SoftBank Group reported a ¥1.1 trillion or $7 billion quarterly loss on Tuesday, reversing a ¥2.5 trillion profit a year earlier as rising financing costs and setbacks in US AI infrastructure exposed the strains behind Masayoshi Son’s investment strategy.
The July–September result fell well below expectations from analysts polled by LSEG, whose forecasts ranged from a ¥233 billion profit to a ¥113 billion loss.
Last year’s comparable quarter benefited from a large gain on SoftBank’s OpenAI investment.
Yet the latest reversal does not reflect a collapse in OpenAI’s valuation. Instead, SoftBank’s accounts reveal mounting costs and weaker investment gains, raising questions about its financial flexibility.
SoftBank earnings: A $3.7 billion setback behind the profit reversal
The most striking disclosure was a ¥597.2 billion ($3.73 billion) loss tied to changes in orders for electricity-generation equipment for US AI data centres, including a project in Ohio.
SoftBank said a subsidiary revised its procurement plans as project requirements evolved. The charge included ¥457 billion in non-refundable advance payments and ¥140.2 billion relating to contract changes and settlements.
It illustrates how committing capital before projects are built can create expensive reversals.
SoftBank said the subsidiary might eventually receive up to $2.1 billion in rebates on future purchases, but recognised no asset for those contingent benefits.
For the six months ended September, financing costs climbed to ¥790.7 billion from ¥340 billion a year earlier. Derivatives produced a ¥433.3 billion loss, against a ¥208.1 billion gain previously.
Investment gains also fell 56% to ¥1.73 trillion, despite a substantial gain on Intel shares.
Writing on Investing.com before the results, Johan Shamshad said: “The market is not saying SoftBank’s AI investments are worthless.” His concern was the growing risk premium attached to financing them.
SoftBank OpenAI investment cannot eliminate borrowing pressure
SoftBank has invested $64.6 billion for an approximately 13% stake in OpenAI, underlining how central the ChatGPT developer has become to Son’s plans.
At September’s end, the Japanese group had invested $54.6 billion and valued its holding at $99.6 billion, implying roughly $45 billion in cumulative investment gains. Another $10 billion was invested on 1 October. The filing said OpenAI’s valuation was unchanged from March.
But rising asset values do not automatically generate the cash needed to service debt. At June’s end, net interest-bearing debt stood at ¥10.8 trillion, versus ¥6.6 trillion a year before.
SoftBank issued dollar bonds in September paying up to 9.75%, underscoring the price of financing its ambitions. Falling values for other holdings, particularly Arm, could also constrain borrowing against assets.
Junji Sakurada of Marina Bay Capital Advisors warned Bloomberg before the results that worsening credit conditions could disrupt planned fundraising.
SoftBank AI investment strategy
Investors were already nervous, as SoftBank shares dropped nearly 11% on Friday and another 4.2% on Monday amid a broader retreat from AI-linked stocks.
Potential US restrictions on new data centres added uncertainty about when infrastructure projects might proceed.
The company also faces complications over its proposed $5.4 billion purchase of ABB’s robotics business after Chinese authorities blocked the transaction in its existing form.
“SoftBank may find itself in a position where they have to stop investing,” Rolf Bulk of Futurum Group told Reuters before Tuesday’s results. He suggested reducing debt or selling holdings might eventually become necessary.
That remains a risk, not an announced change of strategy. Son still owns valuable positions spanning AI software, chips and infrastructure, and SoftBank has experience raising cash through asset sales.
The post SoftBank swings from $16 billion profit to $7 billion loss: what went wrong? appeared first on Invezz
