Arm Holdings Reports Strong Q3 Results Amid AI Boom, But Faces Valuation Concerns

Softbank-Backed Arm Holdings 155% Post-IPO Surge Bolstered by AI Growth and Smartphone Integration - ARM Holdings (NASDAQ:ARM)

British chip designer Arm Holdings Plc ARM stock has surged over 155% since its September 2023 initial public offering, making way to the Nasdaq 100 index. Arm chip designs mainly cater to smartphones, including Apple Inc's AAPL iPhone. CEO Rene Haas proclaimed the potential of AI to drive growth in the smartphone and Arm sectors. Also Read: SoftBank Q3 Earnings: Revenue Rises, Vision Fund Takes $2.33 Billion Hit As Investments Falter Arm Holdings stock gained 26% year-to-date versus the S&P Semiconductors Select Industry Index's 4.3% decline. Haas aims for Arm to capture over 50% of the Windows PC market within five years and envisions 100 billion AI-ready Arm devices worldwide by 2025. In 2024, Microsoft Corp MSFT launched Windows PCs with AI capabilities powered by Arm chips to intensify the rivalry with Apple's Mac lineup. Amazon.Com Inc AMZN and Alphabet Inc's GOOG GOOGL Google remain invested in building out new data centers bypassing Intel Corp's INTC x86 and are instead using a combination of Arm architecture and their in-house chip designs. Arm-based chips are increasingly taking center stage in Nvidia Corp's NVDA current-generation AI systems. Arm sustained gross margins of 95%-96% by designing and licensing semiconductor intellectual property instead of manufacturing physical chips. This enables it to earn upfront fees and ongoing royalties for each chip sold using its designs. Arm's research and development margin increased to 61% in fiscal 2024 from 42% a year ago. Arm's positive catalysts: Last week, CEO Rene Haas declared Arm's expanding role in AI infrastructure through its involvement in OpenAI's $100 billion Stargate AI infrastructure project. It also plans to boost prices by up to 300% and has discussed manufacturing its chips. Reportedly, Arm has been strategizing since 2019 to raise its annual smartphone revenue by ~$1 billion over a decade to boost royalty rates for its latest Armv9 computing architecture. Haas has explored producing complete chips or chipsets, posing as a rival to its current customers, Apple and Qualcomm. However, the British chip designer is involved in a licensing disagreement between Arm and Qualcomm Inc QCOM, reportedly threatening to disrupt the shipment of new AI-powered laptops. Wall Street analysts, including Raymond James' Srini Pajjuri, expressed optimism over Armv9 CPU architecture and the progress of compute subsystems (CSS), which essentially doubles the royalty rate, fueling continued strong double-digit growth. They expect the emergence of AI agents and efficient AI models (such as DeepSeek) to be significant positives for Arm. Needham's Charles Shi noted the company is overdelivering the fiscal 2025 targets set during the IPO and transition from licensing-driven growth to royalty-driven growth. Analysts also flagged exposure to China (historically accounted for 20% of Arm's overall sales) and ongoing smartphone, networking, and auto-cyclical headwinds. Meanwhile, Arm China tapped Chen Feng as sole CEO after co-CEOs Liu Renchen and Eric Chen stepped down. The co-CEOs have served as interim leaders of Arm China since the company terminated Allen Wu in 2022 for alleged conflicts of interest. Japanese conglomerate SoftBank Group Corp SFTBF SFTBY snapped Arm in 2016 for $32 billion. SoftBank retained 90% of its ownership in Arm. Price Actions: ARM stock closed at $155.41 on Wednesday. Also Read: Ryder Q4 Earnings: Fleet and Supply Chain Drive Performance, CEO Warns of Freight Market Headwinds, Modest 2025 Growth Photo via Shutterstock ARMARM Holdings PLC$155.65-1.32%Overview Rating:Speculative50%Technicals Analysis1000100Financials Analysis200100WatchlistOverviewAAPLApple Inc$236.921.85%AMZNAmazon.com Inc$228.76-1.72%GOOGAlphabet Inc$185.14-1.03%GOOGLAlphabet Inc$183.41-1.03%INTCIntel Corp$22.527.39%MSFTMicrosoft Corp$409.10-0.57%NVDANVIDIA Corp$130.93-1.41%QCOMQualcomm Inc$170.50-0.87%SFTBFSoftBank Group Corp$62.27-0.41%SFTBYSoftBank Group Corp$30.88-0.13%Market News and Data brought to you by Benzinga APIs

