ARM Holdings, the chip designer that went public last year, gave a disappointing sales forecast for the current period, signalling that a still-recovering smartphone market may overshadow growth from artificial intelligence (AI).
Revenue will be US$920 million to US$970 million in the current period, which ends in December, the company said on Wednesday (Nov 6). The midpoint of that range would fall short of the US$950.9 million that analysts had estimated. Profit will be 32 to 36 US cents a share, minus certain items, meeting the consensus prediction of 34 US cents on average.
The shares, which were up 93 per cent this year at the close in New York, fell in extended trading.
The Cambridge, UK-based company maintained its annual forecast, predicting sales of US$3.8 billion to US$4.1 billion. “We are not trying to get too far ahead of our skis,” chief executive officer Rene Haas said, referring to the outlook.
Investors have poured money into the stock since its initial public offering (IPO) last year, betting that Arm is well placed to benefit from massive spending on AI gear. But the company’s designs and underlying technology are still used more heavily in other parts of the electronics industry, particularly in smartphones, leaving it vulnerable to demand swings in that area.
Revenue in the three months running to September rose about 5 per cent to US$844 million. That compares with the US$810.9 million analysts had projected. Earnings were 30 US cents a share in the fiscal second quarter, excluding some items. Analysts had estimated 26 US cents on average, according to data compiled by Bloomberg.
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Arm has a unique role in the chip industry – its designs and standards are fundamental to semiconductors that run most of the world’s smartphones. Under chief executive officer Rene Haas, the company has been trying to extend that reach into the lucrative market for data centre components. Arm also is offering more complete chip designs as part of its licensing arrangements, a shift aimed at making it more profitable and less reliant on royalties.
Arm licenses the fundamental set of instructions that software uses to communicate with chips. It also provides so-called design blocks that companies such as Qualcomm use to build their products. Arm licensees pay for access to its blueprints in fixed agreements – and then pay royalties based on the variety and amount of chips they ultimately make, use or sell.
Licensing revenue was US$330 million last quarter, while royalty revenue was US$514 million.
Arm is still roughly 90-owned by Japan’s SoftBank Group. The IPO in 2023 raised US$4.9 billion, marking the biggest debut on a US exchange that year. BLOOMBERG
