SoftBank Group Surges Over 11% as Subsidiary’s Q1 Operating Profit Beats Estimates, 30% AI Growth Guidance Lifts Sentiment

TradingKey - During the Asian trading session on August 5, SoftBank Group (9984.T) shares surged more than 11%, leading the Nikkei index components. After the market closed on August 4, its core majority-owned subsidiary SoftBank Corp. (9434.T) released first fiscal quarter results that beat expectations, with strong growth guidance for its AI and cloud business (with a compound annual growth rate of 30%) serving as the core driver pushing the valuation recovery of its parent company.

As of press time, SoftBank Group rose 11.71% to 5,841 yen (equivalent to $37.03), and SoftBank Corp. rose 3.27% to 227.6 yen.

[Source: TradingView]

According to SoftBank Corp.'s (9434.T) financial report, net sales for the first fiscal quarter reached 1.81 trillion yen, beating the market estimate of 1.76 trillion yen; operating profit was 302.3 billion yen, nearly 10% higher than the 275.54 billion yen expected by analysts; net profit was 150.07 billion yen, which was slightly below the market estimate of 152.52 billion yen, but the market places more weight on operating profit as a core indicator, and the better-than-expected data is sufficient to support short-term sentiment.

The artificial intelligence and cloud businesses, which are of greatest concern to the market, performed outstandingly. In the first quarter, revenue from cloud- and AI-related businesses grew by 31% year-on-year. Overall revenue from the enterprise business reached 260.4 billion yen, up 11% year-on-year, with operating profit at 62.2 billion yen, representing a 28% year-on-year increase.

SoftBank Corp. made it clear during its earnings call that the AI business segment is expected to maintain an annual growth rate of 30% through fiscal year 2027. The market had previously been divided on the return cycle of SoftBank's AI investments, and this guidance provides a relatively clear growth anchor, directly boosting SoftBank's stock price.

Previously, investors were concerned about SoftBank's rising leverage and the financial pressure of its ongoing investments in OpenAI. The strong AI business data has temporarily eased market concerns over the sustainability of its investment strategy.

In addition, SoftBank's core underlying asset, Arm ( ARM) surged 17.36% overnight in the US market, which also significantly drove up the share price of its parent company, SoftBank Group (9984.T). Arm contributes the vast majority of SoftBank Group's investment valuation, and its market capitalization fluctuations are directly reflected in the group's balance sheet.

Looking ahead to the full year, SoftBank Corp. (9434.T) maintained its previous full-year guidance: expecting full-year operating profit of 1.10 trillion yen and net profit of 560 billion yen. Although this guidance was kept unchanged, both figures are slightly below average market expectations.

It is worth noting that the parent company SoftBank Group still has approximately $30 billion in debt maturing in the second half of the year, and is increasingly refinancing through equity pledges (such as pledging Arm shares); hence, leverage risks have not been fully eliminated.