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SoftBank Group Corp.’s profit soared 124% after valuations of tech startups like ByteDance Ltd. rose, in a boost for the Japanese company’s aggressive data center investment plans.
SoftBank, which on Tuesday reaffirmed plans to invest up to $30 billion in ChatGPT-owner OpenAI, reported net income of ¥517.18 billion ($3.5 billion) in its fiscal fourth quarter. That was helped by the Vision Fund, which swung to a profit of ¥26.1 billion thanks to gains in investees such as ByteDance and China’s Didi Global Inc.
Shares of SoftBank jumped as much as 5.8% early Wednesday morning in Tokyo, their biggest intraday gain in more than a month.
SoftBank founder Masayoshi Son and OpenAI co-founder Sam Altman unveiled the US-based Stargate project in January with promises to deploy $100 billion into data centers and other infrastructure. That could rise to more than $500 billion over time. Maintaining a healthy cash flow and balance sheet is key to securing the billions of dollars needed at minimum cost.
Son and Altman’s undertaking however coincides with mounting macroeconomic turbulence. Their bid has been stymied as debt investors and bankers reassess the value of data centers, Bloomberg News reported. SoftBank has yet to begin detailed discussions on how the large-scale data center rollout will be financed.
“Uncertainty is growing and it’s becoming harder to see the landscape ahead,” SoftBank Chief Financial Officer Yoshimitsu Goto said during an earnings conference. “But SoftBank has not changed course for 44 years. We are not changing now.”
He said it wasn’t true that the Stargate endeavor has slowed. “We don’t believe the plan has become stuck due to tariffs,” he said. “What’s important is that we bring about each project, one by one.”
More broadly, SoftBank’s earnings jump reflects its exposure to the startup market after years of Vision Fund investments into hundreds of tech companies. In the March quarter, investors re-rated Chinese firms such as ByteDance that are managing to sustain growth despite economic slowdown back home. Online video darling TikTok has kept up a strong pace of international growth, while SoftBank was also helped by share price increases at Didi and Auto1 Group SE.
That outweighed declines at baby-products retailer BrainBees Solutions Ltd. and stock price falls at other publicly listed Indian portfolio companies such as food-delivery app Swiggy Ltd. and e-scooter maker Ola Electric Mobility Ltd. Vision Fund 2, which is backed by SoftBank, logged a $708 million loss, it said.
Global investment in AI computing is helping to lift sales at SoftBank’s chip unit Arm Holdings Plc and SoftBank is further strengthening its hold on chip technologies Son believes crucial for AI. It’s announced a $6.5 billion acquisition for chip designer Ampere Computing LLC, that it expects to close in the second half of the year. For the year ended March, SoftBank earned a ¥1.15 trillion net income, its first profit in four years after springing back from a loss of about ¥228 billion in the previous year.
Credit watchers are wary about how SoftBank plans to finance its big global ambitions, however. Goto stressed the tech investor’s commitment to keeping its loan-to-value ratio below 25%, saying that the company has the financial strength to weather any volatility ahead. The company is likely to resort to more bonds, loans and asset-backed finance, especially if there is a selloff in equities in the months ahead, according CreditSights analyst Mary Pollock.
“Given the increased macroeconomic uncertainty (including the implications for rates, FX, equity valuations) and the uncertainty around the pace of AI demand, costs, and the appropriate valuations, we are even more concerned for SBG creditors,” she wrote in a note to investors.
