SoftBank swings to a ¥1.1 trillion quarterly loss as AI financing faces scrutiny

SoftBank’s sales grew, but its bottom line moved sharply in the opposite direction. The Japanese technology investor reported a ¥1.1 trillion loss on November 10 for the three months through September. The reversal from a year-earlier profit arrives as investors question the financing behind its large commitments to AI companies, chips, data centers and robotics.

SoftBank earned ¥2.5 trillion in the same quarter a year earlier. Sales, meanwhile, rose 16% to ¥2.2 trillion from ¥1.9 trillion. Those figures show two different sides of the quarter: more revenue did not prevent a substantial loss. They also distinguish the company’s sales performance from the investment concerns that have surrounded its earnings.

The loss was also well outside the forecast range Reuters published before the announcement. Three analysts polled by LSEG had expected anything from a ¥233 billion profit to a ¥113 billion loss for July through September. Even that wide spread understated the eventual downside, illustrating the difficulty of predicting results for an investor with volatile holdings.

Investment scale meets borrowing pressure

The financing questions predate this earnings release. At the end of June, SoftBank had ¥10.8 trillion in net interest-bearing debt, up from ¥6.6 trillion a year earlier. Reuters reported that it had spent $64.6 billion on a 13% stake in OpenAI. Its exposure also stretches across data-center infrastructure, semiconductors and robotics, rather than resting on one AI investment.

Falling share prices can complicate that financing. Some of SoftBank’s largest holdings, including chip designer Arm, serve as collateral for loans. Arm shares stood at $175 on Friday, down around 60% from their June record. Jefferies analyst Atul Goyal wrote last month that an Arm price meaningfully below $200 increased pressure on SoftBank’s finances.

Rolf Bulk, head of semiconductors and infrastructure at Futurum Group, outlined a possible defensive response before the results. SoftBank might have to stop investing, reduce debt or sell some positions, he told Reuters. That was an analyst’s scenario, not an announced company decision. His concerns covered financing the AI buildout, securing power and deciding where infrastructure would be deployed.

A share rebound before the bad news

SoftBank’s stock offered another contrast with the reported loss. Shares closed nearly 14% higher in Tokyo on Tuesday, according to The Associated Press, but that rise came before the earnings were released. It therefore was not a market endorsement of the results. The timing matters when placing the sharp gain beside the company’s new quarterly figures.

The rebound followed steep losses: SoftBank fell 11% on Friday and another 4.2% on Monday. Reuters also reported that the cost of insuring its debt against default reached a four-year high during the selloff. Those movements put pressure on both sides of the investment case: the value shareholders assign to SoftBank and the perceived risk attached to its borrowing.

Investors also entered the earnings event seeking SoftBank’s response to China’s block on its planned $5.4 billion purchase of ABB’s robotics division. Reuters reported before the results that SoftBank was talking with Chinese authorities, citing a person familiar with the matter. Alongside the borrowing questions, that obstacle put execution of its robotics ambitions under scrutiny.