Arm Holdings late Wednesday beat estimates for its fiscal fourth quarter but came up short with its guidance. Arm stock fell in extended trading.
The Cambridge, England-based chip designer earned an adjusted 55 cents a share on sales of $1.24 billion in the quarter ended March 31. Analysts polled by FactSet had predicted Arm would earn 52 cents a share on sales of $1.23 billion. On a year-over-year basis, Arm earnings rose 53% while sales increased 34%.
For the current quarter, Arm predicted adjusted earnings of 34 cents a share on sales of $1.05 billion, based on the midpoint of its outlook. Wall Street was modeling earnings of 42 cents a share on sales of $1.1 billion in the fiscal first quarter. In the same quarter last year, Arm earned an adjusted 40 cents a share on sales of $939 million.
In after-hours trading on the stock market today, Arm stock dropped more than 9% to 112.51. During the regular session Wednesday, Arm stock advanced 1.4% to close at 124.19.
In the March quarter, Arm's licensing revenue rose 53% year over year to $634 million. Its royalty revenue increased 18% to $607 million.
In a shareholder letter, company executives touted the success of Arm's diversification strategy. It is seeing royalty revenue growth from all of its target end markets, including data center, automotive, smartphones and Internet of Things.
Arm noted that Nvidia and major hyperscale cloud service providers are ramping up production of new Arm-based server chips.
"With more AI software being written first for Arm-based chips, we expect close to 50% of all new server chips shipped to top hyperscalers this year will be Arm-based," Chief Executive Rene Haas and Chief Financial Officer Jason Child said in the letter.
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