(Bloomberg) – Arm Holdings PLC has made a modest sales forecast during the current period, saying the timing of the new license agreement has made Chip cautious about its forecasts.
In a statement Wednesday, ARM said revenues would be $1 billion to $1.1 billion in the first quarter. Wall Street estimates the highest end of the range. Profits will be between 30 and 38 cents per share, minus certain items, which is also lower than analysts' forecasts.
After the announcement, ARM shares fell more than 8% in expansion transactions. At the close of the year, the stock was up less than 1%.
CEO Rene Haas said the company is completing a new licensing agreement and hopes to ensure it will be signed before adding revenue to its outlook. He said customers continue to drive investment in chips, especially for AI computing, which has benefited.
ARM is paid for the form of licensing and royalties for its technology, which controls how chips and software communicate. Licensing revenue in the last quarter was $634 million and royalties were $667 million.
“We have been conservative to make sure we don’t over-disclose,” Haas said in an interview. “The health of the business is incredible. We see a huge momentum in the data center business.”
ARM's forecast coincides with comments from Chip's industry peers, which told investors that the start of 2025 is strong, but the economic environment has been clouded.
Revenue rose 34% in the fourth quarter to $1.24 billion, the first time it exceeded $1 billion in revenue. That's compared to analysts' $1.23 billion forecast, according to data compiled by Bloomberg. Apart from some projects, the profit was 55 cents per share, which was higher than the average estimate of 52 cents.
The outlook provides a window for future component plans for some of the world's largest companies that will license their technology to use as the basis for designing chips in-house. Its royalty revenue (collected based on devices sold) is a barometer of major electronics categories, especially smartphones.
ARM has become a core player in promoting AI technology. It is part of a project called Stargate that aims to expand the U.S. AI infrastructure along with most owners, Softbank Group Corp. and OpenAI. It also participates in similar efforts by Japan on which SoftBank is based.
Despite ARM's initial public offering two years ago, about 90% of the company is still owned by Softbank.
ARM's technology is crucial to the semiconductors that run most of the world's smartphones. Under Haas, the UK-based Cambridge company is trying to expand its coverage into data centers and personal computer components – helping it benefit more from AI spending.
(Updated and shared in paragraph 3.)
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