SoftBank Group’s second-quarter net profit more than doubled to 2.5 trillion yen ($16.6 billion), driven by valuation gains in its holding in OpenAI, in results that offered investors the reassurance they had been waiting for after a sharp selloff in AI stocks.
The Japanese investment group reported the July to September profit on Tuesday, November 10, far above the 207 billion yen average estimate of three analysts polled by LSEG, and more than double the 1.18 trillion yen it earned in the same quarter a year earlier. Reuters reported the figures from Tokyo. SoftBank shares surged in Tokyo trading after the results were released.
What the SoftBank Profit Report Shows
The SoftBank profit surge came almost entirely from its investment portfolio. The Vision Fund unit posted an investment gain of 3.5 trillion yen for the quarter, primarily from the group’s holding in ChatGPT maker OpenAI, which totalled 2.16 trillion yen.
For the first half of the fiscal year, SoftBank Group’s net profit reached 2.92 trillion yen, a record high, according to company figures, with second-quarter net sales of 1.92 trillion yen. Chief financial officer Yoshimitsu Goto told the earnings call that the first-half result was a record, and that net asset value stood at 32.3 trillion yen at the end of September.
One distinction matters for readers: these are the results of SoftBank Group Corp., the investment holding company listed in Tokyo as 9984.T, not SoftBank Corp., the telecom operator, which reported its own results separately on November 9. The telecom unit said its first-half revenue rose 11.7 percent to 3.80 trillion yen, with cloud and AI revenue up 37 percent.
Image: SoftBank Group logo (public domain, via Wikimedia Commons).
The OpenAI Engine Behind the Gain
OpenAI’s valuation has risen steadily and sharply through the year, and SoftBank has been one of its largest beneficiaries. In March, SoftBank agreed to lead a funding round of up to $40 billion in OpenAI at a valuation of $300 billion. In October, a source told Reuters that SoftBank was among a consortium of investors acquiring $6.6 billion worth of shares from OpenAI employees at a higher valuation of $500 billion.
SoftBank completed a $30 billion follow-on investment in OpenAI on October 1, lifting its cumulative investment to $64.6 billion for an ownership interest of about 13 percent. The scale of that bet is the reason SoftBank’s quarterly results have become a proxy for sentiment about the AI boom itself.
The group is not slowing down. It recently signed joint development agreements with Grab and PETROS for a $1.85 billion AI infrastructure buildout in Malaysia, targeting five gigawatts or more of AI compute capacity.
Selling Nvidia, Funding the AI Bet
The earnings report also confirmed a striking portfolio move. In October, SoftBank sold 32.1 million shares of Nvidia, including those held by its asset management subsidiary, for $5.83 billion, exiting its entire holding in the chipmaker. The sale was not reflected in the second-quarter earnings, and the company did not disclose a rationale for it.
SoftBank is in the midst of massive AI-related investments, its most ambitious since the launch of the Vision Fund vehicles in 2017 and 2019, and it is in need of funding. Since the start of April it has issued bonds in three currencies worth 620 billion yen, $2.2 billion and 1.7 billion euros. It also took out an $8.5 billion bridge loan for its investment in OpenAI and arranged a $6.5 billion bridge loan for its acquisition of semiconductor design company Ampere, which it has not yet drawn.
The company also said it will conduct a four-for-one ordinary share split, effective January 1, aimed at making its shares more accessible to smaller investors.
SoftBank founder and CEO Masayoshi Son speaking in 2008. Image: nobihaya, via Wikimedia Commons (CC BY 2.0).
Why It Matters
The results arrive at a moment of intense scrutiny. SoftBank’s shares had fallen 11 percent on Friday as AI stocks sold off, and the cost of insuring its debt against default hit a four-year high, with investors questioning how the group would fund its AI commitments and weather a sector downturn.
Tuesday’s numbers answer the funding question, at least for now: the OpenAI holding alone generated more in quarterly gains than most companies earn in a year. But Reuters also noted growing concern among investors about an “AI bubble”, in which the enormous sums committed to capital investment by leading firms may not generate the profits to justify them.
Founder and chief executive Masayoshi Son is experienced in making leveraged bets on what he sees as transformative technologies, but his track record is mixed. An early bet on Chinese e-commerce site Alibaba proved lucrative, while other bets have gone awry, such as shared office provider WeWork. The OpenAI wager is now the largest single bet of his career, and this quarter it paid off handsomely.
The next test comes quickly. SoftBank’s takeover of ABB’s robotics unit was blocked by China, a reminder that geopolitics can still interrupt its AI plans, and the group still has to show that its data center ambitions, including the Ohio campus planned for OpenAI, can be built on schedule. For now, though, the market has its answer: the AI bet is producing record profits.
