SoftBank Group Corp. Q2 FY2027 earnings call

• AI Strategy Pillars: Management reaffirmed focus on four pillars: AI models (OpenAI investment), AI chips (Arm), AI infrastructure (data centers), and physical AI (robotics/autonomous systems).
• OpenAI Investment: Completed a $30 billion follow-on investment, bringing cumulative investment to $64.6 billion with ~13% ownership. OpenAI’s ARR reached approximately $50 billion as of September, growing 25x over three years. ChatGPT weekly active users hit 1.2 billion.
• Data Center Infrastructure: Signed a 20-year lease with OpenAI for the PORTS-Pike Technology Campus (8 GW IT capacity) in Ohio. Also announced a joint venture in Malaysia with Grab and PETROS for $1.85 billion initial investment to build 5+ GW of AI compute capacity. Acquired DigitalBridge to enhance digital infrastructure expertise.
• Physical AI Investments: Highlighted progress in Gravis Robotics (autonomous construction equipment), AutoStore (warehouse automation with Amazon agreement), and Zipline (autonomous drone delivery, raised $1.5 billion at $21.5 billion valuation).
• Financial Discipline: Maintained Loan-to-Value (LTV) ratio below 25%. Repaid $40 billion bridge facility ahead of schedule using proceeds from historic financing activities totaling ~JPY 9 trillion ($56.5 billion) in Q2.

The transcript primarily highlights the financial performance of Arm and the aggregate results for SoftBank Group, rather than providing a detailed breakdown of all product segments.

• Arm: Achieved record-high revenue in Q2, increasing by 27% year-on-year. Fully diluted EPS also reached a record high, up 33% year-on-year. Arm's share among major hyperscalers exceeded 60% by the end of 2026.
• SoftBank Group (Consolidated): Recorded an investment gain of JPY 1.7 trillion for the half-year. However, net income showed a loss of JPY 768 billion for the first half and JPY -1.1 trillion for the full-year projection. Major losses stemmed from Intel evaluation losses (JPY 133 billion quarterly impact) and $3.7 billion in losses related to power generation equipment for AI data centers in the U.S.

• Arm Q3 Guidance: Revenue expected at $1.54 billion (up 24% YoY, range ±$50 million), well above analyst consensus. EPS guidance is also above consensus.
• Long-term Outlook: Management emphasized a mid-to-long-term positive outlook for AI infrastructure investments despite short-term accounting losses. No specific numerical guidance was provided for overall SoftBank Group net income or NAV beyond current LTV safety metrics.

• Equipment Procurement Losses: Recorded $3.7 billion loss due to revisions in power generation equipment procurement strategy for US data center projects, involving non-refundable advanced payments and contract modifications.
• Intel Derivative Losses: Recognized derivative losses due to declines in Intel share price following prepaid forward contracts backed by Intel shares.
• Market Volatility: Net Asset Value (NAV) declined from JPY 59.8 trillion to JPY 44.7 trillion based on recent market prices, impacting LTV ratios, though management maintains LTV is safe.
• Regulatory and Political Risks: Potential impacts from US midterm elections on data center approvals and Chinese regulatory objections to the ABB Robotics acquisition.

Q: M.J. Lee asked if the Ohio data center project would be downsized due to portfolio reviews and commented on Elon Musk's tweet claiming SoftBank defaulted on turbine orders. / A: CFO Goto confirmed there are no plans to downsize the Ohio project, which is progressing well. The portfolio review was a strategic reassessment of mid-to-long-term procurement approaches for new AI data center types, not a cancellation of existing projects. He firmly denied the default allegations, stating they remain on track to execute their AI infrastructure plans.

Q: Yagi from Nikkei asked about the impact of US midterm election results favoring anti-data center candidates in states like Texas and Ohio, and whether SB Energy projects would face delays. / A: Goto stated that while political landscapes can influence discussions, the company had already accounted for these concerns prior to the election. They continue to engage with local communities to mitigate opposition. Regarding delays, he noted that while new administration reviews might take time, SoftBank aims to ensure anticipated projects do not suffer significant delays.

Q: Yamashita from Yomiuri Newspaper questioned the risk of 'round-tripping' transactions among hyperscalers, NVIDIA, and SoftBank, citing IMF warnings about money circulation risks. / A: Goto explained that credit providers (banks) view round-tripping negatively because it doesn't guarantee repayment sources. However, SoftBank acts as an equity provider, not a debt provider, for these projects. He argued that hyperscalers like Microsoft and Amazon have superior credit profiles compared to SoftBank, so the primary risk assessment depends on the specific lender's evaluation of the borrower's creditworthiness.

Q: Masahiro Asamura asked if SoftBank's investment strategy has shifted to 'defense mode' due to declining share price and widening LTV, and if the long-term focus remains 'All-in AI'. / A: Goto acknowledged that short-term actions require balancing 'gas and brake' to maintain LTV below 25%, implying a more cautious approach currently. However, for the mid-to-long term, he affirmed that preparing for AI investments remains a priority, suggesting that current price declines could present good buying opportunities if managed carefully.