SoftBank qtrly loss narrows amid tech rebound, but misses expectations

August 8, 2023 5:09 AM EDT
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Join SI Premium – FREE -- SoftBank Group Corp (TYO:9984) logged a smaller loss for the June quarter from the prior year, benefiting from a rebound in technology shares, although the tech conglomerate still missed expectations for a profit.

The firm logged a net loss of ¥477.6 billion ($1 = ¥143.19), compared to a loss of ¥3.16 trillion a year ago. The figure was much weaker than Refinitiv estimates for a profit of ¥75B.

The group’s flagship Vision Fund logged an investment loss of ¥13B for the quarter, compared to a loss of ¥2.92B last year. The loss marks a sixth straight negative quarter for the fund, given that it backs high-growth stocks that fell sharply out of favor as the Federal Reserve began hiking interest rates over the past year.

Growing bets that the Fed was now close to ending its rate hike cycle spurred heavy flows into tech stocks over the past quarter, somewhat benefiting SoftBank (OTC: SFTBY).

But while some of the firm’s holdings appreciated during the quarter, losses in its weightiest holdings - namely Alibaba Group (NYSE: BABA), Deutsche Telekom (ETR:DTEGn), and T-Mobile US (NASDAQ: TMUS) saw SoftBank log an investment loss of ¥689.69B during the quarter.

The surprise loss now draws questions over more dealmaking activity from SoftBank, with CEO Masayoshi Son having recently flagged a switch into “offense mode” as the company moves to capitalize on a surge in artificial intelligence investment.

The tech giant is also set to list its chip designing unit, Arm, on the Nasdaq later this year. Arm, which counts several global chipmakers among its clients, is expected to benefit from a boom in AI development this year.

But Arm clocked a decline in sales through the quarter, while also swinging to a quarterly loss as the semiconductor industry grappled with a downturn in sales. Several major chip manufacturers have warned that while AI investment is expected to support some demand this year, it is unlikely that it will be enough to offset a cyclical downturn in the industry.

Optimism over AI was among the biggest boosts to tech stocks through the June quarter, with majors such as Microsoft Corporation (NASDAQ: MSFT) and Alphabet Inc (NASDAQ: GOOGL) announcing more investment in the sector as their profits beat expectations.

But this was insufficient in boosting SoftBank's bottom line, with the firm having logged steep losses on its investments over the past two years.

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