SoftBank is about to discover how much credit the market is willing to extend to its most ambitious bet yet. When the Japanese conglomerate releases earnings this week, the headline profit figure is likely to look respectable, but the real test lies in how founder Masayoshi Son plans to finance a sprawling set of commitments to OpenAI and the infrastructure that supports it.

Analysts expect net profit of around ¥148bn, roughly $940m, for the April-to-June quarter. That number is flattered by the rising valuation of SoftBank’s stake in OpenAI, which has become the centerpiece of Son’s strategy. But investors are less interested in paper gains than in the mechanics of funding a multibillion-dollar promise before the calendar forces a reckoning.

Key facts at a glance

• SoftBank has committed more than $60bn to OpenAI and related artificial intelligence infrastructure.
• A tranche of roughly $22.5bn to OpenAI must be met by the end of the year.
• Debt maturities of about $30bn fall due in the second half of 2026.
• A $40bn bridging loan runs to March 2027, while a $20bn margin loan is secured against SoftBank’s Arm shares.
• Plans to borrow against the OpenAI stake have stalled, and SoftBank has cut a related margin-loan target.
• S&P Global put SoftBank’s loan-to-value ratio at 33% in March, against the company’s preferred 17% figure.
• OpenAI is reportedly seeking a $1tn IPO valuation, up from $852bn, though skeptics estimate its true worth at around $300bn.
• Fifteen of twenty sell-side analysts currently rate SoftBank a buy.

The size of the commitment

The scale of SoftBank’s promises has grown quickly. What began as a strategic stake in OpenAI has expanded into a broad AI infrastructure push, with SoftBank committing more than $60bn to the company and related projects. A near-term tranche of approximately $22.5bn is due to OpenAI by the end of the year, and Son has shown no appetite for slowing down.

His conviction is unmistakable. He has dismissed talk of an AI bubble as absurd and predicts that AI-related spending will reach $5tn a year by 2040. On that scale, SoftBank’s current borrowing looks to Son like a down payment rather than a dangerous gamble. The question is whether lenders and shareholders share that view.

How Son plans to pay

The financing stack behind SoftBank’s AI bet is increasingly complex. The company has lined up a new $60bn bond to keep the OpenAI push funded, adding another layer to a structure that already includes a $40bn bridging loan running to March 2027 and a $20bn margin loan secured against SoftBank’s shares in chip designer Arm.

One route has already jammed. SoftBank had hoped to borrow against its OpenAI stake, but lenders grew wary of extending credit backed by a private company. The stall forced SoftBank to reduce a related margin-loan target, leaving a gap that the new bond is meant to fill.

The timing is uncomfortable. SoftBank faces about $30bn of obligations in the second half of 2026. That is not an immediate liquidity crisis, but it creates a narrow window in which the company must either generate cash, sell assets, or refinance at favorable terms. If capital markets tighten or asset values fall, that window closes quickly.

A balance sheet under strain

Credit rating agencies are watching closely. S&P Global placed SoftBank’s loan-to-value ratio at 33% in March, well above the 17% that the company prefers to cite. The discrepancy reflects different methods of valuing assets and debt, but it is a reminder that SoftBank’s own accounting does not always match the market’s view.

The gap matters because SoftBank’s most valuable asset is now tied to its riskiest bet. Its stake in Arm, the chip designer that has delivered huge gains, is pledged as collateral for borrowing that funds the AI push. That means a decline in Arm’s share price would squeeze the liquidity available for OpenAI, while a decline in OpenAI’s valuation would undermine the very loans that keep the structure alive.

The Arm connection

Arm has become the anchor for SoftBank’s AI strategy. The company’s rising stock price has given Son room to borrow, but it has also created a dependency. Every new commitment to OpenAI increases the pressure on Arm to keep performing.

The connection runs both ways. Arm supplies chip designs that power AI data centers, so its fortunes are tied to the same AI spending boom that OpenAI depends on. If the AI buildout slows, both sides of the equation weaken at once.

SoftBank’s history suggests that Son is willing to ride conviction through turbulence. The Vision Funds poured tens of billions into startups during the last decade with famously mixed results. Some bets, such as Arm and early investments in Chinese tech, produced large gains. Others, including WeWork and several ride-hailing companies, produced large losses. The OpenAI wager is the largest single expression of Son’s conviction yet, and the balance sheet is more exposed than it has ever been.

The value of OpenAI is contested

The core asset in this structure is OpenAI, but its valuation is a matter of fierce debate. The company is reportedly chasing a $1tn IPO valuation, up from $852bn in private markets. Sceptics, however, put its true worth closer to $300bn. The gap between those numbers swings SoftBank’s paper gains wildly and makes accounting an exercise in faith.

If OpenAI is worth $1tn, SoftBank’s stake is a source of enormous hidden value. If the skeptics are right, the stake is far less valuable than the company’s books suggest, and the loans secured against that value are shakier than they appear.

What analysts are saying

The Street is mostly still on board. Fifteen of twenty sell-side analysts kept buy ratings this month, betting that Son’s access to capital and the OpenAI upside outweigh the strain on the balance sheet. They point to SoftBank’s ability to raise new bonds and its track record of surviving previous crises as reasons for confidence.

The bears tell a different story. They see a chain reaction waiting to happen. A drop in asset prices could tighten SoftBank’s liquidity at the worst possible time. Rising Chinese competition could squeeze OpenAI’s margins and reduce demand for the chips that the whole thesis rests on. A slowdown in AI spending would hit not just OpenAI but also Arm, leaving SoftBank with collateral that is worth less at exactly the moment lenders start asking questions.

The circularity problem

Critics also point to a circularity at the heart of SoftBank’s strategy. SoftBank borrows money to fund OpenAI. The rising value of OpenAI then underpins those very loans. If OpenAI’s valuation wobbles, the impact travels quickly through the structure: the loans look less secure, SoftBank’s borrowing costs rise, and its ability to fund the next tranche diminishes.

This is why this week’s earnings call is more than a scorecard. Investors want a credible plan for meeting the year-end commitments, not just a profit line lifted by a mark-to-market gain on a stake that has not been sold. They want to know what happens if OpenAI’s valuation does not grow fast enough to cover the debt, and what assets Son is willing to sell if the market closes.

Son has wagered SoftBank’s balance sheet on being right about artificial intelligence, and about OpenAI in particular. The earnings report will not settle that bet, but it will show how much rope he has left before the market asks him to prove it.

Source: TNW | Business News