Arm Holdings Plc on Wednesday issued a revenue forecast for its fiscal first quarter that surpassed Wall Street estimates, attributing the positive outlook to growing demand for its chip technology in artificial intelligence applications and data centers. The announcement was made alongside the company’s fourth-quarter earnings report.
The company projected revenue for the quarter ending in June to be between $960 million and $1.04 billion. According to LSEG data, analysts had, on average, forecast revenue of $951.3 million for the period. The midpoint of Arm’s forecast, $1 billion, represents a significant increase over the same period in the previous year.
For its fiscal fourth quarter, which ended March 31, Arm reported revenue of $928 million, exceeding analyst expectations of $880.4 million. The company posted adjusted earnings of 36 cents per share for the quarter, also above the consensus estimate of 30 cents per share. Following the release of the report, the company’s shares saw movement in after-hours trading.
In a statement, company executives attributed the performance to two primary revenue streams: licensing and royalties. Licensing revenue, generated from agreements with other companies to use Arm’s technology, saw an increase as firms secured access to Arm’s designs for developing new chips, particularly for AI functions.
Royalty revenue, which is earned as a percentage of the price of each chip sold containing Arm’s technology, also grew. Arm reported that this growth was partly driven by the market adoption of its Armv9 architecture, which commands a higher royalty rate than its predecessor.
During a call with investors, Chief Executive Rene Haas commented on the role of artificial intelligence in the company’s outlook. He noted that major technology companies are developing AI-enabled chips for data centers, PCs, and smartphones based on Arm’s platform.
Arm’s business model is centered on designing and licensing semiconductor technology rather than manufacturing the physical chips. Its designs are foundational to the global smartphone market and are increasingly being adopted for use in data centers, automotive applications, and personal computers. The company completed its initial public offering in September 2023.
