SoftBank Group Corp. (OTCPK:SFTBY) reported a swing to a net profit in the January-March quarter, highlighting both successes and ongoing challenges within its investment portfolio. The Japanese technology investor announced a profit of 328.9 billion yen ($2.11 billion), a significant turnaround from the 32 billion yen loss recorded in the same period the previous year. Despite this quarterly profit, SoftBank did not achieve profitability for the full year.
A key focus for investors is the performance of SoftBank’s subsidiary, Arm Holdings, a British chip designer. Arm is central to SoftBank’s strategy to leverage artificial intelligence (AI) technology across its company portfolio, including those held through its Vision Fund. According to SoftBank’s CFO Yoshimitsu Goto, Arm is fundamental to building a new AI ecosystem within SoftBank’s holdings.
Despite a surge in investor interest in AI, leading to a doubling of Arm’s share price in February, Arm’s financial success did not directly enhance SoftBank’s profitability due to its status as a subsidiary. Over the last fiscal year, Arm saw record sales from licensing and royalty revenues but also posted a 33-billion-yen loss for SoftBank, attributed to increased stock compensation costs and aggressive hiring, with the workforce growing by over 1,100, predominantly in engineering roles.
The Vision Fund, another significant component of SoftBank’s investment strategy, faced valuation losses across most of its investments in the fourth quarter, culminating in a 57.5 billion yen loss. However, a notable positive development was the unrealized investment gain of approximately $600 million from South Korean e-commerce giant Coupang. SoftBank’s return to a quarterly profit contrasts with the previous year, where funds raised from its stake in Alibaba Group (9988.HK) were needed to offset writedowns in the Vision Fund’s private portfolio. Moving forward, Goto has expressed optimism about SoftBank returning to a growth trajectory, indicating a cautious but hopeful outlook for the future of the conglomerate.
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