SoftBank’s investments decline in latest quarter but Stargate may ramp them up

SoftBank Group reported a significant slowdown in its investment activity for the latest quarter but it plans to increase its investments in the near future. However, that will depend on how well its big new project, Stargate, takes off.

SoftBank's spending dropped to about $600 million in the quarter ended December 2024. However, in a post-earnings call, company executives signalled that its flagship AI infrastructure project, Stargate, could accelerate investments.

"The invested amount looking at Q3 was less than $1 billion, or around $600 million," SoftBank’s Chief Financial Officer Yoshimitsu Goto said during the earnings call. However, he pointed out that the company increased its investment activity in January, spending an additional $1.4 billion. "So somewhere around $2 billion is something that we want to see as investment," he added.

SoftBank’s earnings call shed light on its broader financial strategy, with executives emphasising a cautious yet opportunistic approach. While investment activity slowed in the last quarter, Goto hinted at a potential ramp-up. "After the announcement of Stargate, it depends on how the project goes, but we may accelerate our new investment going forward."

SoftBank Group swung to a loss of 369.16 billion yen ($2.4 billion) in the October-December 2024 quarter as shares of some of its top portfolio companies declined sharply during the period.

The quarter also saw fluctuations in SoftBank’s asset values. Net asset value (NAV) stood at nearly 30 trillion yen ($200 billion) at the end of December but rebounded to 33.5 trillion yen ($220 billion) after January, bolstered by strong performance from key holdings such as Arm Holdings and T-Mobile.

"We’ve been seeing quite a good pickup on share price from Arm and T-Mobile, one of the biggest contributors," Goto said, noting that SoftBank remained focused on long-term value creation rather than short-term stock price movements.

The Vision Fund, once the crown jewel of SoftBank’s investment empire, reported another quarter of losses at $2.3 billion. SoftBank executives attributed the losses in part to a weaker yen and political instability affecting some portfolio companies, such as Coupang in South Korea and Ola Electric.

Despite these setbacks, SoftBank remains bullish on AI investments. "We have great expectations from those portfolio companies," Goto said, highlighting follow-on investments in OpenAI and a potential IPO pipeline, including Klarna and PayPay.

Swiggy gains

Even as SoftBank’s overall investment activity slowed, its early bet on Indian food delivery giant Swiggy has yielded significant returns. SoftBank’s initial $400 million investment in Swiggy has delivered a 2.4X Gross MOIC (Multiple on Invested Capital), growing to $1.1 billion as of December 31, 2024.

SoftBank’s estimates are based on the Rs 541 a-piece share price it commanded at the end of the third quarter. MOIC, a key metric for investors, measures the total return on an investment relative to the initial capital deployed.

Swiggy’s Rs 11,300 crore ($1.3 billion) IPO on November 13, 2024 was the largest tech listing globally for the year, debuting at Rs 390 per share and valuing the company at Rs 87,300 crore (~$10.4 billion). The foodtech major listed its shares on the NSE at Rs 420, an 8% premium to the upper band of its IPO price.

However, since Swiggy posted a widened Q3 loss of Rs 799 crore, its stock has fallen 17.52% to Rs 344.8 on Tuesday, down from Rs 418.05 on February 5.

Swiggy’s IPO was the second largest in SoftBank’s portfolio of Indian tech companies, behind Paytm's $2.4-billion haul. SoftBank, the second-largest investor in Swiggy, acquired an 8% stake in April 2021 when the company was valued at $5 billion.