One of the key investors and presumed beneficiaries of the AI boom, Japan’s SoftBank, has published its results for Q2 2026.
Despite revenue growth above expectations, the share price fell clearly after the release, with losses exceeding 4%. The reason was a significant deterioration not only in headline profits, but also in their quality.
SoftBank technical analysis (D1)
Despite very volatile valuations, the uptrend has been maintained. Demand managed to return quickly above the EMA200 during the last two corrections. Source: xStation5
Financial data
- Revenue: JPY 2.02 trillion vs. expectations of about JPY 1.92 trillion. Over 10% YoY growth.
- Gross profit: Increased to JPY 1.05 trillion, above expectations of ~JPY 955 billion, also up by about 10% YoY.
- Net profit: This is where the company showed weakness, and more than once. It fell to JPY 347.3 billion from JPY 421.8 billion a year earlier, a decline of more than 17%.
The devil is in the details
Valuation and estimating “true” profit relative to valuation are particularly difficult for investment companies such as SoftBank. The fact that the company invests in, or at least tries to gain exposure to, “AI” does not make this task any easier.
Even so, breaking the result down into components tells a story of increasingly poorer-quality profits.
The biggest issue is a massive increase in selling/administrative costs and in expenses related to currency moves. Selling and administrative costs rose nearly 70% YoY to as much as JPY 1.28 trillion, while financial costs doubled to JPY 328 billion.
SoftBank’s profits are currently caught in the crossfire:
- On one side, the company bears the full burden of its business strategy, including rising costs in the “AI Computing” segment.
- On the other side, due to extreme yen volatility, hedging costs are pressuring margins and returns. This is reflected in revenue in the segment mentioned above, which rose as much as 30% in USD terms, but only 17% in yen.
Two key metrics for an investment company, net asset value (NAV) and the loan-to-value (LTV) ratio, do not show profit, but they suggest that many claims about tension among lenders to AI companies are not supported by the data.
Source: SoftBank Group Corp.
NAV has nearly doubled since the end of Q3 2025, to around JPY 70 trillion. At the same time, LTV fell from a local peak of ~20% to around 13%. This means that despite asset growth, leverage remains low.
All of this shows that despite the huge increase in the value of the company’s investments, it is not translating into real profits for the firm, quite the opposite.
Is this bad for the industry?
Weak, or at least disappointing, SoftBank results do not have to mean failure for AI itself, or even for SoftBank.
SoftBank’s weaker results may be the consequence of specific investment decisions unique to the company and its portfolio, rather than the entire industry. SoftBank’s weak performance may indicate misallocation by SoftBank, an allocation that may be wrong not only directionally, but may also be affected by excessive concentration for which SoftBank itself is responsible.
Even in SoftBank’s case, a decline in profitability does not necessarily mean the investment thesis has failed. Investment companies typically have a longer time horizon and a higher tolerance for episodic lack of profitability, provided the investment strategy is fundamentally justified.
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