SoftBank to report first net profit in last five quarters

SoftBank’s net profit: SoftBank Group is expected to report a net profit for the first time in five quarters when it announces its earnings on Thursday, driven by robust gains in the value of its listed assets.

Investors are eager to learn how SoftBank intends to use its substantial capital reserves, particularly whether it will pursue share buybacks. Analyst estimates compiled by LSEG and Reuters project a third-quarter profit ranging from 282 billion yen to 460 billion yen ($1.9 billion to $3.1 billion), with only one outlier predicting a loss of 67 billion yen.

The company disclosed it would recognise $1.9 billion in gains from its T-Mobile shares acquired last year as part of the 2020 deal to divest Sprint. However, analysts expect minimal revaluations for its non-listed assets, primarily held in Vision Fund 2, due to subdued capital market activity over the quarter.

A return to net profit signals a major turnaround for SoftBank and its founder, Masayoshi Son, following setbacks such as the WeWork debacle and the decline in the valuation of its tech startup portfolio amid post-pandemic interest rate fluctuations. To strengthen its financial standing, SoftBank divested much of its stake in Chinese e-commerce giant Alibaba.

With cash reserves totalling 5.1 trillion yen ($34.5 billion) as of end-September, investor anticipation for share buybacks is high. While SoftBank has a history of repurchasing shares to address trading discounts to net asset value, management's intentions remain uncertain.

SoftBank has recently resumed investing cautiously, implementing stringent quality and valuation criteria for potential investments. However, analysts await clarification on the company's investment strategy, particularly regarding the suitability of prospective targets.

Moreover, SoftBank has the option to leverage its holdings in T-Mobile or its majority stake in chip designer Arm to fund investments or buybacks. Despite a 40 per cent surge in Arm's value since its IPO, this increase does not contribute to SoftBank's investment gains in net profit due to its status as a consolidated subsidiary.

(With Reuters inputs)