SoftBank Corp. Q1 FY2027 earnings call

Opening & Consolidated Performance

• President Miyakawa opened with sympathies for those affected by the Kumamoto earthquake, committing to full support for recovery efforts. This is the first earnings presentation under SoftBank's new midterm management plan, as the company evolves from a traditional telecommunications provider to a next-generation social infrastructure provider.
• Consolidated revenue reached 1,814.7 billion yen, 9% year-on-year growth, with all business segments achieving revenue growth; double-digit growth was delivered by Enterprise, Distribution, and Financial segments.
• Consolidated operating income hit 302.3 billion yen, 4% year-on-year growth, reaching 27% of the full-year forecast. Company-wide cost improvement initiatives offset the impact of a prior year one-time remeasurement gain from LINE Bank Taiwan, delivering profit growth despite initial expectations of a challenging quarter.
• Net income totaled 150.1 billion yen, 3% year-on-year growth, also reaching 27% of the full-year forecast, with steady progress across all business segments against full-year targets.

Enterprise & New Product Updates

• SoftBank launched Patching as a Service (PaaS) on July 14, an end-to-end cybersecurity vulnerability management service. As of Q1, over 100 paid contracts have been secured, with a target of serving approximately 3,000 enterprise customers via a 1,000-person professional team, with ongoing development toward full process automation.
• The cloud and AI business is expected to maintain ~30% annual growth through FY2027, entering the monetization phase after years of investment.

Strategic Acquisitions & Alliances

• PayPay announced the acquisition of a 70% stake in T&D Financial Life Insurance Company, expanding its financial ecosystem beyond existing banking and securities businesses.
• SB Payment Service will acquire 100% of SP.LINKS Inc. for approximately 7.27 billion yen. The combined business will become one of Japan's largest online payment providers, with 13 trillion yen in combined annual online transaction volume (34 trillion yen including PayPay), targeting 10 billion yen in annual medium to long-term synergies from scale, cost reduction, and expanded service offerings.
• SoftBank, PayPay, and Sumitomo Mitsui Card will invest a total of 300 billion yen (100 billion yen each) in a capital and business alliance with Seven & i Holdings to fund AI and digital transformation. The partnership aims to convert 7-Eleven's 22,000 Japanese stores into next-generation social infrastructure, powered by AI robots for back-of-house operations, AI-managed battery emergency power systems, and AI-optimized supply chains, with plans to expand the model globally.

Global Expansion & Capital Allocation

• SoftBank established SB Neo, a 51% owned consolidated subsidiary, to expand its neocloud AI infrastructure business into the U.S. market, using the Infrinia OS platform to provide shared GPU cloud services to U.S. enterprises, with phased deployment starting in FY2027.
• SoftBank sold its $1 billion direct stake in SB Energy for an expected purchase price of $1.5 billion, recording a expected gain in Q2 FY2027 after the Q1 quarter end. The sale followed clarification of roles between SB Neo and SB Energy, removing the need for direct SoftBank equity ownership.
• The company maintains a disciplined capital allocation framework, balancing growth investment, capital recycling via strategic asset sales, financial discipline, and shareholder returns.

1. Enterprise business: Revenue was 260.4 billion yen, 11% year-on-year growth, accounting for ~14.3% of total consolidated revenue. Within this segment, the cloud and AI sub-segment delivered 31% year-on-year revenue growth driven by AI computing infrastructure. Operating income for the full Enterprise segment was 62.2 billion yen, 28% year-on-year growth.
2. Consumer business: Revenue was 749.7 billion yen, 4% year-on-year growth, accounting for ~41.3% of total consolidated revenue. Mobile service revenue grew 3 billion yen year-on-year, and ARPU increased approximately 60 yen in Q1. Operating income was 152.9 billion yen, a 1% year-on-year decline, representing ~50.6% of total consolidated operating income.
3. Media & EC business: Revenue was 446.8 billion yen, 10% year-on-year growth, accounting for ~24.6% of total consolidated revenue. The Media sub-segment grew 3% year-on-year. Operating income was 66.7 billion yen; excluding a prior year one-time factor, operating income grew 19% year-on-year, representing ~22.1% of total consolidated operating income.
4. Financial business: Revenue was 115.9 billion yen, 27% year-on-year growth, accounting for ~6.4% of total consolidated revenue. Growth was driven primarily by PayPay. Operating income was 31.8 billion yen, 76% year-on-year growth, representing ~10.5% of total consolidated operating income.

