Shares of Arm Holdings (NASDAQ:ARM) rose in early trading on Tuesday, after it reported upbeat fiscal second-quarter results.
Management did not provide full-year guidance.
Here are some key analyst takeaways:
- BofA Securities analyst Vivek Arya maintained a Buy rating and price target of $205.
- Rosenblatt Securities analyst Kevin Cassidy reiterated a Buy rating and price target of $180.
- Benchmark analyst Cody Acree reaffirmed a Hold rating on the stock.
- Needham analyst Charles Shi maintained a Hold rating.
Check out other analyst stock ratings.
BofA Securities: Arm reported quarterly sales and earnings 7% and 15% higher than expected. The company raised the December quarter outlook by 11% and 16%, respectively, "on continued strong data center momentum (up 2x YoY) and higher SoftBank contribution," he wrote.
The analyst stated that Arm Holdings has a strong position in the AI data center market and expects:
- Market share gains
- Rise in content per core
- Increase in number of cores
- Pipeline expansion
- New opportunity in designing chiplet/silicon
Rosenblatt Securities: Arm Holdings reported revenues of $1.14 billion and non-GAAP earnings of 39 cents per share, topping consensus estimates of $1.06 billion and 33 cents per share, respectively, Cassidy said in a note. "Growth was led by AI-related demand and adoption of Armv9 and Compute Subsystem (CSS) platforms across smartphones, data center, automotive, and IoT," he wrote.
The company's performance and outlook are supported by 21% year-on-year growth in Royalty revenue to $620 million and 56% growth in license revenue to $515 million, the analyst stated. Arm Holdings guided revenue to $1.225 billion, plus or minus $50 million and non-GAAP earnings of 41 cents per share, plus or minus 4 cents, above consensus estimates of $1.11 billion and 35 cents per share, respectively, he added.
Benchmark: What was the most encouraging aboutArm Holdings' fiscal second-quarter results was the better-than-expected growth of its licensing segment, at 10% sequentially and 56% year-on-year, Acree said. The improved performance in the quarter was "driven by broad-based strength across the breadth of its end markets, including solid volume trends and increasing royalty rates from its data center, smartphone, automotive, and IoT businesses," he wrote.
The company expects continued strong sequential growth of its royalty business during the fiscal third quarter, due mainly to data center growth and a "seasonally stronger" smartphone business, the analyst stated. Arm Holdings has "an attractive positioning at the intersection of multiple accelerating industry themes," he added.
Needham: Arm Holdings' Q2 results and Q3 outlook benefited from royalty and licensing revenues coming in higher than expected, Shi said. The company "attributed the strength to earlier than expected ramp of smartphone chips with growing v9 and CSS contribution.”
Management indicated that revenues and earnings are likely to grow marginally, the analyst stated. This suggests that March-quarter revenues are likely to be lower than previously expected, he commented.
ARM Price Action: Shares of Arm Holdings had risen by 0.88% to $161.60 at the time of publication on Thursday.
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