SoftBank Group swung to a ?1.18 trillion ($7.7 billion) net profit in the three months to September, as the tech giant benefited from higher share prices of listed companies in its Vision Fund investment vehicles.
The results handsomely beat expectations of a ?287 billion profit based on the average of four analyst estimates compiled by LSEG, and compares with a loss of ?931 billion in the same period last year.
The results show SoftBank¡¯s more cautious approach to investment is bearing some fruit.
Founder Masayoshi Son¡¯s investing juggernaut was forced into a prolonged period of retrenchment when interest rate hikes caused the value of its holdings in high-growth tech startups to crater.
Now, some of these valuations are beginning to recover, pushing the Vision Fund unit to an investment gain of ?608 billion.
Strong initial public offerings for Indian startups are buoying the Vision Fund, which for years struggled to win returns commensurate with its $100 billion-plus scale.
Seven years since the investment unit¡¯s launch, it¡¯s reaping gains from the debuts of startups such as e-scooter maker Ola Electric Mobility and online retailer Brainbees Solutions, which sells baby products under the brand name FirstCry.
The SoftBank-backed food-delivery app Swiggy¡¯s imminent $1.3 billion IPO was subscribed more than three times.
SoftBank is seeing a ¡°harvest season in India,¡± Devi Subhakesan, an independent analyst from Investory who publishes on SmartKarma, wrote in a note prior to the earnings release.
It¡¯s a rare moment of victory for the Vision Fund, which posted two straight years of hefty losses after startup valuations collapsed, erasing its previous gains.
It swung to a mild profit in fiscal 2023, but has had to scale back new investments.
The positive earnings come as Son gears up for his next big gamble on the future of artificial intelligence.
SoftBank and the Vision Fund have also adopted a more targeted approach toward investing that focuses on generative AI.
Their latest bets include OpenAI and Perplexity AI.
¡°Roughly half of the second-quarter gain comes from surfacing upside from Indian IPOs,¡± said Kirk Boodry, an analyst with Astris Advisory. ¡°If the IPO pipeline in the U.S. reopens and VF companies are in demand, there could be a mini-boom. But what they plan to do with AI is probably more important.¡±
Shares of SoftBank have risen and fallen with investors¡¯ shifting sentiment about AI¡¯s ability to meaningfully improve people¡¯s lives.
The stock tumbled after hitting a record high in July but has since regained some ground.
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