Japanese technology company SoftBank Group posted a $23.4 billion loss in the April-June quarter as the value of its investments sank amid global worries about inflation and interest rates.
SoftBank Group Corp.’s loss of 3.16 trillion yen ($23.3 billion) was a reversal from its 762 billion yen profit in the same quarter a year earlier.
The company said Monday that quarterly sales rose 6%.
For the fiscal year that ended in March, Softbank racked up losses of 1.7 trillion yen, a reversal from the 4.9 trillion yen profit for the previous year. Annual sales grew 10.5% to 6.2 trillion yen.
Although Softbank’s portfolio is not directly exposed to the war in Ukraine, the company warned that global uncertainty as well as inflation and soaring energy costs would likely hurt its profitability. Foreign exchange losses also bit into its earnings.
Softbank’s intended sale of British semiconductor and software design company Arm to Nvidia failed earlier this year. SoftBank is now promising lucrative future growth at Arm, including an initial public offering, although a date has not been announced for that offering.
SoftBank acquired Arm in 2016. Arm is a leader in artificial intelligence, IoT, cloud, the metaverse and autonomous driving. Its semiconductor design is widely licensed and used in virtually all smartphones, the majority of tablets and digital TVs. Such technology is considered key for autonomous driving cars.
SoftBank also owns stakes in the SoftBank mobile carrier, Yahoo web services provider, Chinese e-commerce giant Alibaba and vehicle-for-hire company Didi.
The group is also planning to cut headcount at its flagship Vision Fund investing arm, CEO Masayoshi Son said on Monday, after the crash in the value of its portfolio, pushed his conglomerate to a record quarterly net loss.
Vision Fund, which upended the world of venture capital with splashy bets on startups such as ridehailers Uber and Didi, posted a $23.1 billion loss in the April-June quarter as value evaporated from its investments in the market rout.
"The world is in great confusion," Son said at an earnings news conference.
The result caps a tumultuous six months for the Vision Fund, which posted a record $26.2 billion quarterly loss in May after SoftBank was caught out by rising interest rates and political instability that hammered markets globally.
Son has already radically scaled back investment activity. The Vision Fund arm approved just $600 million in new investments in the first quarter, compared with $20.6 billion in the same period a year earlier.
On Monday, the billionaire pledged to go further: limiting the second fund just to managing its current portfolio of investments, while planning workforce cuts at Vision Fund and cost reductions across the group.
"We need to cut costs with no sacred areas," Son said.
Son had already suffered a series of high-profile reversals after big bets by the first Vision Fund in late-stage startups such as office sharing company WeWork soured, prompting him to tighten investment controls with the second fund.
However the billionaire said Vision Fund 2, which has taken smaller stakes in a larger number of companies, had invested at frothy prices.
"We were in a kind of bubble on valuations," he said.
The second Vision Fund's portfolio of 269 firms, which cost $48.2 billion to acquire, was worth just $37.2 billion in end-June.
"If we had been more selective and invested better we wouldn't have received this heavy blow," Son said.
Listed investments that fell during the quarter included warehouse robotics firm AutoStore Holdings Ltd. and artificial intelligence firm SenseTime Group Inc.
SoftBank said it wrote down the value of unlisted assets across its two Vision Funds by 1.14 trillion yen ($8.45 billion). Analysts have said writedowns of those private assets were unlikely to reflect the extent of current market weakness.
To raise cash, SoftBank has exited companies, including ridehailer Uber Technologies and home-selling platform Opendoor Technologies, for a total gain of $5.6 billion.
SoftBank sold Uber at an average share price of $41.47, compared to the Friday closing price of $32.01.
The group has used more than two-thirds of the capital in a 1 trillion yen buyback program launched last November to support its shares, which are down 5% year-to-date, compared to a 2% drop in Tokyo's benchmark Nikkei 225.
