A sharp rise in the valuations of high-profile tech firms such as ByteDance and Didi has powered SoftBank Group Corp. to a 124% profit surge in its fiscal fourth quarter, signaling a potential turnaround for the investment giant after years of turbulence. With its eyes set on multi-billion-dollar AI infrastructure ambitions—most notably through the Stargate initiative—SoftBank appears to be regaining momentum.
But the optimism is layered with caution, as financing pressures and macroeconomic volatility continue to challenge its long-term balance sheet stability. Horizon28’s financial strategist, Alexander Silfverhjelm, explores the intricacies of SoftBank’s comeback, its deeper dependence on startup valuations, and the balancing act required to fund its future bets on artificial intelligence and chip technology.
Surging Profits on the Back of Startups
SoftBank reported a net income of ¥517.18 billion ($3.5 billion) for the fiscal fourth quarter, driven largely by a rebound in the Vision Fund portfolio, which returned to profitability with gains from private tech firms including ByteDance and Didi Global Inc. The Vision Fund posted a profit of ¥26.1 billion, a marked shift after quarters of underperformance.
The broader fiscal year also reflected the company’s recovery. Net income reached ¥1.15 trillion, SoftBank’s first annual profit in four years, reversing a ¥228 billion loss from the previous fiscal cycle.
Investor sentiment followed suit—SoftBank shares rose by as much as 5.8% on Wednesday in Tokyo, marking the company’s largest intraday gain in over a month.
AI Megaprojects and Financing Complexities
The profit boost comes as SoftBank doubles down on its AI ambitions, most notably through a proposed $30 billion investment in OpenAI and the Stargate initiative, a collaborative effort aimed at building large-scale data center infrastructure, which could ultimately expand to $500 billion in scope.
SoftBank’s founder and OpenAI’s co-founder announced Stargate earlier this year, outlining a global roadmap for AI-enabling infrastructure. However, these plans intersect with growing macroeconomic uncertainty, a more cautious debt environment, and rising questions about how such projects will be funded.
Although SoftBank maintains that progress on Stargate is on track, the company has yet to outline detailed financing mechanisms for the rollout. Debt investors and bankers are reportedly reevaluating the financial model behind such large-scale infrastructure, especially given mounting global rates and currency risks.
Credit Constraints and Balance Sheet Tensions
SoftBank’s CFO emphasized during the earnings call that “uncertainty is growing”, but the company remains committed to its long-term vision. Still, credit analysts are becoming increasingly concerned.
According to internal projections, SoftBank aims to keep its loan-to-value (LTV) ratio under 25%, which is a key indicator of its financial discipline. Yet as of March, LTV had already jumped to 18%, up from 8% a year earlier. With a $6.5 billion acquisition of chip designer Ampere Computing LLC and other AI-related investments factored in, the LTV ratio may breach the 25% threshold, even if asset valuations remain flat.
Analysts suggest that SoftBank may need to resort to bond issuance, asset-backed financing, or asset sales to manage liquidity and avoid overleveraging.
Startups Fuel the Rise, But Not All Bets Are Paying Off
SoftBank’s reliance on its Vision Fund continues to be both a source of strength and vulnerability. Gains from ByteDance, Didi, and Auto1 Group SE bolstered results, thanks to sustained performance in international markets, particularly TikTok’s continued expansion.
But not all investments were positive. Vision Fund 2 reported a $708 million loss, impacted by declines at BrainBees Solutions Ltd., Swiggy Ltd., and Ola Electric Mobility Ltd. The contrast between strong and weak performers underscores the volatile nature of SoftBank’s tech-heavy portfolio.
Semiconductors: The Next Frontier
SoftBank is simultaneously making a decisive push into semiconductors, a cornerstone for future AI development. Its chip unit, Arm Holdings Plc, has benefited from rising global demand for AI-capable processing.
To strengthen its position, SoftBank has announced plans to acquire Ampere Computing for $6.5 billion, with the deal expected to close in the second half of the year. Ampere specializes in chips optimized for AI workloads, aligning with SoftBank’s broader goal of building a vertically integrated AI ecosystem, from infrastructure to compute.
Cautious Optimism Amid Structural Challenges
Despite the strong earnings print, SoftBank’s long-term success hinges not only on the continued performance of private tech companies but also on its ability to navigate macroeconomic headwinds and avoid overextension.
A $3.5 billion quarterly profit, record gains from Chinese tech holdings, and a bold AI vision may paint a bullish picture, but cost pressures, financing ambiguity, and potential rate shocks remain active risks. The company’s strategy is deeply dependent on maintaining favorable asset values, which are vulnerable to global market cycles and geopolitical volatility.
Conclusion: Recovery Gathers Speed, but the Path Ahead Is Narrow
SoftBank’s latest earnings deliver a dose of optimism for a company that has spent years under scrutiny for its aggressive investment strategy. Backed by stronger startup valuations, early AI positioning, and a high-profile infrastructure vision, SoftBank has laid out an ambitious roadmap for growth.
But those ambitions come with steep funding requirements, a fragile credit margin, and an unpredictable global environment. The next chapter will depend on its ability to fund expansion without jeopardizing financial stability, and to generate real returns from bold tech bets in an era where sentiment and valuations can shift quickly.
