SoftBank swings to surprise $7 billion loss on AI costs

SoftBank Group reported a net loss of 1.12 trillion yen ($7 billion) for its fiscal second quarter on Tuesday, November 10. The loss followed a $3.7 billion charge tied to U.S. AI data center power equipment and falls in the value of its tech holdings, CNBC reported. A year earlier, the same quarter brought a 2.5 trillion yen profit, according to the Associated Press, which said worries about AI investments hurt the company's bottom line.cnbc.com+1

It was SoftBank's first net loss in almost two years. Analysts had on average expected a profit of 129 billion yen, Bloomberg reported. Revenue still beat forecasts, reaching 2.22 trillion yen against LSEG estimates of 2.02 trillion yen, according to CNBC.cnbc.com+1

Data center and Intel hits

SoftBank booked a 597.2 billion yen loss after it changed its plans for buying power generation equipment for U.S. AI data center projects. The company said it had paid for the equipment in advance because it feared shortages and long lead times. Those payments reached $9.48 billion by the end of September and covered projects such as a campus in Pike County, Ohio. "We made bridge investments in advance to secure power generation equipment in anticipation of shortage," a SoftBank executive said on the earnings call, CNBC reported.cnbc.com

Falling shares of Intel ↘ 3.22%, Arm ↘ 5.36% and Coupang ↘ 0.24% also weighed on results, according to Bloomberg reporting. The Financial Times put the loss on SoftBank's Intel stake at 270.1 billion yen. On the call, executives also pointed to a derivative loss on prepaid forward contracts backed by Intel shares, which raised $7.4 billion in August, according to an Investing.com transcript. Financing costs rose to 461.9 billion yen in the quarter, Investing.com reported.business-standard.com+3

The Vision Fund segment lost 81.58 billion yen, compared with a 2.38 trillion yen profit a year earlier. Declines in portfolio companies such as Grab ↘ 2.03% dragged on Vision Fund 1, CNBC said.cnbc.com

OpenAI bet and share rally

SoftBank valued its OpenAI stake at $99.6 billion, against $54.6 billion invested. The company said a possible increase in OpenAI's valuation from a new funding round is not yet reflected in its books and could show up in the fiscal third quarter, according to CNBC. Reuters Thomson Reuters Corporation ↗ 0.50% noted that the year-earlier profit came largely from a gain on that OpenAI stake.money.usnews.com+1

Before the results came out, SoftBank shares closed nearly 14% higher in Tokyo. The stock had lost about a third of its value over the past year, AP reported. Tuesday's rally came as Asian tech stocks such as Samsung Electronics and SK Hynix ↘ 4.23% rose after Wall Street rebounded overnight, CNBC noted. Analysts told AP that SoftBank's earnings are hard to predict because its holdings in companies like OpenAI and Arm swing sharply in value.cnbc.com+1