Arm Holdings' Shares Slip Despite Record Revenue and Strong AI Demand. Is This a Golden Buying Opportunity? | The Motley Fool

Share prices of Arm Holdings (ARM -2.96%) slipped despite the company posting record fiscal Q3 revenue. However, the stock is still off to a strong start to the year, up nearly 35% year to date as of this writing. Let's take a closer look at the semiconductor company's most recent results to see if the dip in price is a buying opportunity. Arm is currently still tied to the smartphone market, as its technology is incorporated into nearly all advanced smartphones in the world. However, its technology has also started to make inroads into the data center as well. At the same time, its new Armv9 technology carries a much higher royalty rate than its older v8 technology, including being about double for Compute Subsystems (CSS), which helps with artificial intelligence (AI) workloads on edge devices and in data centers. Arm does not design its own chips; instead, it licenses its technology. Historically, it generates revenue via royalty payments, for which it collects per-unit royalties based on the number of chips shipped that use its designs. More recently, it has been collecting license revenue via subscriptions to its intellectual property (IP) portfolios. Both arrangements carry very high gross margins. For its fiscal 2025's Q3, Arm's revenue climbed 19% year over year to a record $983 million. Adjusted EPS, meanwhile, jumped 26% to $0.39. Those results were well ahead of analyst expectations for adjusted EPS of $0.34 on revenue of $949 million, as compiled by FactSet. Royalty revenue in the quarter soared 23% to $580 million. It credited the jump to strong adoption of its Armv9 technology, increased usage of its chips in data centers, and an improvement in the Internet of Things ( IoT ) space. The company called out the Dimensity 9400 chip used in flagship smartphones from Chinese companies Oppo and Vivo as being a driver. Meanwhile, in the data center market, it called out Amazon's Graviton CPU (central processing unit) as being a solid contributor. License revenue, meanwhile, increased by 14% year over year to $403 million. It signed one additional Arm Total Access agreement in the quarter, bringing the total to 40. It also added several customers to its Arm Flexible Access program, ending the quarter with 295 customers. Remaining performance obligations (RPO), which is the combination of deferred revenue and backlog and an indicator of future revenue, fell 3% sequentially to $2.33 billion. It expects to recognize 28% of this amount as revenue over the next 12 months. Looking ahead, Arm narrowed the range of its full-year guidance. It now expects adjusted EPS of between $1.56 to $1.64 on revenue of $3.94 billion to $4.04 billion. It previously had guided for adjusted EPS of $1.45 to $1.65 on revenue of $3.8 billion to $4.1 billion. For fiscal Q4, Arm forecast adjusted EPS of between $0.48 and $0.56 on revenue of $1.175 billion to $1.275 billion. Analysts were looking for EPS of $0.53 on revenue of $1.22 billion. The company is excited about the $500 billion announced Stargate data center project, where it said it would be the CPU of choice for the initial configurations. It said the overall use of Grace Blackwell GB200s, which combined a Nvidia GPU (graphic processing unit) with an ARM-based CPU, will be an accelerant for data center growth. Arm turned in a solid quarter. It continues to see solid uptake of its new higher royalty Armv9 technology, while it is doing well in China, which represented about 25% of its revenue in the quarter. It expects this to go back down to the mid-teens in the future, but its success with Chinese smartphone makers is a positive, as they have gained share versus Western brands in the country. The Stargate project is a nice opportunity for the company, and the growing relationship between its parent company, Softbank, and OpenAI can be of benefit as it looks to make further inroads into the data center. The company already has designs with Amazon's Graviton, Nvidia's Grace Blackwell, and Microsoft's Cobalt, so it is making progress. Meanwhile, with its Armv9 technology still around 25% of its total royalty revenue, it still has a nice opportunity to continue to grow this part of the business. It thinks v9 penetration can eventually reach 67% to 70% of total royalties. Looking at valuation, Arm trades at a forward price-to-earnings (P/E) ratio of over 80 based on fiscal 2026 analyst estimates. That's a high valuation, but the company has generally traded at a premium given its high-margin royalty and license-based business model that often sees royalty revenue streams that last a decade or even more. At the time of its September 2023 IPO, it noted that nearly half its royalty income was coming from Arm products released between 1990 and 2012. Over the long term, I believe that Arm's stock should continue to be a solid winner, but with the stock's strong start to the year, I would not chase it here, even after this small pullback.

