SoftBank Corp. Q2 FY2027 earnings call

• Financial Overview: All segments achieved double-digit revenue growth. Progress toward full-year forecast is strong (Revenue 51%, Op Income 58%, Net Income 65%), leading to an upward revision of full-year guidance.
• Cybersecurity Incident: IDC Frontier suffered unauthorized access due to an unpatched open-source software vulnerability. No customer data was exfiltrated. Management acknowledges failure to assess open-source software prior to the incident.
• Patching as a Service (PaaS): Over 7,000 companies signed up by end of October. Management emphasizes the need for weekly vulnerability assessment cycles due to rapid AI-driven attack evolution. Full automation of verification is targeted by fiscal year-end.
• Hokkaido Tomakomai Data Center: Preparations are on track for opening by the end of this fiscal year to drive cloud/AI growth.
• HAPS Trial Success: Lighter Than Air aircraft trial completed successfully, demonstrating territorial-network-equivalent quality, indoor communications, emergency alerts, and world-first AI-RAN latency reduction (>40%).
• Strategic Expansion: SoftBank will exhibit at Mobile World Congress (MWC) in Barcelona in March for the first time, showcasing Beyond Japan initiatives.

Total Revenue: JPY 3,798.7 billion (+12% YoY). Total Operating Income: JPY 642.1 billion (+2% YoY). Total Net Income: JPY 364.5 billion (+5% YoY).

• Enterprise Business: Revenue JPY 538.9 billion (+12% YoY); Operating Income JPY 124.8 billion (+20% YoY). Cloud and AI revenue grew 37%.
• Consumer Business: Revenue JPY 1,602.5 billion (+9% YoY); Operating Income JPY 322.9 billion (-2% YoY), impacted by amortization of customer acquisition costs.
• Media & EC Business: Revenue JPY 894.7 billion (+9% YoY); Operating Income JPY 126.5 billion (+16% YoY excluding one-time factors).
• Finance Business: Revenue JPY 241.9 billion (+27% YoY); Operating Income JPY 67 billion (+74% YoY), driven by PayPay.

• Upward Revision: Full-year revenue forecast raised to JPY 7.9 trillion; operating income to JPY 1.16 trillion; net income to JPY 610 billion.
• Milestone Acceleration: The JPY 600 billion net income milestone, previously set for FY28, is now expected to be reached two years ahead of schedule.
• Future Outlook: Management plans to update forecasts for the next fiscal year and beyond at the next earnings briefing.

• Operational Failure: IDC Frontier service disruption caused by exploitation of open-source software vulnerabilities; management admits delayed response and lack of prior assessment for open-source code.
• Cybersecurity Threats: Increasing frequency and sophistication of AI-powered attacks; rising volume of monthly attacks (estimated to double from previous levels).
• Regulatory/Political Uncertainty: Potential impact of U.S. election results and changing AI infrastructure regulations on SB Neo's US expansion plans.
• Cost Pressures: Rising memory prices and electricity costs impacting smartphone affordability and data center economics.

Q: Regarding the IDC Frontier cyberattack, how has the volume of attacks changed, and what specific operational changes have been made to handle the increased speed of AI-driven threats? / A: Attacks have roughly doubled compared to last year, with monthly incidents reaching ~100 million. Due to AI accelerating attack speeds (e.g., a breach took only 7 minutes), manual decision-making is too slow. Operations have shifted to immediate connection blocking upon alert, rather than deliberative assessment, to counteract the heightened threat level.

Q: What is the current status of the Patching as a Service (PaaS) automation, specifically regarding the verification step, and when is full automation expected? / A: While patching itself is automated, the verification step remains a bottleneck because enterprise systems are highly integrated and require human checks to ensure stability after patching. Management aims to complete full automation of the verification process by the end of the fiscal year, though no exact date can be shared yet.

Q: How does the recent price revision in the Consumer business impact ARPU and churn, and what is the outlook for mid-to-low-end device pricing given rising component costs? / A: Price revisions have positively impacted ARPU (up JPY 230 YoY) and improved churn rates as the focus shifted to long-term customers. However, rising memory prices make smartphones expensive. While high-end sales remain strong, management expects to potentially raise prices for mid-to-low-end devices next year if component costs do not decrease.

Q: What is the strategy for SB Neo’s US cloud business amid worsening sentiment around AI infrastructure, and how is power secured for domestic data centers like Tomakomai? / A: SB Neo is currently a preparatory entity building GPU-equipped data centers. If US regulatory or market conditions prove unfavorable, the company may target other countries with available opportunities. Domestically, power for the 300MW-1GW Tomakomai data center is already secured via alliances, ensuring capacity for Japanese customers while cautiously evaluating overseas demand.

Q: What updates exist on the capital alliance with Seven & i Holdings, and how is SoftBank approaching dividend policy relative to the new net income targets? / A: The partnership with Seven & i is advancing, with LINE Mini apps launched at 7-Eleven and PayPay linked to Seven & i’s app for exclusive deals. Regarding dividends, while a JPY 9/share payout is tied to the JPY 600B net income goal, management refrains from confirming specific amounts until Board approval, emphasizing sustainable, steady dividends balanced with growth investments.