have since partnered on projects.

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

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“What I want to know is their position on investment, as well as how strong the earnings recovery will be,” said Tomoaki Kawasaki, senior analyst at Iwaicosmo Securities. “After withholding investments for a while, they have hinted that they could return to activity.”

–With assistance from Momoka Yokoyama.

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