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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.

 

John Schulman Departs AI Startup Anthropic

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John Schulman, a co-founder of OpenAI, has left his position at the AI startup Anthropic, the company confirmed late Wednesday. Schulman had joined Anthropic in August after departing OpenAI, aiming to focus more intensively on AI alignment and to reengage with hands-on technical work. His departure marks a significant shift for the company, which has been one of the primary competitors to OpenAI in the AI foundation model sector.

In a statement, Anthropic’s Chief Science Officer, Jared Kaplan, expressed support for Schulman’s decision, stating, “We are sad to see John go but fully support his decision to pursue new opportunities and wish him all the very best.”

Despite the departure, Anthropic remains a key player in the AI industry. The company has achieved annualized revenue of approximately $875 million and offers access to its models through direct sales and third-party cloud services, including Amazon Web Services. The news of Schulman’s exit was initially reported by The Information.

 

Applied Digital Posts Smaller-than-Expected Loss on Increased Demand for Cloud Services

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Applied Digital, a data center operator, reported a smaller-than-anticipated loss for the second quarter, driven by heightened demand for its high-performance data center infrastructure and cloud services. The company’s stock surged nearly 10% following the announcement of a significant investment deal with Australia’s Macquarie Group.

Macquarie has agreed to invest up to $5 billion in Applied Digital’s AI data centers, acquiring a 15% stake in the company’s high-performance computing business. This funding is expected to help Applied Digital reduce its debt from constructing data centers in North Dakota and recover more than $300 million of its equity investment in these facilities.

For the quarter ending November 30, Applied Digital reported an adjusted net loss of 6 cents per share, a smaller loss than the 15 cents per share analysts had predicted. The company’s revenue for the quarter was $63.9 million, a 51% year-over-year increase, aligning with analyst expectations.

Applied Digital’s success is closely linked to the growing AI industry, with the company’s data centers serving high-performance computing needs for technologies such as AI and crypto mining. The cloud services segment has also contributed significantly to the company’s growth. As the demand for data center capacity continues to rise, Applied Digital’s ability to secure substantial investments will be crucial in meeting these long-term capital requirements.

The company’s stock has more than tripled over the past two years, as investors look to capitalize on the booming AI sector, positioning companies like Applied Digital to benefit from the growing demand for advanced computing infrastructure.