Key Takeaways
- SoftBank Group lost ¥1.12 trillion ($7.1 billion) in its fiscal second quarter, its first net loss in almost two years, after a $3.7 billion writedown tied to its Ohio data-center campus.
- SoftBank has pledged 769.0 million Arm Holdings shares, 72% of the company, behind a margin loan that was reportedly raised to $25 billion, so a falling Arm stock price puts pressure on its parent.
- A SoftBank affiliate supplied 14% of Arm’s fiscal 2026 revenue, and at June 30, 2026, Arm had booked $577.2 million of revenue from it that it hadn’t yet billed.
- That unbilled balance is the figure to watch, with a $300 million payment from the affiliate due by March.
SoftBank Group (SFTBY) just posted its first net loss in almost two years, and Arm Holdings (ARM) shareholders have good reason to care.
SoftBank owns 86.4% of Arm. It’s also one of Arm’s biggest customers, and it has borrowed against most of its Arm shares.
What exactly happened
SoftBank’s results for the quarter ended Sept. 30 came in far below what analysts expected:
- A ¥1.12 trillion ($7.1 billion) net loss, against an average forecast of a ¥129 billion profit
- A $3.7 billion writedown on non-refundable advance payments for equipment and manufacturing capacity at its Ohio data-center campus
- A ¥81.6 billion loss at the Vision Fund
- Lower share prices at Arm, Intel and Coupang, which added to the loss
Much of that loss is on paper. The writedown covers cash SoftBank had already paid out, and the share-price declines aren’t cash losses at all.
SoftBank’s debt is the bigger worry. Its shares are down more than 50% from June’s record high on fears about the borrowing behind its AI bets. In September it also sold a record $11.1 billion of high-yield bonds, at yields as high as 9.75%.
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Arm is SoftBank’s collateral
As of May 21, 2026, SoftBank held 922.7 million Arm shares, according to Arm’s annual report. It had pledged 769.0 million of them, which is 72.0% of the company. In September, Bloomberg reported that SoftBank had raised its Arm-backed margin loan by $5 billion, to $25 billion. That was the third time it had made the loan bigger.
That loan makes every drop in Arm’s stock a leverage problem for its parent. Arm’s own falling stock helped push SoftBank into the red this quarter. No one has reported the Arm price at which the loan would force SoftBank to post more collateral or sell shares, so investors are left to guess.
SoftBank also pays the bills
A SoftBank affiliate supplied $704.4 million of Arm’s revenue in fiscal 2026, the year to March 31. That was 14.3% of the total, up from $145.5 million a year earlier. Management expects the affiliate’s licensing and design work to bring in about $200 million a quarter for the rest of fiscal 2027.
Arm’s licensing growth depended on that work. Leave out the SoftBank affiliate and Arm China, and Arm’s license revenue fell 9% in fiscal 2026, to $1.3 billion.
That matters more now that royalties have slowed. Royalties grew just 8% in the September quarter as memory costs hit phones. Licensing and other revenue jumped 50% to $773 million, well ahead of the roughly 30% Arm had guided. The bigger the SoftBank affiliate’s share of that beat, the more Arm’s growth depends on a parent that just lost $7 billion.
Analysts expect Arm’s revenue to climb from $4.92 billion in fiscal 2026 to $8.37 billion in fiscal 2028:
SoftBank’s loss shouldn’t move those estimates as long as the affiliate keeps spending about $200 million a quarter.
Watch the $577.2 million
For Arm shareholders, the number to watch is $577.2 million. That’s the revenue Arm had booked from the SoftBank affiliate but not yet billed at June 30, 2026. It’s down from $645.8 million at March 31 but up from $145.5 million at March 31, 2025. It’s also close to half of the $1.29 billion Arm brought in during the June quarter:
Under a restructured work order, the affiliate has a fixed $300 million payment due during fiscal 2027, which ends in March. If that cash arrives and the balance keeps falling, Arm’s SoftBank revenue is turning into real money. If the balance grows again while SoftBank is paying up to 9.75% to borrow, Arm has counted revenue that it may wait a long time to collect.
Arm still carries a rich price
Arm trades at 72x forward earnings. That’s below its three-year average of 85x and far from the 201x it reached in June:
That’s still a lot to pay for the shares that back a $25 billion loan, and it leaves the stock room to fall if SoftBank’s troubles spread.
The way I see it, SoftBank’s loss is a bigger threat to Arm’s stock than to its business. Data center royalties doubled again last quarter. But until the affiliate’s unbilled balance comes down, I’d expect every SoftBank scare to hit Arm’s shares too.
Of course, SoftBank has every reason to keep paying Arm. It controls the company, and Arm CEO Rene Haas also runs SoftBank Group International. Arm’s next report, in early February, will show whether the $300 million has come in.
So what is Arm stock actually worth?
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