Arm disappointed investors with its revenue forecast and stopped publishing statistics on processor shipments

The British developer of processor architectures Arm, after going public in the United States, is required to regularly report on its results, and this week the holding company reported revenue growth of 39% to $939 million, which is above market expectations. However, the company’s full-year fiscal outlook disappointed investors, sending its stock price down 13% in after-hours trading.

Image Source: Arm

Arm’s net income more than doubled year-on-year from $105 million to $223 million. However, Arm management did not revise revenue forecasts for the current quarter and the entire fiscal year upward. In the current quarter, the company expects revenue from $780 to $830 million, which suggests that revenue will remain at the level of the same quarter last year. For the full fiscal year, Arm expects revenue to range from $3.8 billion to $4.1 billion. This is below analysts’ expectations, which were expecting about $4.02 billion, since the middle of the range from Arm’s own forecast is $3.95 billion.

Actually, in the last quarter, Arm received less funds from royalties compared to investors’ expectations: $467 million versus $486.6 million, although the actual result corresponds to a 17% year-on-year increase in the core portion of revenue. For other revenue items, including license sales, Arm’s revenue grew 72% to $472 million, significantly exceeding market expectations.

Investors’ pessimism was also added by Arm’s decision to no longer publish statistics on the number of shipped processors created by the company’s clients using its intellectual property. Since the company is now trying to focus on narrower market niches with high added value, such statistics may not reflect its real success, and therefore it was decided to refrain from publishing them. In the quarter before last, Arm already faced a 10% decline in the number of processors shipped to customers to 7 billion units. The company intends to increase the share of revenue from each chip sold by customers by increasing licensing fees and increasing the concentration of intellectual property per unit of production.

Arm CEO Rene Haas (pictured above) was forced to admit that the company was faced with weak demand in some markets. This forced it to maintain its revenue forecast at last year’s level. The company’s revenue is now more dependent on those market segments in which demand remains weak, although positive dynamics are observed in the server segment and the upper price range of the smartphone market.