SoftBank Group Reports Q1 Results and AI Infrastructure Plans

On Thursday, SoftBank Group (OTC: SFTBY ) discussed first-quarter financial results during its earnings call. The full transcript is provided below. This content is powered APIs. For comprehensive financial data and transcripts, visit The full earnings call is available at Summary SoftBank Group Corp.

3 trillion yen, still considered strong. 8 trillion yen investment gain for the first quarter, with significant contributions from Intel and ByteDance, leading to a net income of 347 billion yen. SoftBank continues to focus on becoming a leading AI platform provider, with strategic investments in AI infrastructure and a notable investment of 20 billion yen in OpenAI during the quarter. The company announced plans to develop a 5 gigawatt AI data center in France, highlighting its commitment to expanding AI infrastructure.

3 billion for the quarter, with growth driven by demand for ARM-based CPU cores in data centers. SoftBank's Vision Fund saw a cumulative investment return of 114 billion, with gains primarily from ByteDance, despite some negative impacts from PayPay's share price. The company is involved in large-scale data center projects in the United States and France, emphasizing the strategic importance of AI data centers. SoftBank maintains a financial policy of keeping loan-to-value below 25% and ensuring a cash position covering at least two years of bond redemptions.

OpenAI's valuation remains stable, with SoftBank viewing its investment as a strategic partnership rather than purely financial. CEO Masayoshi Son expressed a long-term vision for SoftBank's growth, aiming to achieve a net asset value of one thousand trillion yen over the next 15 years. Full Transcript OPERATOR Thank you very much for waiting, everyone. Now we would like to start the SoftBank Group Corp.

earnings results announcement for the first quarter of the fiscal year ending March 2027. First of all, I would like to introduce today's participants. From left, we have Yoshimitsu Goto, Board Director and CFO; Kazuko Kimiwada, Corporate Officer, Senior Vice President and CAO; Makagni, Executive Managing Partner, SB Investment Advisers and SB Global Advisers; and Jason Child, Executive Vice President and CFO. Today's announcement is live broadcast over the Internet.

Now I would like to invite Yoshimitsu Goto to present the earnings results and business overview. Yoshimitsu Goto, Board Director and CFO Good afternoon, everyone. Thank you very much for your time today. I am Yoshimitsu Goto, CFO, SoftBank Group.

First of all, I would like to express my deepest condolences to those who lost their lives in the recent Kumamoto earthquake. I also extend my heartfelt sympathies to everyone affected by the disaster, including those staying in evacuation shelters or living away from their homes under difficult and uncertain circumstances. , and LY Corporation, Fukuoka SoftBank Hawks will donate, and also encourage public contributions. We will continue to support the recovery and the reconstruction efforts through the services provided by our group to help those affected regions regain their daily lives as quickly as possible.

Now, I would like to go into our earnings results. Towards June compared to March close, the market has been dynamically moving. As you know, SoftBank Group is an investment company. We can be affected by the market, and investment portfolio valued by the market is basically reflected in our results.

3 trillion yen. This is a record high number. Our performance is actually described by this value. I believe that this is the most important indicator to see and value our enterprise value.

3 trillion yen. 3, but actually, if you see the trend in the past, 58 is already a great number to be achieved. So I would like to also show this together with our history. This is the kind of record that we've been experiencing, and also this itself actually shows you how much potential we have for further growth in the future.

As I mentioned, every quarter there are good times and bad times. But at the same time, we do not become too happy or too sad about short-term fluctuation. We always look at the mid- to long-term period and how we are building the base for further growth and how that is going to be reflected in future growth. Our investment strategy is pretty much equal to our business strategy.

As an AI platform provider, what do we need to do? We always think backwards once we set the target, and then we discuss what we need to do. Why are we addressing AI infrastructure? Because if you don't address AI infrastructure, you cannot see the enhancement or acceleration of the speed of AI models.

OpenAI and other hyperscalers — those AI model players — we would like to accelerate the speed of those people or those companies. By addressing AI infrastructure, that can also accelerate the growth of Arm, for example. Arm, as you know, designs the core and heart of the chip, and they have dominant market share for that. By having more and more chips shipped, then their basic business model will grow.

