India's IPO boom, SoftBank makes a fortune! Turning losses into profits in the third quarter, earnings significantly exceed expectations | Earnings report insights

Thanks to the growth across all business segments, SoftBank's third-quarter performance has "blossomed," with the Vision Fund turning a profit year-on-year driven by a strong IPO market in India.

On November 12, Tuesday, Japanese telecom giant SoftBank Group announced its financial results for the second quarter of fiscal year 2024, ending September 30, and for the first half of the year.

1) Key Financial Data:

Revenue: The group's revenue for the first half of the year was 3.15 trillion yen, a year-on-year increase of 7%, with operating income rising 14% year-on-year to 585.9 billion yen.

Profit: The group achieved a net profit of 1.18 trillion yen in the second quarter, far exceeding the expected 295 billion yen, compared to a loss of 931 billion yen in the same period last year. The net profit attributable to shareholders for the first half of the year increased by 7% year-on-year to 323.9 billion yen.

2) Business Revenue Data:

Consumer Segment: Driven by increased spending from smartphone users, the consumer segment's revenue grew by 2% year-on-year to 788.8 billion yen, with operating income rising 12% to 94.4 billion yen. The cumulative number of smartphone users increased by 4% compared to the end of the previous fiscal year.

Enterprise Segment: Revenue for the first half of the year increased by 11% year-on-year to 445.8 billion yen, mainly due to stable growth in solutions and other businesses.

Distribution Segment: Revenue and operating income for the first half of the year grew by 44% and 20% year-on-year, respectively, primarily driven by increased demand for AI-related products, with AI server revenue from external customers increasing fivefold year-on-year.

Media and E-commerce Segment: Revenue and operating income for the first half of the year grew by 5% and 40% year-on-year, respectively.

Financial Segment: Revenue for the first half of the year increased by 19% year-on-year to 13.6 billion yen, turning profitable after a loss of 2 billion yen in the first half of fiscal year 2023, with one major contributing factor being PayPay Corporation's return to profitability on a consolidated basis.

The financial report emphasized that in the first half of this year, all business segments of the group saw growth in revenue and profit, while the group raised its full-year performance guidance.

Compared to initial forecasts, SoftBank increased its full-year revenue guidance by 150 billion yen, operating income guidance by 50 billion yen, and net profit by 10 billion yen, now expecting total revenue of 6.35 trillion yen, operating income of 950 billion yen, and net profit of 510 billion yen for fiscal year 2024.

SoftBank Welcomes "Harvest Season in the Indian Stock Market"

It is noteworthy that, benefiting from the increased valuations of companies like Didi Chuxing and Coupang, SoftBank's Vision Fund turned a profit in the second quarter, achieving a profit of 373 billion yen, far exceeding the expected 83.8 billion yen, with investment income reaching 608.5 billion yen The Vision Fund's profit this quarter has significantly increased, mainly driven by the IPO boom in India. Kirk Boodry, an analyst at Astris Advisory, stated:

“About half of the growth in the second quarter came from the rise in Indian IPOs. If the IPO channels in the U.S. reopen and there is demand for virtual currency companies, a small boom may occur. However, what may be more important for the group is what they plan to do with artificial intelligence.”

Devi Subhakesan, an independent analyst at investorpte, wrote in a report prior to the earnings release that SoftBank is entering an "Indian harvest season."

According to Subhakesan's estimates, based on the IPO price of Swiggy, India's largest online food ordering and delivery platform, the value of SoftBank's holdings has reached $803 million, a 78% increase from its investment in January 2022.

For an investment team still burdened with hundreds of loss-making startups, this is a rare moment of victory. Previously, the Vision Fund had suffered massive losses for two consecutive years due to the plummeting valuations of startups, turning profitable in the fiscal year 2023, but recording a loss of 24.3 billion yen again in the first quarter of this year.

Subsequently, Masayoshi Son, founder and CEO of SoftBank Group, began to focus on the generative AI field, investing in AI startups including OpenAI and Perplexity.

As of today's close, SoftBank's stock price in Tokyo fell by 1.09%, having risen 49.5% year-to-date.