- Softbank makes first annual profit since year ended March 2020
- $500 Stargate data centre scheme largely unimpacted by tariffs
- Yet to discuss financing of individual sites as due diligence continues
- Later stage startup holdings perform well but early stage holdings suffer large falls in value
TOKYO, May 13 (Reuters) - Japan's SoftBank Group reported its first annual profit in four years on Tuesday, likely bringing relief to investors scarred by high-profile failures as it embarks on another series of mammoth tech investments.
The Tokyo-based conglomerate reported a 1.15 trillion yen ($7.78 billion) profit for the year ended March versus a loss of 227.6 billion yen a year earlier.
The figure was boosted by the 517 billion yen booked for January-March - more than double that earned in the same period a year earlier - on strong performance from telecommunications holdings and higher valuations in its later-stage startups.
The turnaround illustrates the risk and reward of SoftBank's approach of investing in high-growth technology companies, epitomised by the success of its investment in Chinese e-commerce leader Alibaba Group and bankruptcy of U.S. office-space startup WeWork.
SoftBank is in the midst of its most extensive spending spree since the launch of its Vision Funds - in 2017 and 2019 - this time targeting companies it deems to be leading the development of artificial intelligence.
In March, it said it would acquire U.S. semiconductor design company Ampere for $6.5 billion and in April announced it would underwrite up to $40 billion of new investment in ChatGPT maker OpenAI, of which up to $10 billion would be syndicated to other investors.
As of May 9 co-investors had contributed $1.84 billion while SoftBank's Vision Fund 2 had put in $8.16 billion.
SoftBank is also leading financing for the "Stargate" project - a $500 billion scheme to develop data centres in the United States - saying most of the money would come through lenders in project finance schemes.
The scale of the commitments has prompted analysts and investors to question SoftBank's ability to weather market volatility brought about by new U.S. tariffs.
SoftBank has identified over 100 potential sites for Stargate but is still conducting due diligence and so it is too early to start discussions on financing with lenders, Chief Financial Officer Yoshimitsu Goto told a briefing in Tokyo.
"I don't think our Stargate plans are being held up in a big way by the tariff situation," Goto said.
SoftBank's Vision Fund 1, which invests in later-stage startups, recorded an investment gain of 940 billion yen over the year, boosted by increases in the fair value of holdings such as TikTok operator Bytedance and e-commerce platform Coupang.
In contrast, its Vision Fund 2, which invests in earlier-stage startups, booked an investment loss of 526 billion yen.
Market uncertainty springing from U.S. trade policy has hit the listing market, giving SoftBank less scope to exit the more than 300 companies in Vision Fund portfolios and generate the vast sums needed for new investment.
Portfolio companies including Swedish fintech Klarna, Indian hotel chain Oyo and U.S. fintech Chime have delayed planned listings since the start of April.
A source with source with knowledge of the Vision Fund's investment activities said they expect the holdups to last just a couple of months and do not expect the current uncertainty to last for a year or more.
In total SoftBank's Vision Funds have around $36 billion of late stage holdings that may list soon, including OpenAI and domestic payments application PayPay, Goto said.
($1 = 147.9700 yen)
Reporting by Anton Bridge; Editing by Christopher Cushing, Kirsten Donovan and David Evans
Source: Reuters