SoftBank swings to $7 billion net loss in second quarter

SoftBank on Tuesday reported a net loss of 1.12 trillion yen ($7 billion) in the second quarter, with the losses linked to the purchase of AI data center equipment in the United States and Intel the fall in stocks weighed on profits.

The Japanese investment giant also posted a loss of 597.2 billion yen ($3.7 billion) in the six months ended September 30 due to changes in plans to purchase power generation equipment for AI data center projects in the United States.

SoftBank said it had made advance investments to secure power generation equipment for its AI data center projects in the United States, amid concerns about potential shortages and long lead times. Power is increasingly becoming a key constraint for building AI data centers, as power grids are overwhelmed by power-intensive applications like data centers.

Cumulative payments for power generation equipment for AI data center projects in the United States, such as the PORTS-Pike technology campus in Pike County, Ohio, totaled $9.48 billion as of the end of September.

“We have made interim investments to secure power generation equipment in anticipation of a shortage,” a SoftBank official said during the company’s earnings conference call.

Here’s how SoftBank performed during the fiscal second quarter:

• Net loss of 1.12 trillion yen during the quarter, compared to a net profit of 2.5 trillion yen a year earlier.
• Revenue was 2.22 trillion yen during the quarter, compared to 2.02 trillion yen estimated by LSEG.

Revenue rose 13.3% in the six months ended September 30, supported by growth in the telecommunications and AI computing businesses. The company said its SoftBank segment recorded higher sales across all businesses, while revenue in its AI computing segment increased.

The company’s Vision Fund segment posted a loss of 81.58 billion yen in the fiscal second quarter, compared with a profit of 2.38 trillion yen a year earlier. Vision Fund 1 posted an investment loss of $20 million during the quarter, despite a $1.3 billion gain on ByteDance, as shares of publicly traded holding companies including Coupang and Grab declined.

The Vision Funds segment recorded investment gains of 85.45 billion yen, down sharply from 2.81 trillion yen a year earlier. Vision Fund 2 recorded investment gains of 89.26 billion yen, while Vision Fund 1 recorded a loss of 3.86 billion yen on its investments.

As of the end of September, SoftBank’s cumulative investment in OpenAI was $54.6 billion, with a fair value of $99.6 billion and a cumulative investment gain of $45 billion, according to the company.

SoftBank said a potential increase in OpenAI’s valuation following a new funding round has not yet been reflected in its results, pending an official announcement. The updated valuation could be reflected in the fiscal third quarter, potentially increasing its net asset value and improving its loan-to-value ratio, the company said.

“ChatGPT has always been a weapon of OpenAI, especially for consumers,” the SoftBank executive said during the company’s earnings conference call, highlighting the chatbot’s growing user base.

Shares of the Japanese investment giant closed up 13.9% on Tuesday. The gains came as Asian technology stocks, including Samsung Electronics and SK Hynix, rose following an overnight rebound on Wall Street.

Regarding its investments in AI infrastructure, SoftBank highlighted a 20-year lease agreement with OpenAI for eight gigawatts of computing capacity at a data center project in Ohio.

Responding to concerns over water consumption at its planned data center in Texas, SoftBank said it is taking steps to reduce water consumption through a closed-loop air-cooled system. The company also discussed plans to hire and source locally.

Ahead of its results release, SoftBank Group on Monday announced plans with Grab and Malaysia’s PETROS to commit a combined initial capital of $1.85 billion to develop AI infrastructure in Malaysia, with a long-term goal of at least five gigawatts of AI computing capacity.