Arm Holdings Plc shares took a hit as the chip designer provided a cautious revenue forecast for the fiscal year, sparking concerns about a potential slowdown in the tech industry’s artificial intelligence spending spree.
The company announced that for fiscal 2025, revenue is expected to range between $3.8 billion to $4.1 billion, with a profit of $1.45 to $1.65 per share. This fell short of analysts’ expectations of $4.01 billion in revenue and a profit of $1.53 per share, representing a gain of 26%.
Following the announcement, Arm’s shares plummeted by as much as 10% to $95.25 in late trading. Just three months ago, a positive forecast had sent the stock soaring, making the company a Wall Street darling in the AI sector.
Under the leadership of CEO Rene Haas, Arm is aiming to expand its presence in the data center hardware market, leveraging its chip designs and licensed standards. The company is offering more comprehensive technology blueprints to companies like Amazon.com Inc.’s AWS to capitalize on the growing demand for AI-driven upgrades.
Despite the lukewarm forecast, Haas expressed confidence in Arm’s long-term growth prospects, citing strategies put in place in recent years that are now coming to fruition. The company anticipates a revenue growth rate of at least 20% in fiscal 2026 and 2027.
Arm, based in Cambridge, England, remains majority-owned by SoftBank Group Corp., which acquired the business in 2016 for $32 billion. The company’s licensing sales saw a significant increase last quarter, with revenue from royalties also on the rise.
The future of Arm Holdings Plc remains uncertain as it navigates the evolving landscape of the semiconductor industry and the shifting demands of the AI market.