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Shares in Arm fell as much as 10 percent after the British chip designer gave weak sales forecasts for next yr, raising concerns that technology firms' spending on artificial intelligence hardware could decline.
The SoftBank-backed group, which has been one in all the largest beneficiaries of an AI spending boom since listing on the Nasdaq in September, forecast revenue of between $3.8 billion and $4.1 billion for the yr to March 2025. Analysts had expected revenue of $4.01 billion.
The share price decline in after-hours trading on Wednesday got here at the same time as Arm reported a 47 percent rise in fourth-quarter revenue to $928 million. This meant annual sales rose to over $3 billion for the primary time, exceeding its own forecast of $850 to $900 million.
The results are Arm's third since its blockbuster initial public offering, which was valued at $65 billion and was the most important U.S. initial public offering in nearly two years. Since then, the market capitalization has risen rapidly, reaching a peak of around $117 billion in February. Its market value was $109 billion on Wednesday before the earnings announcement.
CEO Rene Haas said that AI software models like OpenAI's ChatGPT and Meta's Llama are “getting greater and smarter, and their demands for more computing power with greater energy efficiency can only be realized by Arm.”
In a conversation with shareholders, Haas said: “The tailwind of AI has brought unprecedented growth to our company. The company's growth and outlook couldn't be brighter.” He pointed to rising revenue from licensing fees for the most recent chip designs within the smartphone and infrastructure businesses, in addition to increasing demand for chips that power data centers and autonomous vehicles.
Chief Financial Officer Jason Child said Arm expects to take care of overall revenue growth of not less than 20 percent yr over yr in fiscal 2026 and 2027.
Sales last quarter were boosted by an increase in licensing fees for its V9 chip designs, that are licensed to power smartphones, data centers and AI chips made by firms like Nvidia and Amazon to power large language models. Arm sells chip design licenses to manufacturers, who pay royalties for every unit shipped. License revenue increased 37 percent to $514 million within the quarter. Arm said chips based on its V9 technology now account for a fifth of its licensing revenue, compared with 15 percent within the previous quarter.
Arm had revised up its fourth-quarter revenue forecast in February because of rising demand for brand new AI applications, which had led to higher demand for its chip architecture.
Shares of AI chipmakers corresponding to Nvidia and AMD have gained this yr as technology firms laid out plans to proceed investing heavily in AI computing infrastructure, boosting 2024 capital spending forecasts by billions of dollars.
