Arm Tumbles After Weak Forecast, Spurring Slowdown Fears

Yahoo

08-05-2025

(Bloomberg) -- Arm Holdings Plc declined in Thursday trading after giving a disappointing sales forecast for the current quarter, stoking concerns about a tariff-fueled slowdown for the chip industry.
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Revenue will be $1 billion to $1.1 billion in the fiscal first quarter, Arm said in a statement Wednesday. Wall Street had estimated a number at the highest end of that range. Profit will be 30 to 38 cents a share, minus certain items, also lower than analysts' projections.
The company blamed the conservative forecast on the timing of new agreements with customers. Arm is in the process of closing licensing deals and wants to make sure they're signed before it adds the revenue to its outlook, according to Chief Executive Officer Rene Haas. Customers continue to push ahead with investment in chips, particularly for artificial intelligence computing, and that's benefiting Arm, he said.
Arm gets paid in the form of license fees and royalties for its technology, which governs the ways chips and software communicate. Licensing revenue was $634 million last quarter, while royalty sales were $607 million.
'We've been conservative to make sure we don't overreach,' Haas said in an interview. 'The health of the business is unbelievably strong. We're seeing huge momentum in our data center business.'
Arm shares fell as much as 8% after markets opened in New York on Thursday. The stock had been up less than 1% this year through Wednesday's close.
Arm's forecast dovetails with commentary from chip industry peers, many of which have told investors there was a strong start to 2025 but that the economic environment has clouded forecasts.
The company decided not to provide investors with an annual target because of that uncertainty, executives told analysts on a call. A dearth of forecasts from customers for 2025 means that Arm has less data on which to make its own projections, Chief Financial Officer Jason Child said.
Arm's products — classified as services — aren't directly affected by tariffs, Child said. Any hit, which hasn't been felt so far, would come in the form of suppressing demand for devices such as smartphones.
Fourth-quarter revenue rose 34% to $1.24 billion, marking the first three-month period that exceeded a billion dollars. That compares with a $1.23 billion prediction from analysts, according to data compiled by Bloomberg. Excluding some items, profit was 55 cents a share, topping the average estimate of 52 cents.
Arm's technology is fundamental to semiconductors that run most of the world's smartphones. Under Haas, the Cambridge, UK-based company has sought to extend its reach into data centers and personal computer components — helping it benefit more from AI spending.
The chip company's outlook is closely watched because it provides a window into the future component plans of some of the world's largest companies. Those clients license its technology to use as the basis of in-house designed chips. Its royalty revenue – charged based on devices sold – is a barometer for major electronics categories, particularly smartphones.
Arm has emerged as a central player in efforts to promote AI technology. It's part of a project called Stargate aimed at expanding US-based AI infrastructure, alongside majority owner SoftBank Group Corp. and OpenAI. It's also involved in a similar endeavor in Japan, where SoftBank is based.
Though Arm had its initial public offering two years ago, roughly 90% of the company is still owned by SoftBank.
(Updates with shares in the sixth paragraph.)
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