SoftBank Group, the renowned technology investor, has reported a significant comeback in its fourth-quarter performance, with its portfolio crown jewel, Arm Holdings, driving the surge. The Japanese firm booked a net profit of 328.9 billion yen ($2.11 billion) for January-March, marking its second successive quarterly profit. This performance is a positive sign for SoftBank, which has been on a nascent return to growth, as declared by its Chief Financial Officer Yoshimitsu Goto in February.
The strong performance of tech stocks, particularly Arm Holdings, fueled the upbeat quarter. Arm, a British chip design firm, has been benefiting from the enthusiasm surrounding the adoption of artificial intelligence (AI). Although SoftBank hasn’t been a major investor in firms developing generative AI models like ChatGPT, it owns 90 per cent of Arm, whose value has surged on AI hype.
Despite Arm’s record sales and revenue growth, SoftBank’s profit didn’t reflect this surge, as Arm operates as a subsidiary. SoftBank even incurred a 33 billion yen loss from its Arm investment in the last fiscal year due to increased expenses related to stock compensation and hiring. However, Arm’s strategic growth remained evident, with its headcount growing by more than 1,100 in the past year, primarily in engineering roles.
SoftBank’s investment strategy heavily focuses on AI, with Arm positioned to power companies across its portfolio. Nevertheless, most of SoftBank’s investments through its Vision Fund unit suffered valuation losses in the fourth quarter, resulting in a 57.5 billion yen loss. However, there was a bright spot in the form of South Korean e-commerce firm Coupang, which generated around $600 million in unrealized investment gains.
Comparatively, SoftBank’s fourth-quarter performance showed a remarkable turnaround from a 32 billion yen loss in the same period a year earlier. In the previous year, capital raised using its Alibaba Group stake had cushioned writedowns in the value of Vision Fund private portfolio firms.
SoftBank’s CEO, Masayoshi Son, has long championed AI, and the company’s recent focus on Arm’s growth aligns with this vision. As tech stocks continue to thrive, particularly in AI-related sectors, SoftBank’s strategic investments seem poised to capitalize on this trend.
Despite ongoing challenges and losses in some sectors, SoftBank’s resurgence in profitability underscores its resilience and ability to navigate volatile markets. With Arm as its flagship asset, SoftBank is positioning itself to remain at the forefront of technological innovation, driving its comeback in the tech investment landscape.
