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SoftBank fell to an unexpected ¥1.1tn ($7bn) loss after taking a $3.7bn writedown on its US data centre projects, piling pressure on founder Masayoshi Son’s huge AI bet after a precipitous drop in the company’s share price.
The loss in the quarter to the end of September, its first in nearly two years, was far from the ¥84bn profit expected by analysts, according to LSEG data. It compared with a ¥347.3bn profit in the previous quarter and a ¥2.5tn profit in the same period last year.
The tech-heavy Vision Funds recorded an investment gain of ¥85bn, but the group was dragged down by a ¥597.2bn ($3.7bn) charge related to procurement for data centres in the US and high financing costs. It also included a ¥270.1bn loss on the valuation of its holdings in Intel as well as derivatives tied to the stake.
SoftBank said the data centre writedown reflected “the evolving requirements of its existing and planned projects”, including a massive development in Ohio, meaning $2.9bn out of $9.5bn it had paid upfront was spent on equipment it no longer needed.
“We recorded a loss related to non-refundable advance payments and modifications to signed contracts, which resulted in $3.7bn in losses,” said chief financial officer Yoshimitsu Goto on Tuesday.
He added that SoftBank had secured rights to rebates of up to $2.1bn on future equipment purchases, subject to certain conditions.
SoftBank’s highly volatile shares have fallen by more than half since June as investors question the Japanese group’s exposure to the AI boom. The sector has been hit by concerns about how wins by Democratic candidates in the US, who campaigned against data centres, might affect plans for their development.
SoftBank’s US energy infrastructure company SB Energy faces a possible delay to its planned listing at a $50bn valuation, which could also affect Son’s plans to list Roze, an AI and robotics business intended for use in data centre development.
However, SoftBank shares rallied by 13.9 per cent on Tuesday ahead of the group’s results amid a wider rebound in tech stocks across Asia.
In China, SoftBank’s attempted acquisition of ABB’s robotics business has been blocked by regulators following a national security review, with the Japanese group exploring possible solutions.
OpenAI remains Son’s biggest bet. SoftBank has committed about $65bn to the ChatGPT maker, which is also a major prospective customer for SB Energy.
The Japanese group is expected to participate in an upcoming funding round that could value OpenAI at $1.25tn, while investors are also watching the prospects for an eventual listing and a potential IPO by rival Anthropic.
Goto said on Tuesday that any revaluation of SoftBank’s OpenAI stake would not happen until the funding round was complete and could be reflected in the next quarter.
The decline in the value of SoftBank’s holdings, particularly UK chip designer Arm, has increased its debt relative to the value of its assets, although analysts estimate the group still has significant borrowing capacity.
SoftBank’s credit default swap spreads have risen sharply, while the group raised a record $11bn in junk bonds in September. Goto said the company had raised a record $56.5bn in the most recent quarter and fully paid down a $40bn bridge loan, most of which was used to complete its OpenAI investments.
Son is also pursuing further acquisitions, including a potential $30bn deal for security services group Allied Universal, which he hopes to finance partly through a new investment vehicle backed by Gulf investors.
