SoftBank Q3 loss far exceeds expectations, is the 500 billion "Interstellar Gateway" really viable? | Earnings report insights
The main reason for SoftBank Group's loss is the poor performance of its Vision Fund investments. The fund recorded an investment loss of 352.75 billion yen for the quarter, ending the profit streak of the previous two quarters
Due to the poor performance of the Vision Funds, SoftBank Group unexpectedly reported a loss of $2.4 billion in its Q3 financial report. SoftBank founder Masayoshi Son has been actively investing in the artificial intelligence (AI) sector, planning large-scale investments, including the "Stargate" project in collaboration with OpenAI.
On Wednesday, SoftBank released its Q3 financial report for the fiscal year 2024. The data showed that SoftBank Group unexpectedly lost 369.2 billion yen (approximately $2.4 billion) in the quarter, compared to a profit of 950 billion yen in the same period last year. This result was far worse than the LSEG SmartEstimate's previous forecast of a net profit of 234 billion yen.
The main reason for the group's loss was the poor performance of its Vision Funds. The fund reported an investment loss of 352.75 billion yen for the quarter, ending the profit streak of the previous two quarters. The broader Vision Funds segment (including management costs, currency fluctuations, and other factors) incurred a loss of 309.93 billion yen.
In terms of segmented funds, the value of the publicly listed portfolio companies in Vision Fund I decreased by 2.1% quarter-on-quarter, primarily affected by the decline in the stock price of e-commerce company Coupang. The investment value in private companies also fell by 3.3%. The fair value of Vision Fund II decreased by 3.7% compared to the end of the previous quarter. The stock prices of publicly listed companies such as electric vehicle manufacturer Ola Electric Mobility and warehouse automation company AutoStore fell, offsetting the rise in the stock price of food delivery company Swiggy after its listing in November 2024.
Despite the poor quarterly performance, SoftBank's stock price has still risen by about 16% over the past year. Previously, due to market optimism regarding Arm's position as a partner in AI chip design with NVIDIA, SoftBank's stock price once reached an all-time high.
Analysts are concerned that SoftBank's weak performance may intensify doubts about Masayoshi Son's significant investments in AI.
According to previous media reports, SoftBank is close to finalizing a major investment of $40 billion in OpenAI, which would value OpenAI at $260 billion. The new financing would make SoftBank the largest investor in this AI startup, surpassing Microsoft In addition to investing in OpenAI, SoftBank founder Masayoshi Son also plans to collaborate with OpenAI to jointly advance a massive AI infrastructure project called "Interstellar Gateway."
The project is expected to invest up to $500 billion over the next four years. SoftBank plans to initially invest about $15 billion to $20 billion, and may raise funds later through project financing and other means.