SoftBank Group reported a surprise quarterly loss of 369.17 billion yen ($2.4 billion) for the three months ended Dec. 31, 2024, missing analyst expectations.
The decline was primarily driven by losses in its Vision Funds, which saw investments drop 352.75 billion yen in the quarter, reversing gains from the previous two quarters.
The Japanese conglomerate, once known for its aggressive bets on tech startups, also fell short of revenue estimates, posting 1.83 trillion yen, slightly below the 1.84 trillion yen forecast by analysts.
The results highlight ongoing volatility within SoftBank’s investment portfolio, despite its push into artificial intelligence (AI) and high-profile deals, including a potential $40 billion stake in OpenAI.
Vision Funds struggle with portfolio declines
SoftBank’s Vision Fund 1 portfolio saw a 2.1% drop quarter-on-quarter, driven largely by a decline in shares of Coupang, a South Korean e-commerce company in which SoftBank holds a significant stake.
The value of private investments within the fund also slipped 3.3%, resulting in an overall 2.8% decline from the previous quarter.
Meanwhile, Vision Fund 2, which includes a broader range of AI and tech-related investments, saw an even sharper decline of 3.7% from the prior quarter.
The losses raise concerns about SoftBank’s ability to generate strong returns from its once-celebrated investment strategy, which has faced setbacks from overvalued startups and market downturns in recent years.
AI investments accelerate as OpenAI deal nears
Despite its financial struggles, SoftBank is doubling down on AI investments, with reports suggesting it is close to finalising a $40 billion primary investment in OpenAI.
If the deal is completed, SoftBank would surpass Microsoft as OpenAI’s largest backer, with the AI firm recently valued at $157 billion in a private funding round in October.
SoftBank has also committed to spending $3 billion annually on OpenAI’s technology, as part of a broader push to integrate AI across its business ventures.
The two firms have launched a joint venture, SB OpenAI Japan, to market OpenAI’s enterprise products to major Japanese companies.
The move aligns with SoftBank’s repositioning strategy, shifting away from troubled tech investments and capitalising on the AI boom that has propelled companies like Nvidia to record valuations. However, whether SoftBank’s AI-focused pivot can offset the drag from its Vision Funds remains uncertain.
Market reaction
SoftBank’s stock, which gained 45% in 2023, faces renewed investor scrutiny following the disappointing earnings report.
While its AI strategy presents long-term opportunities, near-term concerns over Vision Fund performance and broader economic uncertainties could weigh on sentiment.
As the company shifts towards AI, questions remain about its ability to navigate volatile markets and whether its high-risk, high-reward approach will yield sustainable growth.
SoftBank’s next earnings report will likely be a key indicator of how effectively it can balance its investment losses with its ambitions in the AI sector.
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