Is Arm Stock a Buy After the Artificial Intelligence (AI) Chip Designer Released Its Quarterly Earnings Report? | The Motley Fool

Arm Holdings (ARM -3.34%) stock declined 3.3% on Thursday, following the leading central processing unit (CPU) chip designer's release on the prior afternoon of its report for the third quarter of its fiscal year 2025 (ended Dec. 31, 2024). Let's look at the Q3 report and then the stock's valuation to answer this question: Is Arm stock a buy? Arm stock's modest post-earnings-release decline wasn't related to the quarter's results, as revenue and earnings both handily beat Wall Street's expectations. Rather, guidance was the culprit. Investors were not satisfied that Q4 guidance "only" met analyst consensus estimates for revenue and earnings. In 2025, Arm stock had surged nearly 41% through Wednesday. So many investors had very high expectations and were probably expecting Q4 guidance to exceed Wall Street's estimates. Arm stock's big run-up in 2025 is in part due to investor optimism about the company being a key technology partner in Stargate, as announced on Jan. 21. Stargate is a private $500 billion artificial intelligence (AI) infrastructure project that's a joint venture (JV) between Oracle, SoftBank Group, and OpenAI, best known for its ChatGPT chatbot. Data source: Arm Holdings. GAAP = generally accepted accounting principles. Fiscal Q3 2025 ended Dec. 31, 2024. Investors should focus on the adjusted numbers, which exclude one-time items. Wall Street was looking for adjusted EPS of $0.34 on revenue of $948 million, so Arm easily exceeded both expectations. It also surpassed its own guidance, which was for adjusted EPS of $0.32 to $0.36 on revenue of $920 million to $970 million. The company generated $423 million in cash running its operations during the quarter, up 36% year over year. On an adjusted basis, free cash flow rose 39% to $349 million. Arm ended the quarter with cash, cash equivalents, and short-term investments of $2.67 billion, up 11% year over year. Data source: Arm Holdings. YOY = year over year. Royalty revenue was a quarterly record, while license revenue was better than management had expected. Licensing demand "remains strong as our partners make long-term commitments to more, and more powerful, energy-efficient Arm technology, including [for] AI training and inferencing," the company said in its shareholder letter. Investors should keep in mind that year-over-year licensing revenue growth will be "lumpy" from quarter to quarter due to the timing of larger licensing deals. Royalty revenue growth was driven by continued adoption of the company's newest architecture, Armv9, which generally has a higher royalty rate than its predecessor; the ramp-up of its computer subsystems (CSS); improvements in the internet of things (IoT) devices market; and increased usage of Arm-based chips in AI-enabled data centers. Fiscal fourth-quarter guidance: Going into the report, Wall Street had been modeling for Q4 revenue of $1.22 billion and adjusted EPS of $0.52, so Arm's outlook at both midpoints was in line with expectations. For the full fiscal year, Arm narrowed its guidance ranges for both the top and bottom lines, which had the effect of slightly raising both midpoints. Data source: Arm Holdings. YOY = year over year. *Calculations by author. Fiscal 2025 ends in late March. In short, Arm turned in a very good Q3 report, including strong guidance for Q4. Arm stock remains highly valued. It is priced at 82.1 times Arm's projected (by Wall Street) earnings for fiscal 2026, which begins in April 2025. However, Arm consistently beats the analyst consensus earnings estimate, which means this forward price-to-earnings (P/E) ratio will probably prove to be inflated. So, in my view, what investors should do in cases like this is tweak the forward P/E that's based on Wall Street's estimates. A decent assumption is that Wall Street's consensus estimate for Arm's fiscal 2026 earnings will prove to be too low by 16%, as has been the case, on average, for the last four quarters. In this scenario, Arm's forward P/E is 70.7. Yes, 70.7 is still high, though it's more palatable than 82.1. Arm is a high-quality stock, as the company has a strong balance sheet and a great business model, which generates a long-tailed royalty revenue stream from license agreements inked many years back. So, Arm stock will probably always be more highly valued based on commonly used valuation metrics than those of many of its peers. For folks who have long-term investing horizons, it would seem reasonable to begin dollar-cost averaging your way into your full investment position. As an example, if you wanted to invest $2,000 in Arm stock, you could buy $500 worth of stock each quarter for one year. By dollar-cost averaging, you will avoid investing your entire sum at a peak price in the event of a significant decline. For investors hesitant to start buying Arm stock, it's a good watch list candidate. The stock has significant long-term growth potential, as the company has several ways in which it is benefiting from the AI revolution.

