SoftBank Group profit falls 18% to 347.3 billion yen as Intel gains offset Vision Fund decline

Quarterly results

SoftBank Group Corp. reported on Thursday an 18% drop in fiscal first-quarter net profit to ¥347.3 billion ($2.2 billion) for the April-June period, down from ¥421.8 billion a year earlier. Despite the decline, the result beat analyst expectations of ¥148.4 billion, according to LSEG data. Quarterly revenue rose 10.9% to ¥2,019.5 billion. The profit slide followed records set in recent quarters after successive revaluations of SoftBank's stake in OpenAI. The company attributed the decline to lower gains from its Vision Funds business and a foreign exchange loss of ¥146 billion, up from ¥143.2 billion a year earlier, as a weaker yen weighed on its large dollar-denominated debt holdings.

Chip bets and investment gains

While the Vision Fund business saw a sharp profit decline, SoftBank's overall investment profits nearly quadrupled to ¥1,859.3 billion, driven by a surge in Intel Corp.'s share price, which has jumped more than 150% this year. The Vision Funds, which house SoftBank's OpenAI stake, recorded a gain on investments of ¥255.8 billion in the quarter. The company said it recorded no investment loss or gain related to OpenAI in the quarter. SoftBank's broader portfolio includes ByteDance, the parent company of TikTok; Intel; PayPay, a Japanese mobile payment service; Taiwan Semiconductor Manufacturing Company (TSMC); and UK chip designer Arm Holdings.

Arm and AI operations

Arm Holdings logged a larger net loss from AI-related operations due to higher research and development costs after hiring more engineers, though its sales grew on AI-related demand. Senior Vice President and Chief Financial Officer Yoshimitsu Goto told reporters at a press conference on Thursday that earnings from AI-related operations are expected to improve.

The market for CPUs for data centers will continue to grow.

Through its ownership of Arm, its stake in OpenAI, and investments in robotics, data centre and energy businesses, CEO Masayoshi Son has positioned SoftBank at the centre of the AI boom. One area Son is focused on lately is autonomous driving. Another project in the works is ABB Robotics, which focuses on automation, robotic arms and mobility.

OpenAI commitment and leverage

SoftBank has invested an additional $20 billion in OpenAI and has committed $64.6 billion in total for an eventual stake of roughly 13% once its most recent investment round completes in October. The group has put in place $40 billion in bridge loans for the OpenAI investment and holds margin loans against its near-90% stake in Arm. Son has been a committed backer of OpenAI chief Sam Altman. As OpenAI heads toward a critical initial public offering, and SoftBank tries to bring its own companies including robotics venture Roze to market, the financial stakes for Son are rising along with the leverage necessary to continue financing his ambitions.

Share price and market position

SoftBank shares finished 4% lower in Tokyo trading on Thursday. The stock is still up 23% this year but is down about a third since last year's peak. SoftBank briefly became Japan's most valuable company at the start of June as shares surged, but has since fallen back to third place, behind megabank MUFG and carmaker Toyota. The company, founded in 1981 by Son, does not give annual forecasts.