Japan's Softbank Group Posts $32 Billion Loss in Q2 Amid Rising Interest Rates, Threat of Inflation

The Japanese tech giant announced a total loss of $23 billion during the April-June quarter amid skyrocketing interest rates and rising inflation.

SoftBank Group, a large Japanese multinational conglomerate holding company based in Minato, Tokyo posted a loss of 2.93 trillion Japanese yen or about $23 billion at its Vision Fund unit for Q2 on Monday. The tech giant saw a decline in the value of its assets, including a number of unlisted holdings, amid rising interest rates and the threat of inflation.

According to CNBC, SoftBank Group's Vision Fund saw its second-largest quarterly loss during the quarter that ended in June. This further contributed to a $23 billion net loss for SoftBank Group, versus a $5.6 billion profit during the same period last year.

On Monday, the company said that quarterly sales saw an increase of 6%. SoftBank's Vision Fund began in 2017 and invests in technology companies, which have been impacted by rampant inflation that sparked an increase in interest rates.

SoftBank Pledges to Take a 'Conservative' Approach Moving Forward

SoftBank's founder Masayoshi Son said in May that the company will go into "defense" mode and will take a more "conservative" approach to investing after seeing a record $25.8 billion loss in the investment unit for the last fiscal year. The company said it observed a decline in the share prices of a range of its portfolio companies, driven mostly by concerns over economic recession and rising inflation and interest rates.

According to AP News, SoftBank's portfolio is not directly exposed to the Russian invasion of Ukraine, but the company admitted that global uncertainty as well as increasing energy costs are impacting its profitability. Meanwhile, foreign exchange is also affecting its earnings.

SoftBank failed to sell the British semiconductor and software design company Arm to Nvidia earlier this year. The Japanese tech giant has since decided to pursue an initial public offering for it, but failed to disclose when it will commence.

Arm was acquired by SoftBank back in 2016. The company is a leader in AI, IoT, cloud, the metaverse and autonomous driving. Meanwhile, its semiconductor design is present in many smartphones, tablets, and digital TVs. SoftBank also owns stakes in the SoftBank mobile carrier, Yahoo web services provider, Alibaba, and vehicle rental company Didi.

Softbank's Strategy Moving Forward

Son, who is set to speak at an earnings briefing today, said that SoftBank will revamp its investing criteria and preserve cash to endure the current economic climate, Reuters reported. SoftBank also said it wrote down the value of unlisted assets in its two Vision Funds by up to $8.43 billion. However, analysts said that such writedowns of private assets were unlikely to show the extent of the market's weakness.

SoftBank has also let go of companies such as the ride hailing service Uber and the home-selling platform Opendoor Technologies to free up $5.6 billion. The Japanese tech company was able to sell Uber shares for up to $41.47, well above Friday's closing price of $32.01.