SoftBank Group Corp. Q1 FY2026 earnings call

Core Strategic Direction

• SoftBank positions itself as an AI (ASI) platform investment company focused on four high-growth priority areas: AI infrastructure, Arm, OpenAI, and physical AI. Management prioritizes long-term growth over reacting to short-term market volatility in net asset value.
• The firm's core investment thesis is that building out AI infrastructure accelerates growth across its full portfolio, particularly Arm and OpenAI, and physical AI is an early-stage emerging area the firm is excited to invest in.

Financial Highlights

• End-of-Q1 net asset value (NAV) hit a record 72.3 trillion yen, with a pro forma latest NAV of approximately 58.3 trillion yen as of the call (still a strong historical level). Q1 investment gain totaled 1.8 trillion yen, up 1.3 trillion yen year-over-year, and net income was 347 billion yen. The investment gain was driven primarily by share price increases in Intel and fair value growth for ByteDance.
• Loan-to-value (LTV) ratio ended the quarter at 13%, well below the 25% internal safety threshold, reflecting a very strong conservative balance sheet position. Cash position stood at 2.3 trillion yen, down from 3.5 trillion yen at the prior quarter end due to bond redemptions and investment activity, but still meets the firm's requirement of holding at least two years of bond redemption amounts in cash.
• S&P revised the firm's credit outlook from negative to stable, a positive ratings milestone.

Key Operational Updates

• OpenAI: SoftBank fulfilled 20 billion USD of its 30 billion USD committed 2026 investment in Q1, with the remaining 10 billion USD scheduled for October 2026. Total investment will reach 64.6 billion USD for a 13% ownership stake. OpenAI's GPT-5.6 has earned top performance ratings from independent evaluators at a lower cost than competing models. Weekly active enterprise users for Codex grew from 0.4 million in December 2025 to 10 million in July 2026, a 24x increase, with combined weekly active enterprise users across Codex and ChatGPT Work growing 25x over the same period, driving strong enterprise adoption. SoftBank and OpenAI launched a joint cybersecurity PaaS (Patching as a Service) in Japan that will initially serve 3,000 critical infrastructure companies.
• Arm: 50% of leading global hyperscalers have adopted ARM-based CPUs for data centers, and ARM's new in-house AGI CPU offers significant capex efficiency compared to x86 alternatives. Two new launch partners (Oracle and Varda) were added in Q1, and the AGI CPU is seeing stronger demand than initial forecasts.
• AI Data Centers: The firm announced a 5 gigawatt AI data center project in northern France at the Choose France Summit, with an initial 45 billion euro investment to deliver 3.1 gigawatt of capacity by 2031. The project is designated a fast-track project by the French government, which has facilitated power access and accelerated grid connection, and SoftBank is partnering with Schneider Electric to build a local power module supply chain. In the U.S., the 10 gigawatt Port Technology Campus project in Ohio is in final agreement discussions, with construction expected to start in 2026. The Milam County, Texas project has a signed lease agreement with OpenAI and is on track for delivery. A new NEO Cloud service, a joint project with SoftBank Corp, will offer AI compute as a cloud service using capacity from SoftBank's data centers.
• PayPay: PayPay acquired T&D Financial Life to expand into comprehensive financial services for its user base, and SoftBank formed a 100 billion yen capital and business alliance with Seven & Nine Holdings to leverage PayPay's 75 million user base and Seven & i's 22,000 7-Eleven stores for mutual value creation.

1. Arm: Q1 revenue hit a record 1.3 billion USD, up 22% year-over-year. Fully diluted earnings per share reached a Q1 record high, up 29% year-over-year. Arm contributes 100% of its segment revenue as a core portfolio holding, with strong demand driving outperformance relative to consensus expectations.
2. Vision Fund: Total cumulative investment gain since inception reached 47 billion USD. In Q1, Vision Fund 1 recorded a 2.3 billion USD investment gain driven primarily by a fair value increase in ByteDance. Vision Fund 2 and related funds posted a small net loss due to weak share price performance of newly public PayPay in the quarter (PayPay has since recovered its share price). Cumulative total return across the Vision Fund platform reached 114 billion USD, exceeding cumulative investment cost, with 73 billion USD in completed monetization from exited positions.
3. AI Infrastructure (SB Energy / Data Centers): Cumulative project capital raised for SB Energy totals 19 billion USD, with 5 gigawatt of power generation and storage capacity currently operational or under construction. SB Energy filed a confidential Form S-1 for an initial public offering in May 2026.
4. Physical AI: Over 30 physical AI businesses are held in the portfolio, grouped into robotics/humanoid AI, infrastructure/factory automation, and mobility/autonomous driving. The planned acquisition of ABB Robotics remains on track for completion by the end of 2026.

