SoftBank swings to an unexpected $7 billion quarterly loss as US data centre costs and financing charges mount

SoftBank Group booked a $7 billion quarterly loss, hit by its US data centre business and by financing costs¹. The result was unexpected².

The net loss for the quarter came to ¥1.1 trillion, or about $7 billion³. One analysis described the result as a $16 billion profit turning into a $7 billion loss⁶.

US data centre costs swelled during the quarter⁵. The company is banking on the rising value of its holdings to outpace the interest payments on its debt¹. Chief financial officer Goto declined to give details on the company’s position in OpenAI¹. The quarter left SoftBank with a loss for the first half as its AI ambitions faced fresh setbacks^7,8.

Why it matters to investors

SoftBank’s results are a read on the artificial intelligence build-out. Founder Masayoshi Son has made huge investments in AI companies², and has directed billions of dollars into AI-related hardware and applications⁵. AI infrastructure investments are central to his strategy, and SoftBank’s subsidiary SB Energy is developing large AI data centres⁸. Founded by Son as an early investor in internet technology, SoftBank has focused on companies related to AI and telecommunications⁹.

The results will test investors’ confidence in the artificial intelligence boom³. The loss has raised concern over SoftBank’s bets on AI⁴, and spending on AI infrastructure has exposed the strains behind Son’s investment strategy⁶.

The structure of the bet matters as much as its size. SoftBank is relying on gains in the value of its holdings to cover the interest on the debt it has taken on to fund them¹. When financing costs rise and data centre costs swell at the same time, that equation comes under pressure from both sides^1,5.

The company’s reluctance to give details on OpenAI leaves investors with less visibility into one of its central AI positions¹.

What to watch

The first indicator is the value of SoftBank’s holdings. Its strategy depends on those valuations rising faster than its interest bill¹.

The second is the cost of its US data centre business, which drove much of the quarter’s loss^1,5. SoftBank is set to reassess its US neocloud business, with a potential shift toward other regions, according to one report, which reignited market concerns about the investment prospects of US data centres¹¹.

The third is disclosure. Investors were already watching the AI investment strategy before the results⁶, and further detail on the OpenAI position would help them judge the risks¹.

Market reaction to the results will show how far the loss changes sentiment toward companies that have borrowed to build AI capacity^3,4.