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SoftBank Group Corp. swung to its first profit after four straight quarters of losses, backed by a rebound in the value of Vision Fund’s public holdings and a windfall from T-Mobile US Inc. shares.
The Tokyo-based technology investor reported a net income of ¥950 billion ($6.4 billion) for the December quarter, reversing a ¥783 billion loss for the same period a year ago. It’s the Japanese company’s first profit since September 2022, as it continues to navigate volatile swings in the value of its startup investments.
The Vision Fund segment reported a ¥422.7 billion gain for the period compared with a loss of ¥660.1 billion a year ago. DoorDash Inc., AutoStore Holdings Inc., and Symbotic Inc. were among the best performers contributing to the Vision Fund, and SoftBank said the Vision Fund was helped by a rise in TikTok owner ByteDance Ltd.’s fair value. The value of Didi Global Inc.’s shares also rose 22% in the over-the-counter market.
The solid quarter may herald more relief to come, according to Kirk Boodry, an analyst at Astris Advisory. “We have not been overly bullish on the current portfolio,” he said, but added that key portfolio companies like ByteDance or American online sportswear store Fanatics might list in 2024.
SoftBank booked an extra windfall from an arrangement to receive more than 48 million T-Mobile shares worth almost $8 billion. The deal was part of an agreement struck when T-Mobile acquired rival and former SoftBank unit Sprint Corp. in 2020, designed to give SoftBank more T-Mobile shares if the stock rose above a certain level during a given period.
A 40% rally in newly-listed chip design unit Arm Holdings Plc’s shares in the December quarter further bolstered SoftBank’s finances. As the owner of a roughly 90% stake in the UK firm, SoftBank will likely be able to use Arm to help finance loans for new investments, in the same way a stake in Alibaba Group Holding Ltd. helped SoftBank secure financing to acquire Arm in the first place.
On Wednesday, Arm gave a bullish earnings forecast that beat estimates as a push beyond smartphones to more lucrative arenas such as servers and data centers bore fruit. Arm shares soared in after-hours trading, bringing the company’s valuation closer to $100 billion. Shares of SoftBank surged 11% prior to the earnings results, its highest close since July 2021.
Skepticism remains, however, about the Vision Fund’s hundreds of privately-held startups. The second Vision Fund, funded entirely by SoftBank, is mired in losses after a post-pandemic slump hurt tech valuations worldwide. Its gross performance since inception is a $19 billion loss, while Vision Fund I has had a $16.7 billion gain, SoftBank said this quarter.
The first Vision Fund has had its own setbacks, including from WeWork Inc., the startup once valued as much as $47 billion that filed for bankruptcy last year.
New investment activity by the second Vision Fund dwindled to $90 million, a shadow of the billions that SoftBank used to wield in the startup space. The first Vision Fund hasn’t made any new investments in the past nine months.
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