Arm shares fall amid concerns of a slowdown in AI demand

Arm reported earnings for the December quarter that significantly exceeded market expectations. However, the company provided conservative guidance for the current quarter, prompting a decline of more than 6% in its share price during extended trading hours on Wall Street. Despite this, Arm remained an exceptional stock, largely insulated from the Chinese DeepSeek-led selloff in technology shares. As of market close on 5 February, shares of the British chip designer were up 39% on the Nasdaq. Arm's quarterly results were robust, with both revenue and profit demonstrating solid growth. During the December quarter, the company reported revenue of $983 million (€945 million), up 19% year-on-year, well above the estimated $946.7m (€910m). Earnings per share stood at $0.39 (€0.37), exceeding the expected $0.34 (€0.33). Net income rose by 22% year-on-year, while the company's operating margin widened to 45%, up from 43.8% in the same quarter last year. Within its revenue segments, royalty revenue increased by 23% year-on-year to $580m, while licence and other revenue grew by 14% annually to $442m. CEO Rene Haas commented: "Arm delivered record third-quarter revenue driven by continued strong adoption of Armv9 and CSS compute platforms. With our high-performance, energy-efficient, flexible technology, Arm is a key enabler in advancing AI innovation and transforming the user experience from the edge to the cloud." Arm holds a dominant position in the market, supplying semiconductor design platforms to the majority of smartphones worldwide. The company made its debut on the Nasdaq in September 2023 through an initial public offering, raising $4.9bn (€4.5bn) as it joined the global AI race. However, Japanese conglomerate SoftBank still retains a 90% stake in Arm. The company ceased reporting the number of Arm-based chips shipped from the June quarter onwards, with Haas explaining that Arm has shifted its focus towards higher-value, lower-volume markets such as data centre servers, AI accelerators, and smartphone application processors. In its earnings report, Arm noted that it provides technology support for Nvidia's latest chip, Project Digits, which features cores based on the most advanced Blackwell GPU. Arm is also one of the technology partners involved in Stargate, a $500bn (€481bn) AI infrastructure project announced by US President Donald Trump. Its majority owner, SoftBank, is a key financial backer of the project, alongside other technology firms, including OpenAI and Oracle. Unlike other chipmakers, Arm develops hardware designs that enable communication between software and computer chips, generating revenue through licensing fees and royalties. As a result, the company has indirectly benefited from the AI boom. Despite this, Arm has narrowed its outlook for the full fiscal year 2025 and provided conservative guidance for the current quarter, sparking concerns about a potential slowdown in AI chip demand. On the previous day, Nvidia's rival, Advanced Micro Devices (AMD), also issued a disappointing outlook for its data centre business. Arm has forecast March-quarter revenue of between $1.18bn (€1.13bn) and $1.28bn (€1.23bn), with the midpoint slightly above analysts' estimates. It also narrowed its full-year revenue guidance to between $3.94bn (€3.79bn) and $4.04bn (€3.88bn), down from its previous forecast of between $3.8bn (€3.65bn) and $4.1bn (€3.94bn).

