SoftBank takes $3.7bn charge on cancelled gas turbine orders

SoftBank has posted its first quarterly net loss in about two years, a ¥1.12 trillion (about $7 billion) hit. The bill came from the gas turbines it bought to power its American AI data centres 3

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A year earlier the Japanese investment group made a ¥2.5 trillion profit, and analysts had expected a ¥129 billion profit this time 3

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The turbine bill

The largest single component was a $3.7 billion charge on power-generation equipment: a $2.9 billion write-off of advance payments plus about $900 million from contract changes 3

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. SoftBank had paid out $9.5 billion by the end of September to lock in equipment against shortages, then changed its plans 3

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. Chief accounting officer Kazuko Kimiwada said cancellation fees could not be recovered, though up to $2.1 billion in rebates on future purchases can be claimed over ten years 3

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Per the Wall Street Journal, SoftBank reserved over 13 gigawatts of turbines from late 2025 to early 2026, the bulk of them from GE Vernova 3

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. That is capacity the paper likened to more than six Hoover Dams, and the company then cancelled what it could not use 3

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. Per TechCrunch, the over-order, begun about two years ago, ran to almost 50% more turbines than needed 1

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The charge fell mainly on smaller turbines that Masayoshi Son, SoftBank's chairman and CEO, had bet on 2

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. They were quicker to deliver but costlier and less fuel-efficient to run. Per the FT, the industry has since shifted to larger, more efficient units as primary power instead of backup 2

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SoftBank says it ordered ahead of expected shortages, then changed the orders because the specifications evolved and costs and lead times improved 3

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. Keeping them, the company says, would have cost more over time 3

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. Peter Gardett, chief executive of Noreva, said SB Energy had no choice but to overbook to get turbines at all, and called the charge "price discovery finally happening" 1

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Musk says default; SoftBank says no

Elon Musk posted on X that SoftBank was defaulting on its turbine orders 5

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. CFO Yoshimitsu Goto's answer: "This is simply not correct at all. There is no such default." 3

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The company says the charge reflects changed orders; no payment was missed 3

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. Per Futurism, SoftBank first attributed the loss to Ohio data-centre projects, then called the two unrelated 4

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. The plant at the centre of that dispute, Ports-Pike in Ohio, continues as planned, per SoftBank 4

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The debt question

Revenue beat estimates at ¥2.22 trillion 3

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. Some analysts see the financing costs as the bigger problem 3

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. Interest costs for the half-year through September more than doubled to ¥676 billion 3

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. SoftBank also raised a record $56.5 billion in the quarter, including an $11.87 billion term loan and a $10 billion bond 3

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. Per Futurism, more than $11 billion of the September bonds were junk-rated, making this the largest corporate junk-bond offering ever 4

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. "The more worrying factor is the increase in financial costs," Kazuki Sawamura of Shinkin Asset Management told Bloomberg 3

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. Bloomberg Intelligence expects more fundraising in 2027, with the annual interest bill heading above ¥1 trillion 3

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What backs the debt

SoftBank says its loan-to-value ratio, its loans measured against its collateral, was 15.9% at end-September, below its own 25% limit 3

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. A separate reading by Standard & Poor's, using a different method, put it at 20-25% in June 5

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. Per figures cited by Astris Advisory, Arm is the main collateral at 54% of the adjusted equity value of holdings 5

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. The company's net asset value has fallen to ¥59.8 trillion from ¥72.3 trillion in June, which Morningstar attributes mainly to Arm's 23% share-price drop 5

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. The OpenAI bet sits alongside it: $54.6 billion invested against a company-stated fair value of $99.6 billion 3

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. The latest funding round is not yet reflected in those numbers, and Goto said an announcement this quarter is highly likely 3

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. Shares have fallen roughly half to nearly 60% from their June peak 3

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The loss has not stopped the spending. The day before results, SoftBank and Grab committed $1.85 billion of seed funding for AI data centres in Malaysia 3

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. On Thursday it led Agile Robots' $500 million round 3

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The reassessment

Goto said SoftBank is conducting "a thorough reassessment" that includes how it buys equipment, and put the mood in six words: "We need to balance between gas and brake." 3

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