SoftBank expected to return to profit due to tech stock gains.

SoftBank expected to return to profit due to tech stock gains.

SoftBank Group Expected to Return to Profit on Rebound of Vision Fund Portfolio

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SoftBank Group, the Japanese conglomerate known for its aggressive bets on late-stage startups, is anticipated to report a return to profit in its upcoming first-quarter earnings announcement. Analysts attribute this expected turnaround to the rebound of its Vision Fund investing arm’s portfolio of technology stocks.

Over the past two years, SoftBank has incurred losses due to the slumping value of its Vision Fund portfolio. To strengthen its balance sheet, the company sold part of its stake in Alibaba Group Holding, the Chinese e-commerce giant. The potential return to profitability could alleviate the pressure on SoftBank’s founder and CEO, Masayoshi Son, who has faced challenges and criticism for some high-profile investment stumbles.

Investors are eagerly awaiting updates regarding the potential blockbuster listing of portfolio chip designer Arm. A successful listing would not only provide a significant cash injection for SoftBank Group but also further enhance Masayoshi Son’s reputation as a forward-thinking technology investor.

Analyst Rolf Bulk from New Street Research describes the potential listing as a major catalyst for the company and a significant event for the tech industry as a whole, given Arm’s important position in semiconductors. The average of four analyst estimates compiled by Refinitiv predicts that SoftBank will post a net profit of 75 billion yen ($525 million) for the April-June period, a strong indicator of potential recovery.

SoftBank’s Vision Fund unit has experienced five consecutive quarters of investment losses, primarily due to backing high-growth firms that fell out of favor with the market. As public valuations in the tech sector trend upwards again, experts anticipate a corresponding increase in private valuations. This optimistic outlook could lead to a resurgence in new deals for SoftBank.

During the second quarter, companies such as food delivery giant DoorDash and ride-hailing business Grab Holdings experienced listed gains, contributing to the positive momentum for SoftBank’s portfolio. These developments align with CEO Masayoshi Son’s plan to shift to “offense mode” and capitalize on the advancements in artificial intelligence.

Recent activities by SoftBank, including the creation of a joint venture focused on building automated warehouses and an investment in insurance tech company Tractable, reflect the company’s renewed focus on growth and strategic partnerships.

Analysts are particularly enthusiastic about Arm’s prospects for expansion in data centers and the automotive sector. The increasing investment in artificial intelligence has boosted the market capitalization of chipmaker Nvidia, which was previously interested in acquiring Arm, to over $1 trillion. Macquarie analyst Paul Golding believes there is potential upside of $31.4 billion for Arm from its current book value, considering the elevated valuations of industry peers.

SoftBank’s decision to reinvest all of Arm’s profit in entering new markets has positioned the company to reap the benefits of its strategic investments. This strategy aligns with SoftBank’s overall vision of capitalizing on emerging technologies and driving industry growth.

In conclusion, SoftBank Group’s expected return to profit reflects the resilience and successful turnaround of its Vision Fund portfolio. With potential gains from the listing of Arm and a renewed focus on growth and strategic investments, the company is demonstrating its ability to adapt and capitalize on emerging opportunities in the tech sector.