Arm's Rising Royalties and v9 Adoption Strengthen Market Position, Analysts Say - ARM Holdings (NASDAQ:ARM)

Analysts remain bullish on Arm, citing AI-driven growth, v9 adoption, and increasing market share in data centers and edge computing. Wall Street analysts rerated Arm Holdings ARM after reporting an upbeat quarterly print Wednesday amid an exciting earnings season. The stock is trading lower on Thursday. Arm reported third-quarter revenue of $983 million, up by 19%, topping analyst estimates of $946.73 million. The chip designer reported adjusted EPS of 39 cents, beating analyst estimates of 34 cents. Also Read: Entegris Q4 Earnings: Revenue And Profit Beat, Warns of 2025 Uncertainty Beyond AI Growth Arm expects fourth-quarter revenue of $1.175 billion-$1.275 billion versus $1.22 billion analyst consensus. The company anticipates fourth-quarter adjusted EPS of 48 cents-56 cents versus 52 cents analyst consensus. Several analysts rated the stock post earnings: Raymond James analyst Srini Pajjuri maintained ARM Holdings with an Outperform and raised the price target from $160 to $175. Rosenblatt analyst Hans Mosesmann reiterated ARM Holdings with a Buy and raised the price target from $180 to $225. Needham analyst Charles Shi maintained ARM Holdings at Hold. JP Morgan analyst Harlan Sur reiterated ARM Holdings with an Overweight and raised the price target from $160 to $175. Goldman Sachs analyst Toshiya Hari maintained ARM Holdings with a Buy and raised the price target from $159 to $174. BofA Securities analyst Vivek Arya reiterated ARM Holdings with a Buy and a price target of $180. Raymond James: Arm Holdings' third-quarter results were better than consensus, while its fourth-quarter outlook was mainly in line. Royalty revenue grew 23%, driven by ARMv9, early CSS contribution, data center CPU growth, and IoT recovery. Pajjuri noted that the v9 penetration story has a long way to go and is also encouraged by the early progress of compute subsystems (CSS), which essentially doubles the royalty rate over v9. Licensing grew 14% and fared slightly better than expected as the company closed several large deals. Pajjuri expects strong double-digit growth to continue, driven by v9 or CSS transitions and growing Arm adoption in the data center. Pajjuri also noted the emergence of AI agents and efficient AI models (such as DeepSeek) as significant positives for Arm Holdings, given its strong presence at the edge. Rosenblatt: Arm Holdings once again delivered solid beat and raise for the December quarter driven by v8, v9, and newer CSS royalties in Smartphone and DC, but also recovering Networking and IoT. The licensing pipeline has increasing AI momentum in size, timing, and value, including CSS engagements that increase yearly value as Arm Holdings updates its architectural roadmaps. The read-through is that royalty rates can go double-digits in the coming years (excluding IoT). Analysts seemed perturbed (as usual) on the v9 % of revenues, holding steady sequentially at 25%. V8, the older generation, is just much more potent than expected. Mosesmann noted it will move to 60%-70%. Needham: Arm Holdings delivered a beat-and-raise quarter and raised its fiscal 2025 outlook. In the reported quarter, both royalty and licensing revenues exceeded the estimates. Arm Holdings expects a slight decline in royalty revenues for the March quarter due to smartphone seasonality and a potential pullback in IoT revenues, offset by record licensing revenue supported by a couple of significant renewals. The company is overdelivering the fiscal 2025 targets set during the IPO. Beyond fiscal 2025, Arm Holdings expects to maintain 20% growth in fiscal 2026 and 2027 and noted the company will transition from licensing-driven growth in fiscal 2024-2025 to royalty-driven growth in fiscal 2026 and beyond. JP Morgan: Arm delivered solid third-quarter results - better revenues, margins, and EPS - driven by better-than-expected licensing and royalties. Sur continues to see ARMv9 reaching 60%-70% of the royalty revenue mix over the next 2-3 years. China mix increased to 25% of sales (from 23% in the September quarter). Overall, the solid results and outlook are tracking in line with Sur's investment thesis, where he said Arm Holdings is well-positioned to drive a 20%+ revenue CAGR (40%+ EPS CAGR) for the next several years on higher IP content (driving higher royalty rates), market share gains against proprietary or legacy compute architectures, and Arm Holdings' growing market penetration into the highest growth segments of the market like AI, auto, and datacenter computing. Goldman Sachs: Arm Holdings reported solid third-quarter results as revenue upside across the Licensing and Royalty businesses translated into a 15% adjusted EPS beat. While the penetration of the v9 architecture is proceeding slower than anticipated, on the positive side, Hari has been encouraged by the strong traction in its Compute Subsystems (CSS) business, volume growth in Cloud Infrastructure, and better-than-feared near-term volume trends in IoT. Looking ahead into fiscal 2026, Hari noted the combination of robust Licensing revenue growth, a cyclical recovery in volumes, and a sustained increase in royalty rates, driving strong double-digit earnings growth at the company level. He views the company as a long-term share gainer in the growing Cloud and Edge computing markets. BofA Securities: Licensing upside delivered a third-quarter beat, while the fourth quarter is generally in-line. Near-term royalty remains pressured on ongoing smartphone, networking, and auto-cyclical headwinds. Still, Arya highlights surging licensing revenues today, which should result in strong Royalty fall-through 2-3 years later. ARMv9's adoption of 25% of royalty sales remained flat sequentially for the third consecutive quarter, given the higher mix of v8 phones. The company insists its long-term attach target of 60%-70% remains on track. Importantly, Arm Holdings remains exposed to an expanding range of opportunities into fiscal 2026 or calendar 2025, spanning across v9, CSS, and PC or server share gains, all of which stem from the growing adoption of AI across the industry. Price Actions: ARM stock is down 3.26% at $167.64 at last check Thursday. Also Read: Thomson Reuters Q4 Earnings: Beats Estimates, Boosts Dividend 10%, CEO Highlights Strategic Growth Image via Shutterstock ARMARM Holdings PLC$166.62-3.83%Overview Rating:Speculative50%Technicals Analysis1000100Financials Analysis200100WatchlistOverviewMarket News and Data brought to you by Benzinga APIs

