SoftBank Surges as Arm Holdings’ Bullish Earnings Forecast Propels Valuation, Setting the Stage for Potential Asset-Backed Financing
Shares of SoftBank Group Corp. experienced a remarkable surge of nearly 10% following an unexpectedly optimistic earnings forecast from Arm Holdings Plc. The chip designer’s revenue projection for the three months ending in March, ranging between $850 million to $900 million, surpassed analyst expectations, which averaged at $778 million. Arm’s impressive outlook, propelled by its expansion beyond smartphones, triggered a surge in its shares during after-hours trading, propelling the company’s valuation closer to the $100 billion mark.
SoftBank
As Arm Holdings went public last year, SoftBank retained a stake of approximately 90% in the company. The significant uptick in Arm’s shares during the December quarter, a 40% jump prior to the New York rally, likely contributed to boosting SoftBank’s net asset value to over ¥18 trillion ($121 billion). This valuation is a key metric favored by SoftBank’s CEO, Masayoshi Son, to gauge the health of the investment firm. Arm Holdings now stands as the single largest asset within SoftBank’s diverse portfolio, estimated to constitute around one-third of the total.
While the surge in Arm’s share price may not have a direct impact on SoftBank’s immediate financials, the heightened valuation of the chip design firm increases the likelihood of Masayoshi Son considering new asset-backed financing strategies. The prospect of fresh financing could enable SoftBank to borrow funds for new investments, aligning with Son’s ongoing strategy of leveraging assets to fuel the company’s growth and pursuit of strategic opportunities.
The positive momentum in both Arm Holdings and SoftBank shares underscores the successful trajectory of Arm’s business diversification efforts and its substantial contribution to SoftBank’s overall portfolio strength. As SoftBank explores avenues for continued growth and investment, the buoyancy in Arm’s valuation positions it as a pivotal asset with the potential to influence the Japanese conglomerate’s future financial strategies.
