The loss confirms that the cost of building AI infrastructure is now hitting the income statement, not just valuations, which adds to the wider debate about returns on AI spending. Record NAV and steady leverage limit balance-sheet concern. But the drop in pro forma NAV to around ¥44.7 trillion at November 9 prices shows how exposed SoftBank is to the recent tech sell-off. Any official OpenAI revaluation is the clearest potential positive catalyst for the shares. The data centre power writedown also adds to the evidence that power supply is a binding constraint on AI capacity growth, an issue also raised in UBS’s latest strategy note.
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Posting ICYMI. SoftBank Group reported on Tuesday, November 10, after the Tokyo market close.
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SoftBank paid up early for power to run AI data centres, and the bill has landed in its quarterly results, while the OpenAI upside is still waiting to be booked.
Summary:
- SoftBank Group posted a fiscal Q2 net loss of about ¥1.12 trillion ($7 billion), against a ¥2.5 trillion profit a year earlier
- A roughly $3.7 billion writedown on advance payments for US data centre power equipment was the largest hit, alongside Intel losses and higher financing costs
- Revenue of ¥2.22 trillion beat the ¥2.02 trillion consensus
- NAV reached a record ¥59.8 trillion at end-September, with LTV at 15.9%, but stood at about ¥44.7 trillion at November 9 prices
- A further ¥3 trillion OpenAI investment lifted the stake to about 13%, and the new funding round valuation is not yet reflected
SoftBank Group swung to a net loss of about ¥1.12 trillion ($7 billion) in its fiscal second quarter, reversing a ¥2.5 trillion profit a year earlier, as a writedown on US AI data centre equipment, a fall in its Intel holding and higher financing costs weighed on results.
The biggest single hit was a roughly $3.7 billion (about ¥600 billion) writedown on nonrefundable advance payments for power-generation equipment intended for US data centres. A company executive said on the earnings call that SoftBank had made bridge investments early to secure the equipment in anticipation of shortages. Declines in investments including Intel and rising financing expenses added to the loss.
The top line was stronger. Revenue for the July to September quarter came in at ¥2.22 trillion, ahead of the LSEG consensus estimate of ¥2.02 trillion, supported by growth in telecommunications and AI computing.
For the first half of the fiscal year, SoftBank booked investment gains of about ¥1.7 trillion, down ¥2.2 trillion from a year earlier, leaving a net loss of around ¥770 billion for the six months.
The balance sheet tells a different story. Net asset value rose to a record ¥59.8 trillion at the end of September, up ¥20 trillion from the end of the last fiscal year. The loan-to-value ratio held at 15.9%, and the group kept about ¥5 trillion in liquidity. Recent market volatility has taken a toll, however: at November 9 prices, pro forma NAV stood at about ¥44.7 trillion.
OpenAI remains central to the investment case. SoftBank completed a further ¥3 trillion investment in the ChatGPT maker during the period, taking its stake to roughly 13%. It said any increase in OpenAI’s valuation from a new funding round has not yet been reflected in its results, pending an official announcement, which leaves potential upside for future quarters.
SoftBank also said this week that it would commit, together with Grab and Malaysia’s PETROS, a combined $1.85 billion in initial capital to develop AI infrastructure in Malaysia.
The results highlight the cost of SoftBank’s aggressive push into AI infrastructure. Investors will be watching the OpenAI revaluation and the group’s financing costs as the main swing factors in the second half.
This article was written by Eamonn Sheridan at investinglive.com.