Chipmakers Qualcomm and Arm post sales rise on smartphone strength

Qualcomm and SoftBank-backed Arm posted strong quarterly sales growth on Wednesday as the chipmakers benefited from better than expected smartphone demand. Qualcomm reported revenue of $11.7bn for the quarter to the end of December, above consensus estimates in a S&P Capital IQ poll of $10.9bn and up 17 per cent year on year, and gave March quarter guidance that was above expectations, with a high end of about $11bn. Arm also beat revenue forecasts for its quarter to the end of December at $983mn, up 19 per cent year on year. The UK chip designer gave guidance for the current quarter of about $1.2bn, in line with estimates. Despite beating revenue forecasts, Qualcomm shares were down more than 4.5 per cent in after-hours trading, while Arm shares were about 6 per cent lower. Shares in both groups have rallied over the past year, setting a high bar for their quarterly earnings reports. Cristiano Amon, Qualcomm chief executive, told investors the company had seen better than anticipated demand for its smartphone products, thanks in part to Samsung's wholesale adoption of its Snapdragon 8 Elite chips for its flagship new AI smartphone, the S25. Both Qualcomm and Arm -- which supplies Qualcomm with architectural designs -- are betting that demand for artificial intelligence features, such as virtual assistants that run on more powerful chips, present a significant growth opportunity. This includes smartphones, where leading device makers Apple and Samsung are investing heavily into new AI assistant features. Qualcomm's long-running partnership with Apple to supply it with 5G modems is set to come to an end in 2026. Apple is bringing more of its chip design in-house. It is now in the process of diversifying its chip business beyond smartphones into sectors such as automotive computer systems and PCs. On Wednesday it said it believed the recent success of China's DeepSeek AI models is good news for the on-device AI features that Qualcomm's chips power, as models become more capable and efficient. In December, Qualcomm came out on top in a licensing dispute with SoftBank-backed Arm over the technology it uses to build custom "cores" for its chips. A US jury ruled largely in Qualcomm's favour in the legal dispute, which stemmed from its acquisition of Nuvia in 2021. The dispute saw Arm raise the prospect of withdrawing Qualcomm's licence to use its architecture. On the call with investors on Wednesday, Qualcomm's Amon said Arm had indicated it had "no current plans to terminate the Qualcomm architecture agreement". In a letter to investors, Arm chief executive Rene Haas said the company was also benefiting from the rise of "edge" AI applications on smartphones, applications that can run on the device without needing to connect to a cloud server. Apple, for example, has adopted Arm's latest "V9" chip architecture for chips in the iPhone 16. He said the company's involvement in a $500bn US government-backed investment project led by OpenAI and SoftBank, known as Stargate, showed that its chip designs would play a "critical role" in one of the largest AI infrastructure projects to date.

