ARM Holdings climbed as much as 26 per cent in late trading after the chip designer gave a surprisingly bullish forecast, showing that its push beyond smartphones is helping fuel growth and profitability.
Revenue in the three months ending in March will be US$850 million to US$900 million, Arm said on Wednesday (Feb 7). That compares with an average analyst estimate of US$778 million. Earnings will be roughly 30 US cents, excluding some items, well ahead of the 21 US cent projection.
The upbeat outlook reflects an expansion by chief executive officer Rene Haas into more markets, including server chips. Haas said that the smartphone market now accounts for less than a third of the company’s sales, underlining how successful he’s been at spreading its bets. Phones also now use more Arm technology per device, helping lift royalties.
The stock rose as high as US$96.88 in extended trading following the announcement. It earlier closed at US$77.01, up 2.5 per cent this year.
Arm now expects sales of US$3.16 billion to US$3.21 billion in fiscal 2024, which runs to March. That’s up from a previous range that topped out at US$3.08 billion.
Revenue grew 14 per cent to US$824 million in the fiscal third quarter. Excluding some items, profit was 29 US cents a share. Wall Street had predicted revenue of US$760 million and earnings of 25 US cents a share.
Arm has an unusual role in the semiconductor industry. It licenses the fundamental set of instructions that software uses to communicate with chips. The company also provides so-called design blocks that companies such as Qualcomm use to build their products.
Under Haas, Arm has been moving towards providing more complete layouts that can be taken to directly to the manufacturing stage. That shift makes it more useful to some customers, such as cloud computing companies such as Amazon.com, but also more of a rival to some traditional clients, such as Qualcomm.
Cambridge, England-based Arm is still 90-owned by SoftBank Group, which acquired the business in 2016 for US$32 billion. An initial public offering last year raised US$4.9 billion, marking the biggest debut on a US exchange in 2023.
Arm’s licensing sales rose 18 per cent to US$354 million last quarter, and royalty revenue gained 11 per cent to US$470 million.
Arm’s customer list spans the technology industry. Apple uses its instruction set for the processors that power the iPhone and Mac computers. Amazon relies on Arm designs for its Graviton server processors for data centres. Qualcomm and MediaTek are major users of Arm’s blueprints for smartphone processors. BLOOMBERG
