① Arm's revenue and profit for the third fiscal quarter exceeded expectations, and performance guidelines for the fourth fiscal quarter and full fiscal year also exceeded expectations, driving the company's stock price to soar 42% after the market; ② As the company's strategy to expand its business beyond the smartphone sector is taking effect, the company's future business is expected to grow further.
Financial Services Association, Feb. 8 (Editor Liu Rui) After trading on Wednesday EST, British technology company Arm Holdings released strong financial results for the third fiscal quarter. Revenue and adjusted profit forecasts for the fourth fiscal quarter were also higher than Wall Street expectations.
After the financial report was released, the company's stock price skyrocketed by 42% after the market, and as of press time, the increase narrowed to 22%.
After a sharp rise in the after-market period, the company's stock price reached nearly $95, which is almost double that of $51 at the time of the IPO in September last year.
Financial reports show that in the third fiscal quarter, which ended at the end of December last year,
Arm reported sales of US$824 million, higher than Wall Street's estimate of US$761.6 million;
Adjusted earnings per share were $0.29, higher than Wall Street's estimate of $0.25.
Arm's licensing sales increased 18% to $354 million; royalties revenue increased 11% to $470 million.
Arm predicts that in the fourth fiscal quarter ending the end of March this year,
The company's median revenue estimate was US$875 million, higher than Wall Street's estimate of US$780.3 million;
The company's adjusted EPS estimate was $0.3, higher than Wall Street's estimate of $0.21.
For the entire fiscal year,
Arm expects full-year revenue of $3.18 billion, higher than analysts' estimates of $3.05 billion;
Adjusted earnings per share for the full year are expected to be $1.22, higher than analysts' estimates of $1.07.
AI brings new impetus to business growth
Arm plays a unique role in the semiconductor industry: the company authorizes the sale of software to write basic instruction sets to communicate with chips, and provides so-called design modules that chip companies like Qualcomm use to build their products.
Although in 2023, due to the slump in the smartphone market, Arm sales contracted for a while. However, in 2024, as demand for smartphone and laptop upgrades is once again strong, and generative artificial intelligence services are extremely popular, Arm's business growth has regained significant momentum.
Arm Chief Financial Officer Jason Child (Jason Child) said that due to strong performance in markets such as automobiles and artificial intelligence in the fourth fiscal quarter, the company raised its earnings forecast by about 100 million US dollars.
The company anticipates that licensing revenue from chips that power artificial intelligence in data centers, mobile phones, and personal computers will be an important factor.
Bob O'Donnell (Bob O'Donnell), president and chief analyst at TechNalysis Research, said: “Arm's steady profits, and more importantly, their strong predictions are good signs for the company and the tech industry as a whole.”
Business diversification initiatives have paid off
Since 2016, Arm has substantially diversified its business. According to the company's CFO, smartphones currently account for 35% of the company's downstream business, compared to 60% to 70% in 2016.
Today, Arm's customer list covers almost the entire technology industry: Apple uses instruction sets for processors that power iPhones and Mac computers, Amazon's data center Graviton server processors are also designed by Arm, and Qualcomm and MediaTek are the main users of Arm's smartphone processor blueprint.
“We are involved in almost every terminal market,” company CEO Rene Haas (Rene Haas) said during a conference call with analysts. “Almost every market is investing more computing power into its devices.”
Analysts at TechNalysis Research said that the spread of Arm design in other markets shows the company's growing influence in the tech industry. However, despite diversification, Arm's participation in the field of artificial intelligence still has a lot of room to improve.
Due to interest in artificial intelligence, “We are seeing increased customer interest in new designs and new technologies,” Charles said. “This is real. People are actually buying and licensing this technology.”
Haas said the company's customers are switching to using Arm's 9th generation core chip architecture, and the technology's royalties are double that of its predecessor. They're also using more Arm computing cores on each device—Microsoft's new server chips, for example, use more than 100 cores — which has also increased royalties.
“What you see are all the strategies we've been trying to implement over the years,” Haas said during the conference call. “Despite our good performance over the past few quarters, we're just getting started.”
Arm is headquartered in Cambridge, England, and the SoftBank Group still holds 90% of its shares. SoftBank Group bought the business for $32 billion in 2016. It raised $4.9 billion in an IPO last year, making it the largest initial public offering on the US exchange in 2023.