Japan's SoftBank swings to quarterly profit, eyes on Arm unit

By Anton Bridge

TOKYO (Reuters) - Japan's SoftBank Group swung to a net profit in the final quarter of its financial year, it said on Monday, even as an investment loss at its Vision Fund arm underscored the challenges the technology investor faces, including realising its big AI ambitions.

SoftBank booked a profit of 328.9 billion yen ($2.11 billion) in January-March, compared to a loss of 32 billion yen a year earlier. Still, the second straight quarter of profit was not enough to keep it in the black for the full year.

Investors are increasingly focused on the outlook for SoftBank subsidiary Arm Holdings, the British chip designer, which SoftBank's management hope will fuel the push into artificial intelligence across its portfolio of companies.

"Arm is at the core of SoftBank Group's AI shift which will create a new ecosystem, along with the various assets we've held for a long time that are using AI, centred on the Vision Fund," Chief Financial Officer (CFO) Yoshimitsu Goto told a press briefing in Tokyo.

Arm has ridden a wave of investor enthusiasm for the perceived beneficiaries of widespread adoption of AI, helping its share price more than double in February.

Still, Arm's surging valuation has not contributed to SoftBank profit as it is a subsidiary.

Whereas Arm reported record January-March sales on licence and royalty revenue, SoftBank booked a 33-billion-yen loss from its Arm investment in the last fiscal year due to increased expenses related to stock compensation and hiring.

Arm's headcount grew by more than 1,100 in the year ended March, with more than 80% of net new hires being in engineering.

Most of SoftBank's investments through its Vision Fund unit suffered valuation loss in the fourth quarter, leaving it with a 57.5 billion yen loss.

A bright spot came in the form of South Korean e-commerce firm Coupang which generated around $600 million in unrealised investment gain.

In February, Goto said SoftBank - known for volatile earnings - was returning to a "growth trajectory".

Overall, SoftBank's fourth-quarter net profit compared with a 32 billion yen loss in the same period a year earlier, when capital raised using its Alibaba Group stake cushioned writedowns in the value of Vision Fund private portfolio firms.

($1 = 155.8500 yen)

(Reporting by Anton Bridge; Editing by David Dolan, Christopher Cushing, Bernadette Baum and Emelia Sithole-Matarise)