• Arm: Second quarter revenue guidance midpoint is 1.38 billion USD, and EPS guidance midpoint is 47 cents, both above analyst consensus. For ARM's AGI CPU, orders already exceed 2 billion USD across FY27 and FY28, with demand expected to double in the following year, and management expects demand to potentially outpace prior forecasts. • Financial Policy: No change to core policy: LTV will remain below 25% in normal market conditions, and the firm will maintain a minimum cash balance equal to two years of bond redemptions to preserve balance sheet safety. The current 13% LTV leaves significant capacity for additional investment. • SB Energy: The firm expects SB Energy to complete its initial public offering following the confidential S-1 filing, enabling further independent growth.

• Short-term volatility in public market valuations directly impacts SoftBank's NAV, as the majority of the investment portfolio is marked-to-market, leading to quarterly fluctuations in reported net asset value. • Large-scale AI data center projects require massive capital expenditure and depend on securing sufficient power capacity and timely grid connection, which can delay project delivery. While the French project has secured supportive government approvals, U.S. projects are still in late-stage negotiation. • Intense competition in the large language model (LLM) space, including improving performance from Chinese LLM providers, creates market pressure on OpenAI's market position. • Newly public portfolio companies like PayPay can face near-term share price volatility that negatively impacts quarterly fair value results, though weakness can reverse in subsequent periods.

Q: Recent U.S. market discussion claims there is overinvestment in AI data centers, potentially forming a bubble. Will SoftBank change its data center investment plans? / A: Management believes there is currently a structural shortage of AI compute supply, not an oversupply. Securing sufficient data center capacity is required to enable continued AI development and growth, so the current wave of investment is healthy and necessary. SoftBank will continue progressing with its planned projects as a participant in this necessary buildout.

Q: What is the expected timing of an OpenAI IPO, and what impact would a postponement have on SoftBank? / A: OpenAI is the issuer, so SoftBank cannot comment on the planned IPO timing. As an investor, SoftBank is strongly expecting and supportive of an eventual OpenAI IPO.

Q: How strong is the demand pipeline for ARM's new in-house AGI CPU over the next three years? How likely is it to hit the projected 2 billion USD in demand? / A: ARM initially projected 1 billion USD in revenue across the first two years of AGI CPU shipments starting in Q4 FY26. Demand has consistently outpaced forecasts, and the firm now has orders for more than 2 billion USD across the first two years. Management expects demand to double again in the third year, as the order pipeline continues to grow and new large customers are added, so demand is tracking ahead of prior projections with visible upside.

Q: Will SoftBank invest in competing large language models besides OpenAI, given fierce LLM competition, and how does SoftBank value its OpenAI stake? / A: OpenAi is marked to market at the valuation from its most recent recent private funding round, which is the standard valuation approach for all private holdings. While SoftBank has invested in competing companies in other sectors in the past, OpenAI is treated as a strategic partner, so SoftBank has no current plans to invest in other competing LLMs.

Q: How does SoftBank approach future financing for large investments amid higher interest rates and recent U.S. tech stock volatility? / A: SoftBank does not set fixed annual investment budgets, as this leads to poor investment decisions (overinvesting to hit budgets or passing on good opportunities if budgets are exhausted). The firm will invest whenever attractive opportunities arise. The financing market remains active, and while interest rates are higher than in the past, expected investment yields justify the current borrowing costs. SoftBank has strong credit capacity from its ~58 trillion yen net asset value, so financing capacity is not a constraint.