SoftBank Writes Off $3.7B in Data Center Gear

Call it the most expensive "never mind" in the data center boom. SoftBank Group swung to a ¥1.12 trillion ($7.1 billion) fiscal second-quarter loss after a $3.7 billion writedown on advance payments for equipment for its Ohio campus, Bloomberg reported ^[1].

It was the Tokyo company's first net loss in almost two years, and analysts had penciled in a ¥129 billion profit ^[1].

How we got here

• With turbines and transformers taking years to arrive, SoftBank and its units made nearly $10B in upfront payments to lock up gear, often before projects were fully planned ^[2].
• A portfolio review led SoftBank to exit part of those orders, leaving $3.7B in deposits and advance payments unrecoverable ^[2].
• SB Energy's Pike County, Ohio, campus could reach as much as 10 GW, with a price tag approaching $500B, per Bisnow ^[2].
• Investing.com reported that the quarter's financing costs rose to 462 billion yen, more than twice the prior level ^[3].

But the bigger worry is who else ordered early. CFO Yoshimitsu Goto said the canceled orders do not shrink current projects, yet said he could not promise "it's not going to happen again" ^[2]. GLJ Research founder Gordon Johnson argued SoftBank is unlikely to be the only buyer that ordered before it knew its needs, as quoted by Bisnow ^[2]. Shares fell as much as 10.5% in Tokyo on Wednesday ^[3].

What it means for you

Roughly 37 cents of every upfront dollar SoftBank paid is now gone, by our math ($3.7B against nearly $10B) ^[2]. For anyone holding data center REITs, power suppliers or land near planned campuses, that is a reminder that a signed equipment order is not a finished building. Bisnow said GE Vernova and Bloom Energy shares sold off on the news ^[2].

Zoom out

SoftBank shares have dropped more than 50% from their June record amid worries about AI debt and the midterm results, Bloomberg reported, making the company a gauge of how far the data center buildout can stretch ^[1].