San Francisco, CA – Arm Holdings, a chip designer, disappointed investors with its full-year revenue forecast, causing a 9% drop in shares. The company exceeded expectations for the March quarter but uncertainties surrounding the growth of artificial-intelligence computing contributed to the lower guidance.
Analyst Kinngai Chan of Summit Insights noted that the market had priced Arm for outperformance, highlighting the discrepancy between investor optimism and actual results. Following Arm’s report, other AI chipmakers like Nvidia and Advanced Micro Devices also experienced slight declines in their share prices.
Looking ahead, Arm projected revenue for the current fiscal quarter to fall between $875 million to $925 million, with a midpoint of $900 million. The company also announced a full-year revenue forecast between $3.8 billion to $4.1 billion, with an expected midpoint of $3.95 billion. Despite slight misses on revenue estimates, Arm’s Chief Financial Officer, Jason Child, expressed confidence in the company’s ability to deliver on targets.
Arm’s success is intricately tied to the growing demand for AI computing, with its shares experiencing a significant surge since its IPO last September. Its licensing and royalty segments both saw impressive growth in the last quarter, driven by major licensing agreements and new higher-rate designs. The company’s licensing business grew by 60% to $414 million, while the royalty segment saw a 37% increase to $514 million.
Despite Arm’s dominant presence in smartphones and efforts to expand into other markets, the company has not realized the same level of benefit from AI as its competitor, Nvidia. While Arm’s designs often support AI applications, its revenue and profit margins continue to lag behind Nvidia’s robust performance in the AI sector.
The story of Arm Holdings reflects the ever-changing landscape of the semiconductor industry, where market expectations can influence stock performance. Through strategic partnerships and innovative designs, Arm continues to navigate the evolving demands of the tech market.
**Max A. Cherney, Stephen Nellis, Arsheeya Bajwa, Pushkala Aripaka, and Noel Randewich contributed to this report.**