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Arm Lowers Full-Year Forecast, Shares Fall 6%

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Arm Holdings has revised its full-year revenue guidance downward, announcing that it will no longer meet the top end of its previous forecast. The chip technology provider, which has benefitted from the AI boom, reported a slight miss on its broader revenue expectations, sending its shares down by about 6% in extended trading.

Arm narrowed its revenue guidance for the full year to a range of $3.94 billion to $4.04 billion, down from the previous range of $3.8 billion to $4.1 billion. The company also adjusted its earnings per share forecast. Despite this, the company surpassed Wall Street’s expectations for the current quarter, with a forecast of $1.23 billion in revenue for the fiscal fourth quarter, compared to an analyst estimate of $1.22 billion.

CEO Rene Haas explained that the downward revision was due to the company being near the end of its fiscal year, providing more visibility on its final figures. Investors had been hoping for a more optimistic outlook, particularly with Arm’s technology being adopted for AI server chips and the increasing use of its higher royalty rate Armv9 design for smartphones.

Arm’s third-quarter revenue rose by 19% to $983 million, exceeding analysts’ expectations. The company continues to benefit from its widespread use in smartphones, including Apple’s latest iPhone, where its Armv9 chips are used. However, Arm faces challenges as it attempts to compete with its largest customers by raising prices and increasing royalties. Recently, the company encountered a setback in its attempt to secure higher royalties from Qualcomm, with the dispute culminating in a court case.

Arm’s participation in the U.S. government’s $500-billion AI infrastructure venture, Stargate, highlights its significance in the AI space. However, the company’s strained relationship with major customers like Qualcomm remains a challenge as it seeks to grow in new markets such as data centers.

 

Qualcomm Announces Arm Has Withdrawn License Breach Notice

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Qualcomm CEO Cristiano Amon announced on Wednesday that Arm Holdings has withdrawn its notice of a breach regarding Qualcomm’s license agreement. This followed a dispute over the technology used in Qualcomm’s personal computer chips. Arm had initially threatened to terminate the agreement in October due to concerns about Qualcomm’s chip technology.

Amon confirmed that Arm notified Qualcomm that it had withdrawn its breach notice and has no immediate plans to terminate the architecture license agreement. This announcement came during a conference call discussing Qualcomm’s first-quarter results.

In December, Qualcomm secured a favorable ruling in the ongoing dispute when a jury determined that Qualcomm’s personal computer chips were properly licensed under the existing agreement with Arm. However, the jury could not reach a unanimous decision on other aspects of the case, leading Arm to file for a new trial.