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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 Forecasts Strong Q2, Shares Drop After Licensing Outlook

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Qualcomm exceeded analysts’ expectations for Q1 sales and adjusted profits but forecast a more tempered outlook for its patent licensing business, sending its stock price down 4.8% in after-hours trading. The company reported Q1 sales of $11.67 billion and adjusted earnings of $3.41 per share, significantly outperforming the expected $10.93 billion and $2.96 per share. For the upcoming fiscal second quarter, Qualcomm projected sales of $10.75 billion and adjusted profits of $2.80 per share, both surpassing analysts’ expectations.

However, the company warned that its patent licensing business, which generates revenue from companies paying royalties for 5G technology, would not see growth this year after a deal with Huawei expired. This news caused some investor concern, despite positive projections in Qualcomm’s chip business. Licensing revenue for Q2 is forecasted at $1.35 billion, below the $1.43 billion analysts anticipated.

The market’s response was mixed, with Qualcomm’s shares dropping by 4.8% after the announcement. Investors have been closely monitoring Qualcomm’s involvement in the AI and smartphone markets, and while the company continues to secure major deals, such as with Samsung and Microsoft, the uncertain future of its Huawei agreement looms large.

Despite the dip in licensing revenue expectations, Qualcomm’s position in the smartphone, automotive, and IoT markets continues to strengthen. The company reported strong handset revenue of $7.57 billion, up 13% from the previous year, and its automotive chip sales saw significant growth, reaching $961 million.

 

Malaysia Grants Licences to WeChat and TikTok Under New Social Media Law

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Malaysia’s communications regulator has granted licences to WeChat and TikTok to operate under the country’s new social media law, which aims to combat rising cybercrime. The law, which took effect on January 1, mandates that social media platforms and messaging services with more than 8 million users in Malaysia must obtain a licence, or face legal action.

The Malaysian Communications and Multimedia Commission (MCMC) announced on Wednesday that Tencent’s WeChat and ByteDance’s TikTok have been granted their licences. Messaging platform Telegram is in the final stages of the application process, while Meta Platforms, which owns Facebook, Instagram, and WhatsApp, has begun the licensing procedure.

However, some platforms have not applied for the licence. X (formerly Twitter) has not submitted an application, stating that its local user base does not exceed the 8 million threshold. The regulator is currently reviewing the validity of this claim. Additionally, Alphabet’s Google, which operates YouTube, has not applied for a licence either, citing concerns about YouTube’s video-sharing features and how they relate to the new law. The MCMC has indicated that YouTube must still comply with the licensing requirements.

The law requires platforms to adhere to guidelines to curb harmful content, including online gambling, scams, child pornography, cyberbullying, and offensive content related to race, religion, and royalty. Malaysia has seen an uptick in harmful social media content in early 2024, prompting authorities to urge platforms like Meta and TikTok to enhance their monitoring efforts.

While companies do not disclose their user numbers per country, independent data suggests WeChat has 12 million users in Malaysia, while TikTok has around 28.68 million users aged 18 and above. Facebook has 22.35 million users, YouTube has 24.1 million users, and X has 5.71 million users in the country.