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Arm’s annual revenue forecast fails to impress investors; shares fall
By Max A. Cherney and Stephen Nellis
(Reuters) -Arm Holdings on Wednesday released a full-year revenue forecast that missed investor expectations that sent the chip designer’s shares soaring last September following its IPO on optimism around AI .
Arm shares fell about 7% in extended trading following the report.
For the current fiscal first quarter, Arm forecasts revenue of between $875 million and $925 million, with a midpoint of $900 million, compared to an average analyst estimate of $857.5 million, according to with data from LSEG.
The U.K. chip designer also said it expects full-year revenue of between $3.8 billion and $4.1 billion, with a midpoint of $3.95 billion. That compares to a consensus estimate of $3.99 billion.
“I wanted to make sure we set a goal that was tied to what we have high confidence in and what we can deliver,” finance chief Jason Child told Reuters in an interview. The timing of some of the company’s licensing deals, he added, can be “difficult to define,” which is why the company issues a series of guidance.
Arm’s fourth-quarter revenue rose 47% to $928 million, compared with analyst estimates of $875.6 million.
It reported fourth-quarter earnings of 36 cents per share, adjusted for stock-based compensation, among other things.
Arm generates revenue from licensing fees for its semiconductor designs and collects royalties for each chip sold that uses its technology.
Arm’s designs power nearly every smartphone in the world, and the company has been trying to make inroads into data centers and other markets. Chips with Arm technology generates $200 billion in revenue per year for the many chipmakers who sell them, according to research from TD Cowen.
The company’s licensing business grew 60% to $414 million in the fourth quarter compared with the same period a year ago, and its royalties segment jumped 37% to $514 million.
Arm closed four major licensing deals during the quarter, which is why this segment grew substantially, Child said. The royalties business benefited from a new arm design that commands a higher rate and today accounts for 20% of the segment, growing 5 percentage points.
Bets that Arm will benefit from a surge in artificial intelligence computing have doubled the chipmaker’s share price since its initial public offering last September, giving it a market value of about $110 billion. . The shares recently traded at almost 70 times expected earnings, compared with 35 times earnings at chipmaker Nvidia, according to LSEG data.
Although Arm’s designs are adjacent to the chips that power AI applications, the company’s revenue and profit have not benefited from AI to the same degree as Nvidia’s.
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Nvidia shares fell 0.5% in extended trading following the Arm report.
(Reporting by Max A. Cherney and Stephen Nellis in San FranciscoAdditional reporting by Arsheeya Bajwa and Pushkala Aripaka in Bengaluru and Noel Randewich in Oakland, CaliforniaEditing by Matthew Lewis)