Arm's revenue hit a record high last quarter, driven by a 23% surge in key business due to AI demand, raised guidance, and still plummeted in after-hours trading | Earnings report insights

Chip design giant Arm's unexpected accelerated growth in the last quarter benefited from the key business of patent royalties, which maintained a surge of over 20% due to the trend of AI-enabled smartphones. The company also raised its guidance for the current fiscal year, but its stock price still plummeted after hours.

On February 5th, Eastern Time, Arm announced its financial data for the third quarter of fiscal year 2025 (referred to as the fourth quarter) ending December 2024, while also providing performance guidance for the first quarter (referred to as the first quarter) and the entire fiscal year (referred to as the full year), as well as for the first quarter of fiscal year 2025 (referred to as the third quarter).

1) Key Financial Data

Revenue: Fourth quarter revenue was $983 million, a year-on-year increase of 19%, while analysts expected $946.8 million. Arm guided revenue between $920 million and $970 million, with a year-on-year growth of 5% in the third quarter.

EPS: Fourth quarter adjusted non-GAAP earnings per share (EPS) was $0.39, a year-on-year increase of 26%. The company's guidance was between $0.32 and $0.36, with a year-on-year decline of 17% in the third quarter.

2) Revenue by Segment

Royalties: Fourth quarter device royalty revenue was $580 million, a year-on-year increase of 23%, while analysts expected $568.4 million, with a year-on-year growth of 23% in the third quarter.

Licenses: Fourth quarter licensing revenue was $403 million, a year-on-year increase of 14%, while analysts expected $378.6 million, with a year-on-year decline of 15% in the third quarter.

3) Performance Guidance

Revenue: First quarter revenue is expected to be between $11.8 billion and $12.8 billion, while analysts expect $12.3 billion. Full year revenue is expected to be between $3.94 billion and $4.04 billion, while the company originally expected $3.80 billion to $4.10 billion.

EPS: First quarter adjusted EPS is expected to be between $0.48 and $0.56, while analysts expect a dollar amount. Full year adjusted EPS is expected to be between $1.56 and $1.64, while the company originally expected $1.45 to $1.65.

After the earnings report was released, Arm's stock price, which rose 6.8% on Wednesday, plummeted after hours, with a decline of over 6% at one point.

Risk Warning and Disclaimer

The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at their own risk