Arm’s stock plummets as revenue projections fail to meet expectations despite surge in AI technology

Arm, the UK chip designer, faced a significant drop in its share price after issuing lacklustre revenue projections for the year ahead. The SoftBank-backed company forecasted revenues between $3.8bn and $4.1bn for the year to March 2025, falling short of analysts’ expectations of $4.01bn.

Despite reporting a 47 per cent surge in fourth-quarter revenue to $928mn, pushing annual turnover to over $3bn for the first time, Arm’s shares plummeted by about 8 per cent in after-hours trading. This comes after the company’s blockbuster IPO last year, which valued it at $65bn and saw its market capitalization soar to $117bn in February.

Arm’s CEO, Rene Haas, emphasized the increasing demand for AI computing infrastructure, highlighting the importance of Arm’s chip designs in powering smartphones, data centers, and AI chips for companies like Nvidia and Amazon. The company’s royalty revenue rose by 37 per cent to $514mn in the quarter, driven by the success of its V9 chip designs.

The surge in demand for AI applications has also benefited other AI chip manufacturers like Nvidia and AMD, with tech companies planning to increase their spending on AI computing infrastructure in the coming years. Arm’s revised revenue guidance in February reflects this growing trend in the tech industry.

As the competition in the AI hardware market heats up, Arm remains confident in its position as a key player in providing efficient and powerful chip designs for the evolving AI landscape.