Arm’s first earnings report since IPO comes with a disappointing forecast

Arm Holdings PLC reported earnings Wednesday for the first time since returning to the public markets, but its shares were headed lower in the extended session as its December-quarter outlook missed the mark at the midpoint.

The chip designer logged a fiscal second-quarter net loss of $110 million, or 11 cents a share, whereas it earned $114 million, or 11 cents a share, in the year-before quarter. On an adjusted basis, Arm

recorded 36 cents in earnings per share, compared with the 26-cent FactSet consensus.

Total revenue rose to $803 million from $630 million, while analysts had been expecting $740 million. The company generated $388 million in revenue from licenses and other sources, along with $418 million from royalties.

Arm’s quarterly revenue total was its highest ever, the company said in its shareholder letter.

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“We have seen strong demand for higher-performance CPUs as companies look to capture the increasing demand for [artificial intelligence], from cloud servers to smartphones to automotive applications,” the company said in its letter.

Royalty revenue was down 5% from a year before, Arm executives noted in the letter, amid lower sales of smartphone chips.

For the fiscal third quarter, Arm is modeling $720 million to $800 million in revenue, along with 21 cents to 28 cents in adjusted EPS. The FactSet consensus was for $776 million on the top line and 27 cents in adjusted EPS.

Arm’s stock was down 8% in Wednesday’s late trading. The company went public in mid-September.

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