• The cloud and AI business is expected to grow at an annual rate of approximately 30% through FY2027. Management expects an accelerating pace of revenue growth compared to the conservative FY2030 revenue target laid out in the midterm plan, with management personally expecting faster growth than the published conservative target.
• For the Consumer business, full-year operating income growth is still expected, despite a 1% year-on-year Q1 decline, with Q1 performance exceeding initial expectations. ARPU is expected to increase by approximately 200 yen starting from Q2.
• SoftBank expects Q2 FY2027 to face a difficult year-on-year comparison due to a 40+ billion yen one-time remeasurement gain in the prior year, but management is committed to overcoming this headwind. Management will assess whether to upgrade the full-year earnings forecast after including the Q2 SB Energy stake sale gain and stronger-than-expected underlying business performance.
• Patching as a Service is expected to begin contributing material revenue in the second half of FY2027, and represents upside not currently included in the official business forecast.
• Accelerating operating income growth from the AI business is expected in the medium term, as the business shifts from 5 years of infrastructure buildout to monetization of software and subscription services over the next 5 years, with an expected minimum 30% profit margin for AI cloud services.

• Entry into the U.S. AI cloud market depends on securing non-recourse project financing, which is conditional on securing long-term customer off-take agreements from hyperscalers; management has noted that financing skepticism exists, and the company will only proceed if the non-recourse financing framework can be put in place, otherwise it will prioritize the Japanese market.
• The Consumer mobile segment faces ongoing industry price competition in the mid-data plan segment, following competitors' data allowance increases; while SoftBank currently remains competitive and will not match changes directly, the competitive landscape remains a headwind.
• Global GPU and accelerator supply remains constrained across the industry, though SoftBank notes it holds an advantageous position via its relationship with NVIDIA and Arm holdings.
• Japan continues to face structural labor shortages in retail and other sectors, which creates both opportunity for SoftBank's AI automation solutions but also adds operational pressure to the industry segments the company serves.
• Natural disasters such as the Kumamoto earthquake continue to pose risks to telecommunications and infrastructure operations, highlighting the need for improved emergency preparedness including HAPS deployment.

Q: What is SoftBank's commitment level to the Seven & i Holdings alliance, and why was the announcement made at this earnings call rather than a standalone event? / A: The original standalone press conference was canceled after the Kumamoto earthquake, as it would have been inappropriate to hold a large celebratory event while the region suffered damage and many stores were impacted. SoftBank does not intend to operate Seven & i's convenience store business; it only aims to provide AI and infrastructure technology to support Seven & i's transformation, with a small 2% stake intended to avoid interfering with existing operations. The partnership will focus on labor-saving back-office automation, emergency power infrastructure, and payment integration, leaving store operations to Seven & i's existing management team.

Q: When will Patching as a Service start contributing to revenue and profit, and are contributions included in current forecasts? / A: Paid service launched August 1, and revenue has started to be recorded. Management expects material revenue contribution in the second half of FY2027, but this contribution is not included in current official forecasts, so any revenue from PaaS will be pure upside for the company. Management declined to disclose detailed pricing at this early stage per customer agreement terms.

Q: How does SoftBank plan to fund and structure the U.S. cloud AI expansion, and can it secure the necessary GPUs, financing, and customer contracts? / A: SoftBank expects to secure sufficient GPU and accelerator resources primarily via its long-standing relationship with NVIDIA, and will also consider utilizing Arm CPUs and Google TPUs. The business model relies on non-recourse project financing raised via special purpose companies, which depends on securing long-term off-take agreements from hyperscalers. A key competitive advantage is Infrinia OS, which allows efficient sharing of GPU resources across multiple customers, reducing risk for off-takers and financing providers. If non-recourse financing cannot be arranged, SoftBank will prioritize the Japanese market instead, and may start smaller with in-house funding if needed.

Q: What is SoftBank's perspective on the Japanese national sovereign/physical AI initiative, and how does the company fit into this effort? / A: Management welcomed the initiative, noting that it aligns with SoftBank's long-held view that Japan needs domestic sovereign AI to support its manufacturing industry, leveraging domestic historical industrial knowledge rather than relying on overseas AI models. While domestic technology currently lags overseas players, management views this as a once-in-a-generation opportunity that is critical for Japan's long-term future, and SoftBank is contributing by bringing together leading domestic AI talent from across the Japanese industry to advance the effort.