And not only that, recently they have announced to also address their in-house chip, with a high-quality, high-capability chip to be used in many AI models and AI infrastructure. Because we've been telling the market that we try to become a company to change people's lifestyle — lifestyles or working styles to be changed — physical AI is going to be a very focused area that we pay very good attention to. This area is actually just the beginning, and there are not many companies making profit, and we don't really know who will be the winner for the future in this area either. So that makes us even more excited to see, and each has a kind of correlation to each other.

That is why we address these four. So only for the quarter, we do have some developments here which I will be explaining in later pages. To become a real number one AI platform provider is something that we are trying to achieve, and that's something that MASA is very much putting his effort into. This is the financial highlights for the first quarter.

3 trillion year over year — and the net income, 347 billion yen. 3 trillion yen, highest ever compared to the past numbers. And third, for our own investment in OpenAI, we invested 20 billion in this first quarter. Towards October we have a remainder of 10 billion which is committed.

And fourth, for the first quarter period, we have announced plans to develop a 5 gigawatt AI data center in France, which was a highlight for our quarter. Now we would like to go into consolidated results. You see the numbers in each respective line, but the investment gain actually increased dramatically compared to the previous fiscal year, and net income is another important number — 347 billion yen. So I will explain to you the trend from the past, but something is missing from here, which is the net asset value.

I would like to also add once again that the net asset value is also an important KPI for our company — investment gain or loss and the net income — how it has been developed. 8 trillion yen. This was mainly due to, actually, Intel. Last year, we've been paying attention to the semiconductor business in the United States, and we invested in Intel.

As a result, in the first quarter, it has been making quite a good increase. Also, ByteDance invested by Vision Fund — the fair value increased — was another contributor to the investment gains for the quarter. 3 trillion yen. Compared to a quarter before, that has increased dramatically.

And also the indicator to measure our safeness — this is the net debt over equity value of holdings — at the end of June, 13%, which is also a very safe level, or even too safe. So we may need to invest more — probably that's how we believe — tightening the loan to value. 3. But this is due to the redemptions for the maturity of the bonds and also some investment activities.

Still, it does maintain the necessary cash position based on the financial policy we have. 3 trillion yen. Loan to value: if you look at the trend from the past, as a financial policy we have 25% as a threshold. At the same time, I would also like to emphasize 25% itself is already safe enough, but we make it even safer for our business itself because our company has quite a large investment from our own balance sheet, which is quite rare and unique compared to other global investment companies.

So I believe this is important for us to share with you — the safety of our business using loan to value. And why 25%, you may ask. It's because we do need to see some kind of threshold — where do we think the safety level is. Of course, financial people may understand well about the loan to value — how much will be the safe level — but for the public to understand, even if the market can be volatile, as long as we keep this level, we will be able to keep the company at a safe level.

5 trillion yen for bond redemption, so our cash position covers more than enough. Now let me talk about ARM, one of the most important companies to US revenue. 3 billion. It increased 22% year on year.

Amazing result. Fully diluted earnings per share hit a record high in the first quarter; it increased 29% year on year, against great performance guidance. 38 billion for the second quarter. Guidance for EPS is 47 cents at the midpoint compared to analyst consensus as of ARM's earnings announcement.

Both are higher. So I think that's really convincing and something that you agree on. Looking at ARM's performance, ARM-based CPU cores for data centers are growing. As you know, it's been growing since 2019.

Many hyperscalers have adopted ARM-based CPU—Cobalt and others—and Google especially grew significantly in the last 12 months, which should have a positive impact on ARM's future going forward. Again, many tech companies have adopted ARM's products. ARM IP-based CPU chips have been used by about 50% of leading hyperscalers, like you can see on the slide—like Graviton, Axion, Cobalt, and Grace. They help us to raise ARM's brand value and recognition.

As you know, ARM has provided chip designs since the beginning, but also ARM has announced that they would develop their own product by themselves, which is a huge jump from ARM's perspective. In fact, this CPU, compared to x86, per 1 gigawatt of data center capacity, helped save up to 10 billion CapEx. Very efficient CPU, and as agentic AI is deployed further, the market of CPUs for data centers should grow significantly, and ARM's AGI CPU attracts more demand than what we had expected and what ARM had expected, which is all positive. And we have two more companies joining as launch partners of ARM AGI CPU: Oracle and Varda, which is great.