Qualcomm and Arm shatter Wall Street's targets, but investors aren't too happy - SiliconANGLE

Qualcomm and Arm shatter Wall Street's targets, but investors aren't too happy Shares of Qualcomm Inc. and Arm Holdings Plc headed south in late-trading today, even though both chipmakers delivered solid quarterly earnings and revenue beats and provided optimistic guidance for the current quarter. In the case of Qualcomm, it delivered stellar results, with fiscal first-quarter earnings before certain costs such as stock compensation coming to $3.41 per share and revenue rising 18%, to $11.67 billion. Those results blew Wall Street's forecasts away. Analysts had expected the company to report earnings of just $2.96 on sales of $10.93 billion. Qualcomm's net income rose 15% from a year earlier to $3.18 billion. For the current quarter, Qualcomm said it's looking at earnings of between $2.70 and $2.90 per share, while forecasting revenue in a range of $10.2 billion to $11 billion. Once again, those numbers were well ahead of expectations, with the Street looking for a profit of $2.69 per share on sales of $10.34 billion. Qualcomm Chief Executive Cristiano Amon (pictured) said the company's revenue was a new quarterly record, driven by a combination of its strong technology, its product roadmap and customer demand. Looking at the company's results, it's not apparent where it went wrong, but for some reason investors appeared less than satisfied, as its stock fell more than 4% in the after-hours session. The company said its main business, the QCT segment, delivered $10.1 billion in revenue, up 20% from a year ago, thanks to growth in each of its major end markets. By far the most important market for Qualcomm is smartphones, where sales rose 13%, to $7.57 billion in the quarter, above the Street's target of $7.04 billion. The company also sells chips to the automotive industry, and that business grew by an impressive 61%, raking in $961 million in sales. It's a relatively new market for Qualcomm, which only began to pivot away from handsets a few years ago when Amon took over the top job. "We are delivering growth across our diversification initiatives and remain committed to executing on our fiscal 2029 targets to achieve $22 billion of non-handset revenues," Amon said in a statement. Taking questions from analysts on a conference call, Amon explained the company's handset business benefited from high demand for "premium-tier" smartphones in China, as well as the launch of Samsung Electronics Co. Ltd.'s new flagship Galaxy smartphone, which is powered exclusively by Qualcomm processors. In a wide-ranging discussion on the call, Amon also hailed the emergence of the Chinese artificial intelligence startup DeepSeek Ltd. as something that bodes well for his company. He pointed out that Qualcomm processors are more than capable of running the DeepSeek-R1 large language model locally on smartphones, given how efficient it is. "AI models are developing faster, becoming smaller, more capable and efficient, and [they are] now able to run directly on device," he said. Qualcomm's third major market is internet of things devices, including low-powered chips for industrial machines and also the processors that go into Meta Platforms Inc.'s Quest headsets and Ray-Ban-branded "meta glasses," which are an augmented reality device. The IoT segment also includes sales of Snapdragon Elite chips that power laptops. All told, the IoT segment delivered $1.55 billion in revenue, up 36% from a year earlier, as Ray-Ban meta glasses exceeded expectations. "We remain optimistic that we are at the beginning of an inflection point for smart glasses," he said. Besides selling chips, Qualcomm has a second business unit called QTL which sells licenses for the thousands of wireless technology patents it owns. Its patented tech is used in almost every smartphone in the world, and so the segment proves to be a nice little earner for the company. During the last quarter, it generated $1.54 billion in revenue. Arm executives also delivered similarly impressive results and guidance, only to see its stock plunge more than 6% in extended trading, erasing gains it had made earlier in the day. The company reported third quarter earnings before certain costs of 39 cents per share, beating the Street's guidance of 34 cents. Revenue for the period rose 19%, to $983 million, easily beating the $949 million target. For the current quarter, Arm said it's looking for sales of between $1.175 billion and $1.275 billion, which perhaps doesn't compare so favorably with the Street's forecast of $1.22 billion. Arm CEO Rene Haas (pictured, adjacent) said in a letter to shareholders that the revenue was a new quarterly record for the company, driven by rapid adoption of its most advanced Armv9 chip architecture. "With our high-performance, energy efficient, flexible technology, Arm is a key enabler in advancing AI innovation and transforming the user experience, from the edge to the cloud," he said. Arm doesn't make computer chips itself, but instead licenses designs to other semiconductor manufacturers and smartphone brands. The Armv9 design debuted last year, and is the company's most powerful and efficient yet. The company charges significantly higher royalties for that design, compared to its previous-generation Armv8 technology. Though Arm has long been focused primarily on smartphone chip makers, the Armv9 architecture has seen rapid adoption among makers of chips for high-end cloud servers, where its customers include Amazon Web Services Inc. and Microsoft Corp. Those customers are using Arm's designs to make server chips powered by more than 100 cores. Despite today's after-hours decline, Arm's stock is still up by an impressive 137% in the last 12 months, vastly outperforming the iShares Semiconductor exchange-traded fund, which mirrors the broader semiconductor market.

