Arm Holdings (ARM) released its fiscal fourth-quarter earnings for the three months ending in March after the market closed on Wednesday. The data showed that the company’s quarterly revenue increased 20% year-over-year to $1.49 billion, surpassing market expectations of $1.47 billion. Net income reached $641 million, while adjusted earnings per share stood at 60 cents, also beating forecasts. However, following the earnings announcement, the stock experienced significant volatility, initially surging 12.6% before quickly turning lower and plunging nearly 10%. As of the time of this report, the stock was down approximately 6.03%.
In its outlook for the next quarter, the company expects first-fiscal-quarter revenue of approximately $1.26 billion, slightly above the analyst average estimate of $1.25 billion. Adjusted earnings per share are projected at 40 cents, compared to the general market expectation of 36 cents.
Arm holds a significant position in the handheld device market, with its designs powering nearly all smartphones globally, and it generates revenue by collecting royalties on every device shipped. But this core business is facing challenges. In the fourth fiscal quarter, Arm’s royalty revenue was $671 million, below market expectations of $693 million to $697 million. During a conference call, CEO Rene Haas acknowledged that smartphone shipment growth “turned negative” in the previous quarter, primarily affected by factors such as memory chip shortages, weak consumer electronics demand, and a contraction in the low-end smartphone market. However, Haas also noted that the weakness was mainly concentrated in the low-end market, and since Arm’s royalty revenue is more dependent on high-end models, the overall impact remains within a manageable range. Downstream chip manufacturers such as Qualcomm had previously issued similar warnings.
In contrast to the weakness in the mobile phone business, robust demand from AI data centers is becoming a growth engine for Arm. Haas stated that royalty revenue related to data centers in the current quarter will see “considerable growth.” In the fourth fiscal quarter, licensing revenue reached $819 million, exceeding expectations of $775 million, indicating strong customer interest in adopting Arm technology for AI computing and other applications. As an underlying architecture licensor, Arm is deeply benefiting from the trend of cloud computing providers increasing their investments in AI infrastructure.
The chip manufacturer, which went public in 2023, remains nearly 90% owned by Japan’s SoftBank Group. In April of this year, SoftBank appointed Haas to a broader role within the group; he will lead SoftBank’s international operations and coordinate collaboration among the group’s chip and AI companies.
