Investors have high expectations for $Arm Holdings (ARM.US)$ AI-driven growth, while the company's actual performance guidance fell short of Wall Street's high expectations, causing the stock price to drop over 5% in post-market trading.
On November 6th, post-market trading in US stocks, SoftBank's chip software design company Arm announced its second-quarter performance in 2025.
1) Key Financial Figures:
Revenue: Total revenue for the second quarter increased by 5% year-on-year to $0.844 billion, analyst expectations $0.8109 billion. Second-quarter invention usage fee revenue was $0.514 billion, analyst expectations $0.5089 billion. Licensing and other revenue for the second quarter was $0.33 billion, analyst expectations $0.3002 billion.
EPS: Adjusted EPS for the second quarter was $0.30, analyst expectations $0.26.
Expected Q3 revenue growth of 3.25%-4.25% and adjusted earnings per share of 0.51-0.52 US dollars, below the market estimate of 0.55 US dollars.
EPS: It is expected that the adjusted EPS for the third quarter will be in the range of $0.32 to $0.36, while analysts expect $0.34. The full-year adjusted EPS expectation of $1.45 to $1.65 remains unchanged, with analysts expecting $1.56.
Operating Expenses: It is expected that the adjusted operating expenses for the third quarter will be approximately $0.525 billion, with analysts expecting $0.5274 billion. The full-year adjusted operating expenses expectation of around $2.05 billion remains unchanged, with analysts expecting $2.04 billion.
Revenue: It is expected that the revenue for the third quarter will be in the range of $0.92 billion to $0.97 billion, with analysts expecting $0.9509 billion.
After the financial report was released, ARM's stock fell more than 5% in post-market trading.
Arm's performance guidance fell short of Wall Street's high expectations.
Arm profits by licensing its designs, benefiting from market expectations of benefiting from the AI boom. Since its first public offering in September last year, the company's stock price has more than doubled.
Analysis points out that Arm Holdings' performance guidance is in line with Wall Street's target, but the stock price dropped significantly because investors had overly high expectations for Arm's growth in AI-driven revenue, which the company's actual performance guidance did not meet.
Arm is associated with the AI trend, but it does not directly design or manufacture the final AI chips. Instead, it participates in this market by licensing its designs, which could lead to less growth potential in the field of AI compared to companies like AMD and nvidia that directly design and manufacture AI chips.
According to LSEG data, Arm's stock trading price is about 70 times the expected earnings, while heavyweight chip manufacturer Nvidia's stock price is about 33 times the expected earnings. This indicates that investors have higher expectations for Arm's growth prospects.
Wall Street analysts' remarks also indicate this, as Bob O'Donnell, President and Chief Analyst of TECHnalysis Research, stated:
"Arm has done well in linking itself to the AI semiconductor trend, but the challenge lies in that after they have done so, they may have created some expectations that have not yet been fully realized. Arm is still a few steps away from the final chip product."
Summit Insights Group analyst Kinngai Chan also pointed out:
"Investors want to see Arm reflecting the current prosperity of AI in its financial results."
Despite this, Arm Holdings also had shining moments in the second quarter, with revenue and profits exceeding expectations. Part of the reason is that important customers like Apple are using Arm's more profitable next-generation technology versions. Arm's revenue comes from licensing fees for its chip designs and royalties for each chip sold using its technology. The company is currently rolling out its v9 architecture, with v9 technology bringing a 25% revenue increase to the company, and Apple's latest iPhone 16 series design includes v9 technology.
Arm Holdings CEO Rene Haas said in an interview with Reuters:
"The focus of this quarter is to validate the strategy we have been discussing, and we already have some tangible data points. The company is optimistic about the growth of the mobile market, including the cooperation with Apple."
Editor/rice
