Analysts predict that Japan’s SoftBank Group will record a return to profit when it releases first-quarter profits on Tuesday because its portfolio of technology stocks in the Vision Fund investing arm has recovered.

Due to the declining value of the Vision Fund portfolio, the tech investor has reported a loss for the past two years. To improve its balance sheet, it sold a portion of its largest interest in Chinese e-commerce company Alibaba Group Holding (9988.HK).

Masayoshi Son, founder and CEO of the company, may feel less pressure if it starts to generate a profit. Son shocked the tech investing community by placing risky bets on late-stage startups, but his bets underperformed, leading to a string of high-profile failures.

Investors will also be watching for developments around the portfolio company Arm’s prospective blockbuster offering, which, if successful, would boost the group’s financial situation and enhance Son’s reputation as a savvy tech investor.

“It’s a major catalyst for the company and a very important event for tech as a whole, considering Arm’s important position in semiconductors,” said analyst Rolf Bulk at New Street Research.

According to Refinitiv’s average of four analyst projections, SoftBank is expected to report a net profit of 75 billion yen ($525 million) for the four months of April through June.

After backing high-growth companies that lost market favour, its Vision Fund business has recorded investment losses for five straight quarters, prompting the conglomerate to take a defensive position in order to retain capital.

“Public valuations in tech are trending up again and I would expect private valuations to follow suit,” said Bulk.

Food delivery service DoorDash and ride-hailing operator Grab Holdings were among the listed gainers during the quarter.

Analysts predict that a return to profit could signal an increase in new business. Amid excitement over developments in artificial intelligence (AI), Son stated in June that he intends to go into “offence mode.”

SoftBank has recently invested in the insurance technology startup Tractable and formed a joint venture to construct automated warehouses.

Analysts are especially excited about Arm’s potential for growth in the data centre and automotive industries. Already, chipmaker Nvidia, a former Arm suitor, has seen its market capitalization rise past $1 trillion due to expectations that investments in AI will spur industrial growth.

Given the high book values of Arm’s industry competitors, Macquarie analyst Paul Golding predicted that the company could increase its value by $31.4 billion.

“SoftBank mandated Arm to reinvest all of its profit to enter new markets,” New Street Research’s Bulk said. “Arm is now in a phase where they can reap the benefits of that investment.”

(Adapted from BusinessToday.in)