SoftBank Group swings to profit in first quarter, Stargate timeline delayed

By Anton Bridge

TOKYO (Reuters) -Japanese technology investor SoftBank Group on Thursday booked a net profit of $2.87 billion in the first quarter, driven by gains among larger listed investments in its Vision Fund portfolio.

The result will likely be welcomed by investors as SoftBank pursues its biggest spending spree since the launch of its Vision Funds in 2017 and 2019, this time making mammoth investments in artificial intelligence companies.

Investors and analysts are awaiting updates on the timeline for returns to materialise and to what extent assets will be monetised to fund the new projects.

The Stargate project - a $500 billion scheme to develop data centres in the United States for which SoftBank is leading financing - has been delayed by longer than expected negotiations with other parties and deciding on sites, chief financial officer Yoshimitsu Goto told a briefing in Tokyo.

"It's taking a little longer than our initial timeline but I want to pick up the pace," Goto said.

SoftBank has identified sites across the U.S. and several are progressing, Goto said, but he declined to provide details on the schedule or the order sites would be built out.

Favourable market conditions for technology companies over the quarter raised valuations of SoftBank's array of startup stakes, potentially fuelling monetisation opportunities that can be directed toward newer investments.

SoftBank's Vision Funds hold $45 billion worth of late-stage companies ready to list soon, up from $36 billion at the end of March, although much of the increase derives from the additional $7.5 billion Vision Fund 2 invested in OpenAI in June.

The group overall logged a net profit of 421.8 billion yen ($2.87 billion) for the April-June quarter.

The result compared with a net loss of 174.3 billion yen for the same period a year earlier and the average profit estimate of 127.6 billion yen compiled by LSEG from three analysts.

The Vision Fund unit posted an investment gain of 726.8 billion yen ($4.94 billion), around half of which derived from a surge in the share price of South Korean e-commerce firm Coupang over the quarter.

AI INVESTMENT SPREE

SoftBank is leading a $40 billion funding round for ChatGPT maker OpenAI. SoftBank has until the end of the year to fund its $22.5 billion portion, although the remainder has been subscribed, according to a source familiar with the matter.

The OpenAI investment and Stargate project form part of SoftBank's effort to position itself as the "organiser of the industry," founder Masayoshi Son said in June.

Concerning Stargate, SoftBank remains committed to its target of building out $500 billion worth of data centres over four years and the banks involved in the project financing, including Japan's "Megabanks" and major U.S. banks, have shown positive interest in the scheme, Goto said.

SoftBank has yet to release details on what kinds of returns its financing of the Stargate project could generate. The extent of third-party investment will determine what other financing tools, such as bank loans and debt issuance, it may have to deploy.

SoftBank has raised $7.8 billion by selling off a portion of its holding in T-Mobile in June and August, Goto said.

However SoftBank's performance in exiting from investments and distributing profit has been patchy of late. The Vision Funds have made a cumulative investment gain of just $5 billion out of a total committed capital of $172.2 billion as of the end of June.

($1 = 147.0600 yen)

(Reporting by Anton Bridge. Additional reporting by Krystal Hu. Editing by Edwina Gibbs, Christopher Cushing and Mark Potter)