Chip designer Arm Holdings late Wednesday matched analyst estimates for its fiscal first quarter, but it disappointed with its earnings guidance. Arm stock fell in extended trading.
The Cambridge, England-based company earned an adjusted 35 cents a share on sales of $1.05 billion in the quarter ended June 30. Analysts polled by FactSet had predicted the same results. In the year-earlier period, Arm earned an adjusted 40 cents a share on sales of $939 million.
For the current quarter, Arm expects to earn an adjusted 33 cents a share on sales of $1.06 billion. That's based on the midpoint of its guidance. Wall Street was modeling earnings of 35 cents a share on sales of $1.06 billion. In the same quarter last year, Arm earned an adjusted 30 cents a share on sales of $844 million.
In after-hours trading on the stock market today, Arm stock dropped more than 8% to 149.78. During the regular session Wednesday, Arm stock dipped a fraction to close at 163.32.
Arm has two sources of revenue: licensing and royalties. Licensing involves giving customers access to its portfolio of intellectual property for developing Arm-based processors. Royalties enable Arm to get a payment for each chip sold.
In the June quarter, Arm's licensing revenue fell 1% year over year to $468 million. However, its royalty revenue increased 25% to $585 million.
Arm Stock Is On Three IBD Lists
"Royalty revenue growth from all target end markets — including data center, automotive, smartphones and IoT (Internet of Things) — illustrated the momentum we are building across every corner of our business," Arm Chief Executive Rene Haas and Chief Financial Officer Jason Child said in a shareholder letter.
Arm said licensing revenue was down slightly due to normal fluctuations in the timing and size of its license agreements and contributions from its backlog.
Arm noted significant traction for its Neoverse data center chips.
"More than 70,000 enterprises now run AI workloads on Arm Neoverse data center chips — a 40% increase year-on-year and a 14x surge since 2021," the executives said. "Arm Neoverse CPUs (central processing units) also power some of the most important cloud AI infrastructure deployed today, including custom silicon such as Nvidia Grace, AWS Graviton, Google Axion and Microsoft Cobalt, among others."
Arm stock is on three IBD lists: IPO Leaders, Stock Spotlight and Tech Leaders.
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