Arm's earnings and revenue exceeded expectations, but guidance disappointed, plunging over 11% in after-hours trading | Earnings Report Insights
Chip design giant Arm announced its financial report, with both profit and revenue exceeding expectations, but the guidance was lukewarm, expecting first-quarter revenue of $1 billion to $1.1 billion, while analysts expected the upper end of the range to be $1.1 billion. Arm's expectations are in line with its peers in the chip industry, which have also indicated to investors that the start of 2025 is strong, but the economic environment makes forecasts more uncertain
Chip design giant Arm announced its financial results, with profits and revenue exceeding expectations, but it issued disappointing guidance. After the U.S. stock market closed on Wednesday, Arm's stock price plummeted over 11%, and Nvidia also saw a slight decline after hours.
As of the close of the U.S. stock market on Wednesday, Arm has seen a slight increase year-to-date. The drop after hours on Wednesday resulted in an approximately 11% decline for the year.
(1) Key Financial Data
Revenue: Total revenue for the fourth fiscal quarter grew 34% year-on-year to $1.24 billion, surpassing the $1 billion mark for the first time, with analysts expecting $1.23 billion.
Net Profit: Net profit for the fourth fiscal quarter was $210 million, a 6% decrease from $224 million in the same period last year.
Adjusted EPS: Excluding certain items, the adjusted EPS for the fourth fiscal quarter was $0.55, with analysts expecting $0.53.
Operating Profit: Operating profit for the fourth fiscal quarter was $655 million, with analysts expecting $621.8 million.
(2) Revenue by Segment
Arm charges through technology licensing fees and royalties, with its technology determining how chips communicate with software.
Licensing: Licensing and other income for the fourth fiscal quarter was $634 million, with analysts expecting $662.1 million.
Royalties: Royalty income for the fourth fiscal quarter was $607 million, an 18% year-on-year increase, with analysts expecting $567.7 million.
(3) Performance Guidance
Arm's sales forecast for the current quarter is lukewarm, indicating that the timing of new licensing agreements has made the company more cautious in its predictions.
Revenue: Expected revenue for the first fiscal quarter is $1 billion to $1.1 billion, with analysts expecting $1.1 billion at the high end of the range.
EPS: The expected earnings per share, excluding certain items, is projected to be between $0.30 and $0.38, lower than analysts' forecast of $0.42.
Arm's CEO Rene Haas stated:
The company is advancing new licensing agreements and hopes to incorporate related revenue into its outlook after these agreements are formally signed.
Customers continue to invest in chips, particularly in artificial intelligence computing, which is bringing revenue to Arm.
We have adopted a conservative strategy to ensure we do not make overly optimistic predictions. Our business fundamentals are very strong, and the data center business is growing rapidly.
Arm's expectations align with those of its peers in the chip industry, which have also indicated to investors that 2025 is starting strong, but the economic environment makes forecasts more uncertain.The prospects of Arm reflect the future chip plans of some of the largest companies globally. Major companies license Arm's technology to develop chips designed in-house. Arm designs the infrastructure relied upon by many chips, with Qualcomm and NVIDIA as its clients.
Arm charges royalties based on device sales, and this type of revenue has become an important barometer for measuring trends in major electronic product markets, particularly the smartphone market. Arm claims that 99% of high-end smartphones globally use Arm technology. Arm's technology is at the core of most smartphone semiconductors worldwide.
Headquartered in Cambridge, UK, Arm is working under the leadership of Rene Haas to expand into the data center and personal computer components sectors to better benefit from growth in the AI field.
Arm has become one of the core companies driving the development of AI technology. It is involved in a U.S. AI infrastructure project called "Stargate," which is jointly participated in by its major shareholder SoftBank Group and OpenAI. At the same time, Arm is also involved in similar projects in Japan, where SoftBank's headquarters is located.
Arm went public two years ago, and SoftBank currently holds approximately 90% of Arm's shares
