SoftBank Group, the Japanese tech investment giant, is on track to announce a significant quarterly profit of ¥287 billion ($1.87 billion) on Tuesday, driven by strong IPO performances from its portfolio companies, even though a stronger yen has slightly affected foreign currency gains. Analysts are particularly eager to examine the company’s next steps in investment, following its recent successes and its optimistic outlook on artificial intelligence (AI).
The anticipated net profit for the July-September quarter, based on the average of four analyst predictions, contrasts with a substantial loss of ¥931 billion reported for the same period last year. David Gibson, an analyst with MST, projects a $3.9 billion gain from investments this quarter, largely attributed to the IPOs of Indian companies Brainbees Solutions and Ola Electric, which are expected to contribute $0.9 billion and $1 billion, respectively.
However, the exchange rate dynamics could influence the final profit margin, with a 10% drop in the dollar’s value against the yen forecast to impact SoftBank’s overall earnings.
Investors are closely watching for any indications of SoftBank’s new investment strategy. Founder and CEO Masayoshi Son recently revealed in a Saudi Arabian investment summit that he is holding back tens of billions of dollars for future ventures, signaling the potential for substantial investments ahead. The company’s investment activity has already surged this year, with $1.9 billion invested in the April-June quarter, up from just $0.3 billion in the previous quarter. In October, SoftBank also participated in a new funding round for OpenAI, the operator behind ChatGPT.
One area that has caught analysts’ attention is SoftBank’s push into AI chip development. The company is reportedly exploring collaborations to rival Nvidia’s dominance in the chip market, potentially through its 90% stake in chip designer Arm and its recent acquisition of chip manufacturer Graphcore. SoftBank’s licensing deal with Arm, worth $43.2 million in revenue, is also seen as a sign of progress in this field.
Thanks to a robust financial position, SoftBank is in a strong position to pursue large-scale investments. Morningstar analyst Dan Baker highlighted the company’s “strongest balance sheet in the past five years,” bolstered by recent upgrades in its credit ratings from both S&P Global Ratings and the Japan Credit Rating Agency.
Although SoftBank initiated a $3.4 billion share buyback in the last quarter, analysts believe there is still room for more aggressive investments as the company continues to expand its portfolio.