\n<\/p>\n
May 6 (Reuters) – Arm Holdings forecast first-quarter revenue above Wall Street expectations on Wednesday, benefiting from higher adoption of its chip technology as tech companies spend heavily on artificial intelligence compute.<\/p>\n
Arm\u2019s stock jumped 12% in the wake of the report,\u00a0but reversed course after Arm executives told analysts on a conference call that they have not yet secured supplies to meet \u200cthe demand for a new chip. Analysts also probed the costs of the chip designer getting into the business of making its own chips.<\/p>\n
Shares in Arm were down over 6% in premarket trading on Thursday as investors assessed the comments and results.<\/p>\n
The company expects quarterly revenue of $1.26 \u200bbillion, compared with analysts’ estimates of $1.25 billion, according to data compiled by LSEG.<\/p>\n
Arm generates revenue by licensing its technology to companies such as Nvidia and Apple, collecting royalty payments for every product built using its designs.<\/p>\n
These chip architectures are highly valued for consuming relatively little power \u2014 a key advantage for data center operators who are under increasing pressure to control the rising energy demand and heat output that come with running large-scale AI \u200cmodels.<\/p>\n
ARM DESIGNS DOMINATE SMARTPHONES<\/p>\n
Arm’s designs power virtually every \u2060smartphone in the world, giving it an important role in the vast handheld market.<\/p>\n
However, a shortage of memory chips has strained the industry, driving up the prices of consumer electronics and stalling sales, leaving Arm with \u2060potentially lower royalties.<\/p>\n
Smartphone chip designer Qualcomm last week provided a dour quarterly revenue forecast due to the memory issues, but its stock jumped on upbeat comments of a demand rebound.<\/p>\n
Arm shares have soared this year, climbing more than 91%, and outperforming other major chip makers including Nvidia, Advanced Micro Devices \u200band \u200bBroadcom, as of Tuesday’s close.<\/p>\n
\u201cIt was a very tough setup for them – the \u200bexpectations were just so high,” said Seaport Research Partners \u200canalyst Jay Goldberg. “They were good numbers, but not good enough.\u201d<\/p>\n
Arm’s fourth-quarter revenue came in at $1.49 billion, beating estimates of $1.47 billion.<\/p>\n
Royalty revenue was $671 million, compared with expectations of $697.1 million. Licensing and other revenue was $819 million, while analysts had expected $774 million.<\/p>\n
Arm forecast first-quarter adjusted earnings per share of 40 cents, compared with Wall Street estimates of 36 cents.<\/p>\n
Arm, like its peers, has tapped into the growing market for central processing units, as the rise of artificial intelligence agents introduces the need for substantial general-purpose compute.<\/p>\n<\/p><\/div>\n
“We are very bullish about this data center demand,” Arm CEO \u200cRene Haas said in an interview, adding the current quarter includes a “pretty healthy \u200buptick in terms of royalties associated with the data center.”<\/p>\n
Earlier this year, Arm \u200bannounced the AGI CPU, a data center chip that will \u200baddress data-crunching needed for a specific type of AI that is able to act on behalf of users \u200cwith minimal oversight, instead of responding to queries as part \u200bof a chatbot.<\/p>\n
Arm has said the \u200bchip will add billions of dollars of revenue.<\/p>\n
Arm has enough capacity secured to fulfill $1 billion of demand the company discussed when it launched the AGI CPU, but has not yet secured it for the second billion dollars’ worth of orders, Haas said.<\/p>\n
\u201cThe \u200bmarket sees that as a party spoiler,” said \u200cMichael Ashley Schulman, partner at wealth management firm Cerity Partners. They will likely get the supply but the market \u200bdoubt hinges on whether it will be quick enough and then what happens when more demand arrives.\u201d<\/p>\n
(Reporting by Zaheer \u200bKachwala in Bengaluru; Editing by Sriraj Kalluvila, Bill Berkrot and Stephen Coates)<\/p>\n<\/p><\/div>\n