Arm Holdings’ shares dropped 9% in premarket trading Thursday after issuing a weaker-than-expected revenue forecast, becoming the latest chip firm to raise red flags about tariff-driven economic headwinds and weakening smartphone demand.
The UK-based chip design company joins the ranks of Apple and AMD, which have also warned of added costs and uncertain demand due to the U.S.-China trade conflict. Analysts said Arm’s heavy exposure to consumer electronics, especially smartphones, leaves it especially vulnerable.
Highlights:
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Revenue forecast disappointed, partly due to a delayed licensing deal.
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Smartphone market decline expected to continue in 2025 due to rising prices from tariffs.
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Counterpoint Research expects overall smartphone demand to fall this year.
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Royalty revenues are likely to face “tariff-driven end demand headwinds,” according to Citigroup.
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AI data centers seen as a growth avenue, but still in early stages for Arm.
Analyst Reaction:
Barclays analysts warned that Arm’s long-term growth story remains intact, but its near-term exposure to consumer tech is concerning. Three brokerages have cut their price targets, with the median now at $144.5, according to LSEG data.
Valuation Snapshot:
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Arm trades at 58.76x forward earnings, compared to:
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Nvidia: 24.49x
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AMD: 20.96x
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Despite the pullback, Arm shares are up nearly 1% year-to-date, while Nvidia and AMD have declined 13% and 17%, respectively.
CEO Rene Haas told Reuters that a large licensing deal, if delayed, could dent Q1 performance but affirmed long-term growth potential, especially in AI infrastructure.
Still, the short-term picture remains cloudy, with tariffs distorting both demand and supply chain clarity.