Arm CEO Stresses AI Demand Is Accelerating As Stock Dips 4% Following Earnings

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy. Arm CEO Rene Haas stressed earlier today that his firm continues to see tailwinds from AI demand. The firm's shares dropped by more than 4% at market open today after investors sold the stock on worries about lower AI demand. Haas appeared in an interview on CNBC, during which he stressed that his firm's CPUs work alongside NVIDIA's GPUs in AI computing and are widely used in general-purpose computing data centers. He also praised President Trump's $500 billion Stargate AI project, which he believes will create huge opportunities for technological innovation. Haas added that Arm is the CPU vendor of choice for the Stargate program. Haas's comments about AI demand appeared to have a soothing effect on the stock as it reversed the trend and retook more than a percentage point of losses while he was talking. Haas stressed that, as opposed to perceptions of AI demand slowing down, his company only saw it accelerate. Investors in AI stocks, particularly those with data center exposure, have been wary of them since last month's DeepSeek AI selloff, which wiped a trillion dollars of market value from these stocks. According to Haas, "the key thing we're seeing taking place in the data centers is two parallels. One is the general purpose compute and that is where we're seeing just continued acceleration of Arm adoption." He mentioned Amazon's Graviton data center chips to add that more than 50% of new installations are Arm-based, with 90% of Amazon's top one thousand customers using Arm products. Shifting towards AI, Haas outlined that it primarily involves running training and inferencing operations with large language models. NVIDIA's Blackwell chips are the "flagship product," within which "Blackwell is the GPU and Arm is the CPU," according to the ARM CEO. This makes it "a great partnership," due to which Arm is "seeing acceleration for both general purpose compute in the cloud on Arm and AI compute." When asked whether he was seeing any slowdown in orders for NVIDIA's products, Haas shared that, "I don't really see a slowdown." Delving deeper, he added that "when you look at these large language models that need to be trained . . .these are increasingly requiring lots and lots of power. Lots and lots of compute." Capital spending is not slowing down either, believes Haas. He also commented on how DeepSeek demonstrating lower costs didn't mean that existing AI models had lost relevance. According to Haas, "People need to remember what's happening is they're distilling, which basically means building, on the frontier models that have been created." Haas added that the reliance on frontier models "doesn't mean the frontier model creation goes away. However, it "does mean that improvements can be made fast." These factors combined lead the Arm CEO to conclude, "net net no, we're not seeing a slowdown of any kind." Calling Stargate "an amazing opportunity," Haas believes that it's going to create a huge opportunity for technological innovation. He is also optimistic about AI proliferating the consumer end of the market and believes that efficient models after DeepSeek are a great thing for Arm. This is because "you end up having much more efficient models and more efficient models means you can run more inference at endpoints." The endpoints are power-constrained devices, and AI efficiency on this front drives demand for Arm, according to Haas.