Masayoshi Son, CEO of SoftBank, weighed several options for chipmaker Arm after Nvidia pulled out of the company’s purchase.
Alessandro Di Ciommo | Nurphoto | Getty Images
SoftBank saw its biggest gain in nearly three years at its flagship technology investment arm, the Vision Fund, in the December quarter amid a rebound in tech company valuations.
Here’s how SoftBank did in the December quarter against LSEG estimates:
- Net sales: 1.77 trillion Japanese yen ($11.9 billion) versus 1.8 trillion Japanese yen expected.
- Net income: 950 billion Japanese yen vs. 196.5 billion yen expected.
The Vision Fund posted an investment profit of 600.7 billion Japanese yen, continuing its recovery from record losses in the previous financial year. This gain is the highest since the March 2021 quarter, when the Vision Fund posted a profit of ¥3.59 trillion.
SoftBank’s net income was also its first quarterly gain after four straight losses.
SoftBank’s top tech investment arm struggled in the fiscal year that ended in March last year, posting a record loss of about $32 billion amid falling tech stock prices and the deterioration of some of its China bets.
The Vision Fund has been profitable for the past three quarters.
SoftBank also said it saw rising valuations from two major companies in which the Vision Fund invests, Chinese app Didi and TikTok owner ByteDance.
In the June 2023 quarter, the Vision Fund posted its first investment gain in five consecutive quarters, signaling early signs of renewed growth that coincided with a rebound in tech stock prices.
In 2022, SoftBank founder Masayoshi Son said the company will go into “defensive” mode, slowing the pace of its investment and taking a more cautious approach. In June, Son signaled a switch to “offense” mode, touting his excitement about the potential of AI technology. The Vision Fund is exposed to artificial intelligence through investments in companies such as China’s SenseTime.
Arm reinforcement
SoftBank said in the December quarter that it posted an investment gain of $5.5 billion thanks to the sale of a majority ownership stake in chip designer Arm to one of the Japanese company’s wholly-owned subsidiaries.
Arm went public in the US last year. The British company was acquired by SoftBank in 2016 for around $32 billion at the time and Arm’s initial public offering valued the company at over $50 billion.
Ahead of the earnings report, Tokyo-listed SoftBank shares closed 11 percent higher after Arm on Wednesday posted earnings and gave a financial forecast that beat market expectations.
SoftBank’s Son has repeatedly talked about Arm’s potential to become a major player in artificial intelligence, a sentiment echoed by the Japanese company’s chief financial officer Yoshimitsu Goto.
“Arm is the largest contributor to the global evolution of artificial intelligence,” Goto said during an earnings call Thursday.
Investors will be watching what SoftBank does in March, when the lock-up — the period in which the company is not allowed to sell Arm shares after the IPO — ends. Jefferies equity analyst Atul Goyal said in a note on Thursday that when the lock-up ends, SoftBank could fuel its share buyback by selling shares in Arm.
Moving from ‘Alibaba to AI’ and away from China
Goto said SoftBank “has gone through the shift from Alibaba to the AI-centric portfolio.”
SoftBank grew into one of Japan’s biggest companies thanks to Son’s early bet on Chinese e-commerce giant Alibaba in 2000, which boomed in the years that followed.
SoftBank was recently cutting its stake in Alibaba. Goto revealed that Alibaba accounted for almost zero percent of SoftBank’s assets at the end of the December quarter, down from 50 percent at the end of December 2019.
Meanwhile, the arm grew from 9% to 32% of SoftBank’s assets held over the same period.
Goto also said SoftBank has reduced its investment exposure to China.
“When we had a lot of Alibaba [shares] we used to be China-centric, but now we’ve gone through the bend,” Goto said.