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Japan's SoftBank Group beat analysts' expectations and reported its first quarterly profit in more than a year, giving the volatile technology conglomerate and its founder Masayoshi Son a much-needed boost.
SoftBank on Thursday announced net profit of 950 billion yen ($6.4 billion) for the third quarter ended December, which was higher than analysts' consensus estimates of 373 billion yen from Bloomberg and 196.5 billion from data provider LSEG. It significantly exceeded the yen. A year ago, the company posted a deficit of 783 billion yen.
SoftBank last reported a profit in the second quarter of 2022 after selling a stake in Chinese e-commerce group Alibaba.
The group's technology-focused Vision Fund totaled 600.7 billion yen in the third quarter, helped by gains from companies such as TikTok owner ByteDance and food delivery app DoorDash, as well as a “recovery in public assets.” made a profit on investment. In the same period last year, Vision Fund posted a loss of 730 billion yen.
But even though SoftBank Chief Financial Officer Yoshimitsu Goto saw Vision Fund's performance as “steadily improving,” the fund still had cumulative losses of just under 3 trillion yen, or nearly $20 billion. I am holding.
“We are… very close to the surface now,” Goto said, referring to Vision Fund's performance.
SoftBank's shares had already risen 11% on Thursday, up more than 20% since the beginning of the year, after British chip design company Arm, which is 90% owned by a Japanese group, reported strong results on Wednesday. .
In its second earnings report since going public in September, Arm said its royalty and license income is increasing on the back of strong demand for artificial intelligence. This confirmed Son's vision for SoftBank, which has focused on AI trading.
SoftBank's CEO is exploring a variety of opportunities, including a possible investment in OpenAI and advancing discussions to fund the “iPhone of artificial intelligence.”
Last June, Mr. Son told shareholders that the Vision Fund had lost money following years of asset sales and losses, including startups such as WeWork, the once-high-profile desk rental startup that declared bankruptcy. The company said it was “fighting back.” last year.
On Thursday, Goto said Son was “exploring an AI strategy.” . . But everything he wants to do always leads back to Arm. . . chips and Arm technology.”
Goto said the company has undergone a “dramatic transformation from an Alibaba-centric company to an AI-centric company,” adding that Arm accounts for 32 percent of assets and Vision Fund another 38 percent. Ta. End of December.
A jump in Arm's stock market value and the windfall of $7.6 billion worth of new T-Mobile stock acquired in December as part of the merger deal with Sprint in 2020 improved results and boosted investor sentiment. Enhanced the group's image.
“It was a strong quarter,” said Kirk Boudry of Astris Advisory. “Although Arm was the driving force behind today's stock price, the quarterly results suggest that other parts of the business could also contribute, as both T-Mobile and Vision Fund helped SoftBank achieve its first profit in five quarters. We were encouraged by VF's results, especially as both funds reported increases in the valuations of their private portfolio companies. ”
However, the discount between SoftBank Group's stock market valuation and the increase in the value of the company's listed assets remained close to 50% in the third quarter, Goto said.
He added that even though Arm's stock price soared on Thursday, its discount rate was still “40-odd percent” and that it was “a very serious issue that we have to consider.”
Boudry said in a note to clients that “the market is reluctant to allocate the full amount to short-term fluctuations” in net asset value, but the discount reflects Son's decision to make the right investment strategy. Some said it reflected a decline in trust in the country.
“The market doesn't like his move to early-stage investments, given the lower probability of success compared to later-stage investments,” said David Gibson, an analyst at MST Financial, adding that the discount is also low. , he added, represents a judgment on how quickly to invest. The IPO market may be revived.
“Son will not be able to realize capital value because the market is not convinced that the capital markets are still open,” Gibson said.
