SoftBank’s Quarterly Surge Fueled by OpenAI Stake and Strategic Moves

SoftBank JP3436100006

Japanese investment giant SoftBank Group has reported its fourth consecutive profitable quarter, with its substantial holding in artificial intelligence leader OpenAI serving as a primary catalyst. Alongside these valuation gains, the company is advancing the monetization of its portfolio, highlighted by the formal filing for a U.S. initial public offering of its digital payments platform, PayPay.

For the quarter ending December 31, SoftBank announced a net profit of 248.6 billion yen (approximately $1.62 billion). This result marks a dramatic reversal from the 369 billion yen loss recorded in the same period a year prior. On a nine-month basis, net profit reached 3.17 trillion yen, representing an increase of 2.54 trillion yen year-over-year.

The performance of the Vision Fund investment arm was central to this improvement, registering a quarterly profit of $2.4 billion. A standout contributor was the OpenAI investment, which alone generated a $4.2 billion gain for SoftBank in the third fiscal quarter. By year-end, the total investment gain attributed to OpenAI had reached $19.8 billion.

Deepening AI Commitments and Financial Leverage

SoftBank has significantly expanded its position in OpenAI. The conglomerate concluded a follow-on investment of $22.5 billion in December, bringing its cumulative investment to $34.6 billion for an approximate 11% stake. Chief Financial Officer Yoshimitsu Goto noted that 60% of SoftBank's assets are now allocated to "ASI-oriented investments," a reference to Artificial Superintelligence.

This aggressive investment strategy coincides with a noticeable increase in financial leverage. The group's Loan-to-Value ratio rose to 20.6% at the end of December, up from 16.5% three months earlier. Concurrently, its cash position declined to 3.8 trillion yen.

To fund its AI ambitions, SoftBank has increased a margin loan backed by its shares in chip designer Arm to $20 billion, up from $13.5 billion. Borrowings against its domestic telecom unit also grew, reaching 1.2 trillion yen compared to a previous 800 billion yen.

PayPay's IPO Filing and a New Reporting Segment

In a significant operational development, PayPay publicly submitted documentation for a U.S. stock market listing on the day of SoftBank's earnings release. The payment service, which plans to trade on the Nasdaq under the ticker "PAYP", reported strong growth. For the nine months ending December, it achieved a profit of 103.3 billion yen on revenue of 278.5 billion yen, a substantial improvement from a profit of 29 billion yen on 220.4 billion yen in revenue a year earlier. The platform's registered user base stood at approximately 72 million.

SoftBank also introduced a new "AI Computing Segment" in its reporting, which includes Arm and the recently acquired semiconductor firms Graphcore and Ampere. This segment reported a loss of 91.8 billion yen for the nine-month period, attributed to increased headcount and costs related to the acquisitions.

While valuation gains from OpenAI provide powerful earnings momentum, SoftBank's rising financial leverage introduces a new dynamic. The upcoming U.S. IPO of PayPay emerges as the next tangible milestone, even as the newly formed AI Computing unit works to transition out of its current loss-making phase.