From a PC perspective, in fact agentic AI goes into not only cloud but also a variety of devices. And NVIDIA announced a chip for PCs with agentic functionality, and this has an ARM-based Grace CPU and NPU. And by the way, if you have any questions about ARM, you can ask Jason later. Now OpenAI.

6 billion and ownership to 13%. OpenAI's GPT is a base to offer a variety of products for consumers. As you are familiar with, ChatGPT is there, and for business users, especially for software engineers, Codex is offered, which we focus on, and they focus on selling Codex. On top of that, ChatGPT Work was released recently.

So the AI model evolves, and product performance goes up accordingly. 5 was released as what we know as ChatGPT, and GPT has been adding more and more functionality and capabilities, more than you imagine. GPT-4 has an AI capability that solves problems, not just answers questions. It was released in March 2023, three years ago, and GPT-5 has agentic AI capability.

So it is AI that performs tasks. 5 to 4 it is a significant evolution. 6, agentic functionality is even enhanced. So it is an AI that gets work done.

So AI does work autonomously, which is unique. 6 is viewed—there was an evaluation methodology developed by UC Berkeley and others. According to their evaluation, OpenAI yielded the highest performance in terms of a score. 6 cost far less.

6 is seen by professionals. I'm not an engineer at all, I am a finance guy, so I cannot answer any professional or expert questions. But this is as much as I can tell you. Generally, Codex for software engineers has been growing significantly.

4 million, and in July 10 million; it grew 24 times in just seven months. On top of Codex, ChatGPT Work was released for business persons. So combined, Codex and ChatGPT Work again, weekly active users grew 25 times in seven months. So OpenAI is kind of a latecomer in terms of the enterprise market because they started off with the retail users, retail market.

But OpenAI has advantage in terms of their brand recognition among the consumer market. So going forward, the enterprise market is a key focus so that they can grow more in the enterprise market. Now let me talk about PARSE, or patching as a service. In July, last month actually, SBOAI Japan, our joint venture between SoftBank and OpenAI, announced and launched PARSE as a cybersecurity solution.

We are a holding company, and we are a strategic investment holding company. So from our perspective, our job is to make sure that our portfolio companies work together so that we can help them to raise their corporate value. We want to help them to do that. So again, this PARSE launch by our portfolio companies is a great example.

This PARSE will be rolled out to 3,000 companies in Japan. So they start from vulnerability assessment, and once vulnerabilities are identified, they run the program to apply patches from end to end. They offer this PARSE service to those critical infrastructure companies in Japan—3,000, that is. And later, we want to even offer code modernization.

Now let me go into AI infrastructure. AI data center portfolio we are mainly leading right now is in the United States, and also we have a project in France as well, which is announced this quarter for United States, Ohio and Texas state, and in France. All the France, which is northern France area, is actually the place we are addressing our project in France. We announced a plan to develop 5 gigawatt AI data center in France.

1 gigawatt of AI data center capacity in northern France by 2031. More specifically, Dunkirk, Bushan, Bosco — those are the first sites that we will be addressing. First gigawatt Bosco AI data center is actually designated as a fast-track project by French government. So with that we have secured one gigawatt of power, and also accelerated grid connection is actually addressed.

In United States, if we try to address the data center project or if we try to do in Japan, because data center concerns a huge volume of power, you also need to build power generation plant at the same time, which means you need double the size of capex. But in France, compared to the rest of the world, they have a very unique advantage, which is that they are actually the exporting country of the power, so that they can provide the power to the data center use without causing any impact to the French citizens, but still they'll be able to allocate some power to the data center.

Meaning addressing data center project approach is different compared to the other world, and they do have a kind of a good base to proceed the data center project from that reason. And also in France we've been building supply chain for AI data center equipment, and establishing a local supply chain for power modules in Dunkirk to accelerate data center development together with Schneider. So SoftBank Group and Schneider are going to set the supply chain for the power module, and we will be able to accelerate data center development in United States.