SoftBank announces quarterly profit of $1.5 billion as it turns to investing in AI

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SoftBank swung to a profit for the second straight quarter as the Japanese conglomerate sought to capitalize on the soaring valuation of British chip designer Arm and build war chests for its push into artificial intelligence .

The group recorded a net profit of 231 billion yen ($1.5 billion) in the quarter to the end of March, beating analysts’ expectations of a profit of 23.3 billion yen, according to S&P Capital IQ.

However, the fourth quarter results failed to make up for the weak start to the year, as the group fell to a full-year net loss of ¥227.6 billion. SoftBank last made an annual profit in the fiscal year ending March 2021, when the Covid-19 pandemic sent tech stocks surging.

Despite the year’s loss, analysts and investors are increasingly confident that SoftBank founder Masayoshi Son will develop a strong AI strategy based on its UK subsidiary Arm, where it owns 90%.

“Arms are at the heart of our AI transformation. . . so Arm and its portfolio companies should create a new ecosystem in the future,” Yoshimitsu Goto, SoftBank’s chief financial officer, said Monday. “That is our view and expectation.”

Goto added that “continuing change is the greatest risk prevention measure our company can take,” emphasizing SoftBank’s intention to continue investing in AI.

Last year, Son, who withdrew from SoftBank’s earnings presentation, said the company was ready to “counterattack” after nearly three years of selling assets and hoarding cash.

The Japanese conglomerate sold off billions of dollars in investments made by Vision Funds – which lost 57.5 billion yen in the fourth quarter – to build a dry powder warehouse it can deploy. The group had 6.2 trillion yen in cash at the end of March.

“The bottom line is they are selling more than they are investing. The expectation is that they are building a war chest, possibly for AI, but they are well positioned to start investing wherever they want,” said Kirk Boodry, SoftBank analyst at Astris Advisory in Tokyo, said.

Arm is central to Son’s plan, with SoftBank planning to reposition its strategy around the chip designer, which is one of the biggest beneficiaries of the strategy. artificial intelligence Spending has skyrocketed since listing on Nasdaq in September.

“The stock price is still driven by Arm,” Boodry said.

Last yearThe Financial Times reported that Arm is developing its own chip to demonstrate its design capabilities. On Sunday, Nikkei reported that Arm and SoftBank may move from chip design to manufacturing. SoftBank’s Goto did not comment on this report.

“We have extensive coverage and it doesn’t feel like [moving beyond chip design is] something that is needed,” Arm chief financial officer Jason Childs told journalists during a results presentation in Tokyo.

Goto said the group is doing some AI deals through SoftBank instead of Vision Funds to avoid having to exit.

Last week, SoftBank led an investment of more than $1 billion in British self-driving car startup Wayve to seek investments in AI.

Although Vision Fund executives were responsible for evaluating and valuing Wayve, the money for the deal came from SoftBank, not Vision Funds. The investment was signed off by Son, which executives said was due to the size of the deal and the AI ​​theme.