SoftBank Earnings Preview: ARM Warning and Negative Stock Pattern Weigh on Outlook

SoftBank Group is scheduled to report its first-quarter fiscal 2027 earnings on August 6, facing a complex set of investor expectations. While analyst forecasts are modest, a recent warning from its key holding Arm Holdings and an unusual pattern of post-earnings stock declines have created a cautious atmosphere.

ARM's Shadow and a Puzzling Pattern

The most significant headwind for SoftBank is the performance of Arm Holdings, in which it holds an approximate 90% stake. Last week, Arm warned that its smartphone royalty revenue is expected to fall in the coming quarters, a development that could directly impact the valuation of SoftBank's largest asset. Following the news, SoftBank's shares fell 2.6% on July 30.

Compounding investor concerns is a recurring "beat-and-drop" trend. For the last three consecutive quarters, SoftBank has surpassed earnings estimates by significant margins, only for its stock to decline in the subsequent trading session. This pattern suggests that positive results from portfolio markups may already be priced in, prompting investors to sell on the confirmation.

• Q4 FY2026: Earnings beat estimates by +407.6%; stock fell -3.62%.
• Q3 FY2026: Earnings beat by +32.2%; stock fell -6.70%.
• Q2 FY2026: Earnings beat by +103.4%; stock fell -1.55%.

Analyst and Technical Caution

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Adding to the cautious sentiment, Deutsche Bank recently downgraded SoftBank to "Hold" from "Buy." The bank cited the stock's sharp prior rally, which leaves limited room for further upside, and the potential for currency fluctuations to impact reported profits. A stronger yen can deflate the value of SoftBank's overseas investments when converted back to its home currency.

Technical indicators have also turned bearish. A "dead cross" pattern formed on July 28, when the stock's 25-day moving average crossed below its 75-day moving average, a signal often interpreted as a precursor to further declines.

A Low Bar for Volatile Results

Analysts have set a low bar for the upcoming report, with consensus estimates at a modest ¥24.62 earnings per share (EPS) on ¥1.96 trillion in revenue. This is a steep drop from the ¥320 EPS reported in the prior quarter, but such volatility is characteristic of SoftBank, whose profits are driven by the mark-to-market valuation of its vast technology investment portfolio rather than stable operating income.

Despite the headwinds, the low EPS target could be surpassed if the company's artificial intelligence-related investments post even moderate gains. However, the central question for investors is whether any potential earnings beat will be strong enough to overcome the entrenched negative sentiment and break the recent stock performance pattern.