SoftBank Swings to Q4 Profit in Sign of Comeback Gaining Steam

Reuters

17:33 JST, May 13, 2024

TOKYO (Reuters) – Technology investor SoftBank Group 9984.T reported a second successive quarterly net profit on Monday, with performance at portfolio crown jewel Arm Holdings ARM.O boding well for what the Japanese firm has said is a nascent return to growth.

SoftBank booked January-March profit of 328.9 billion yen ($2.11 billion), though full-year earnings remained in the red.

In February, Chief Financial Officer Yoshimitsu Goto had declared SoftBank – known for volatile earnings and outsized bets on startups – to be returning to a “growth trajectory.”

Tech stocks including British chip design firm Arm performed well in the quarter on unabated enthusiasm for the likely beneficiaries of the adoption of artificial intelligence (AI).

Founder and CEO Masayoshi Son has championed AI but SoftBank has not been a major investor in firms developing generative AI models like ChatGPT that have caught the popular imagination. Instead, it owns 90% of Arm whose value has surged on AI hype.

Still, that surge did not contribute to SoftBank profit as Arm is a subsidiary. And whereas Arm reported record January-March sales on license and royalty revenue, SoftBank booked a 33 billion yen loss from its Arm investment in the last fiscal year on increased expenses related to stock compensation and hiring.

Arm’s headcount grew by more than 1,100 in the year ended March, with more than 80% of net new hires being in engineering.

SoftBank has said group assets are AI-focused and that Arm will power companies across the Japanese firm’s portfolio.

However most of SoftBank’s investments through its Vision Fund unit suffered valuation loss in the fourth quarter, leaving it with a 57.5 billion yen loss. A bright spot came in the form of South Korean e-commerce firm Coupang CPNG.N which generated around $600 million in unrealised investment gain.

Overall, SoftBank’s fourth-quarter net profit compared with a 32 billion yen loss in the same period a year earlier, when capital raised using its Alibaba Group 9988.HK stake cushioned writedowns in the value of Vision Fund private portfolio firms.

$1 = 155.8500 yen