The shares of Arm Holdings (ARM) lost ground on Thursday after the company issued a slightly lower-than-anticipated FY 2025 outlook. Notably, the semiconductor chip design company reported better-than-expected fiscal 2024 fourth-quarter earnings and revenues. The stock of Arm ended Thursday’s trading session at $103.59, down $2.48, or 2.34%, from the prior close.
The Cambridge, United Kingdom-based Company reported fourth-quarter revenues of $928 million, up 47% from $633 million in the corresponding quarter of fiscal 2023.
For the recent quarter, which ended on March 31, 2024, Arm posted net income of $224 million, or $0.21 per share, an increase from $3 million, or $0 per share, in the quarter that ended on March 31, 2023.
Excluding acquisition-related intangible asset amortization, share-based compensation costs, employer taxes related to SBC, net of R&D tax incentives, and one-time employee benefits, among others, Arm recorded Q4 2024 non-GAAP net income of $376 million, or $0.36 per share, compared with $18 million, or $0.02 per share, in Q4 2023.
Analysts surveyed by Visible Alpha anticipated earnings of $0.14 per share on revenues of $880.90 million.
Commenting on the quarterly results, Rene Haas, CEO, stated, “We finished our financial year achieving over $3 billion in revenue for the first time, and with strong tailwinds heading into FYE25 as AI is driving increased demand for Arm-based technology across all end markets.”
Segment wise:
- Revenue from external customers surged 51.10% y-o-y to $754 million.
- Revenue from related parties was $174 million, up from $134 million last year.
Based on the nature of business:
- Licenses and other revenues jumped 59.80% y-o-y to $414 million.
- Royalty revenues were $514 million, an increase of 37.40% from the previous year. Arm pointed out that chips working on Armv9 tech now account for about 20% of royalty revenue, an increase of about 15% from the previous quarter.
Arm’s innovations drive the functionality of a vast majority of smartphones globally, with the company also striving to expand its presence in data centers and various other market sectors. Notably, during the quarter, Arm secured four significant licensing agreements, contributing significantly to the growth of this particular segment, as highlighted by CFO Jason Child.
Although Arm’s CEO underscored the favorable momentum anticipated for FYE25 due to the rising demand for Arm-based technology fueled by AI, the company’s fiscal 2025 guidance fell short of analysts’ projections.
Looking ahead, the company projects Q1 2025 revenues in the range of $875 million to $925 million, with mid-value being $900 million. Analysts’ surveys by LSEG anticipate Arm to record 1Q 2025 revenues of $857.50 million.
Furthermore, Arm anticipates FY 2025 revenues to be between $3.80 billion and $4.10 billion, with the mid-value being $3.95 billion. Analysts surveyed by Visible Alpha expect the company to report earnings of $4.03 billion.
The quarterly earnings beat and slightly weaker FY 2025 estimates are expected to keep the stock of Arm Holdings slightly bearish in the near term.
The historical price chart indicates that the stock of Arm is declining after facing resistance at $135. The next major support is anticipated to be only near $80. Additionally, the stock is trading below its 50-day moving average, while the stochastic RSI is in the overbought region. Therefore, we anticipate Arm’s stock to remain in a downtrend in the short term.
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