According to analysts, Japan’s SoftBank Group (OTCMKTS:SFTBY) is likely to announce a return to profit during its first-quarter earnings report on Tuesday, as its Vision Fund investing arm’s portfolio of technology stocks experienced a strong rebound.
After suffering two consecutive years of losses due to the declining value of the Vision Fund’s portfolio, SoftBank took measures to improve its financial position. One of those measures involved selling a significant stake in Chinese e-commerce firm Alibaba Group Holding (9988.HK) to bolster its balance sheet.
The potential return to profit could alleviate pressure on founder and CEO Masayoshi Son, who made aggressive bets on late-stage startups but faced challenges with underperforming investments.
Investors are eagerly anticipating updates on the potential blockbuster listing of SoftBank’s portfolio chip designer, Arm. A successful listing would not only provide an additional cash injection for the group but also enhance Son’s reputation as a visionary tech investor. Analyst Rolf Bulk at New Street Research emphasized the significance of Arm’s position in semiconductors and called the listing a major catalyst for the company and the tech industry as a whole.
Analysts’ estimates, compiled by Refinitiv, show that SoftBank is expected to post a net profit of 75 billion yen ($525 million) for the period from April to June.
SoftBank’s Vision Fund has faced five consecutive quarters of investment losses, primarily due to backing high-growth firms that lost favor in the market, forcing the conglomerate into a defensive stance to preserve cash. However, Bulk expressed optimism, noting that public valuations in the tech sector are trending up, potentially leading to a similar trend in private valuations.
During the quarter, SoftBank (OTCMKTS:SFTBY) saw gains in listed companies such as food delivery company DoorDash (NYSE:DASH) and ride-hailing business Grab Holdings (NASDAQ:GRAB).
Analysts believe that a return to profit could pave the way for an increase in new deals. Son had previously mentioned plans to shift to “offense mode” amidst the excitement over advances in artificial intelligence (AI).
Recent activities by SoftBank (OTCMKTS:SFTBY) include creating a joint venture to build automated warehouses and investing in the insurance tech company Tractable.
The market has shown eagerness concerning Arm’s prospects for expansion, particularly in data centers and the automotive sector. The expectation that AI investments will drive industry growth has contributed to the market capitalization of chipmaker Nvidia (NASDAQ:NVDA), a former suitor of Arm, surpassing $1 trillion.
Macquarie analyst Paul Golding sees the potential for Arm to gain $31.4 billion from its current book value, given the elevated valuations of industry peers. New Street Research’s Bulk highlighted that SoftBank had mandated Arm to reinvest all its profits into entering new markets, and now, Arm is positioned to reap the benefits of that investment.
Featured Image: Megapixl @ Andreistanescu
Author Faith Yakubu 
