SoftBank Group, the Japanese investment giant, shocked markets on Wednesday by reporting a net loss of 369.17 billion yen ($2.4 billion) for the third quarter ending December 31, 2024. Analysts had forecasted a profit of 298.53 billion yen, according to LSEG estimates, making the loss a significant deviation from expectations. The company also reported revenue of 1.83 trillion yen, slightly below the 1.84 trillion yen anticipated by analysts.
Vision Fund Investments Fall Into the Red
The primary driver of SoftBank’s unexpected loss was the underperformance of its Vision Fund investments, which posted a loss of 352.75 billion yen during the quarter. This marked a sharp reversal, as the Vision Fund had reported gains in the previous two quarters. The broader Vision Fund segment, which accounts for administrative costs and currency fluctuations, reported a loss of 309.93 billion yen.
SoftBank’s Vision Fund 1 saw a 2.1% quarter-on-quarter drop in the value of its public portfolio companies, largely due to a decline in the share price of e-commerce firm Coupang. Investments in private companies under Vision Fund 1 declined by 3.3%, bringing the overall decrease in fair value to 2.8%. Meanwhile, Vision Fund 2 faced a 3.7% drop in fair value, with losses stemming from public firms such as Ola Electric Mobility and AutoStore. These declines overshadowed a notable increase in the stock price of food delivery company Swiggy, which went public in November 2024.
Strategic Shift Toward AI Investments
In light of the challenges faced by its Vision Funds, SoftBank is repositioning itself to capitalize on the booming artificial intelligence (AI) sector. The company is reportedly nearing a $40 billion primary investment in OpenAI at a $260 billion pre-money valuation. This would make SoftBank the largest backer of OpenAI, surpassing Microsoft, which had previously held the top spot. OpenAI was last valued at $157 billion by private investors in October 2024.
Additionally, SoftBank has committed to spending $3 billion annually on OpenAI’s technologies and has launched a joint venture called “SB OpenAI Japan.” This partnership aims to exclusively market OpenAI’s enterprise technologies to major companies in Japan, signaling SoftBank’s strategic focus on AI as a growth driver.
Market Reaction
SoftBank announced its quarterly earnings after the Tokyo Stock Exchange had closed. Despite the recent loss, SoftBank’s stock had performed strongly in 2024, gaining 45% over the year. The company’s pivot to AI investments, coupled with its strong backing of OpenAI, could bolster investor confidence moving forward.
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