Investors unimpressed by Arm’s annual revenue forecast as shares plummet

Arm Holdings, a leading chip designer, provided a full-year revenue forecast that fell short of investor expectations, causing its shares to drop about 7% in extended trading. The company’s March-quarter results exceeded expectations, but its full-year guidance highlighted uncertainty surrounding the growth of artificial-intelligence computing.

Analyst Kinngai Chan noted that Arm is priced for outperformance, and the outlook provided by the company did not meet those expectations. This led to a dip in shares of other AI chipmakers, including Nvidia and Advanced Micro Devices.

For the current fiscal first quarter, Arm forecasted revenue between $875 million and $925 million, with a midpoint of $900 million, surpassing analyst estimates. The UK chip designer also projected full-year revenue between $3.8 billion and $4.1 billion, with a midpoint of $3.95 billion, slightly below consensus estimates.

Arm’s finance chief, Jason Child, emphasized the importance of setting realistic targets based on the company’s capabilities. Despite bets on Arm benefiting from the AI computing surge, its revenue and profit have not seen the same level of growth as Nvidia’s.

Arm’s designs power the majority of smartphones globally, and the company has been expanding into data centers and other markets. The company’s licensing business grew by 60% in the fourth quarter, reaching $414 million, while its royalty segment increased by 37% to $514 million.

Overall, Arm’s performance and outlook reflect the ongoing challenges and opportunities in the semiconductor industry, particularly in the rapidly evolving AI computing landscape.