Arm Holdings Plc (ARM) delivered a solid quarter on Wednesday, but Wall Street wasn't entirely impressed. The chip designer beat analyst expectations on both the top and bottom lines, yet shares tumbled more than 8% in after-hours trading as investors parsed through the forward guidance.
Arm Holdings Beats Earnings But Stock Falls 8% on Q4 Guidance
Get Arm Holdings Alerts
Weekly insights + SMS alerts
The Numbers Tell a Strong Story
Arm reported fiscal third-quarter revenue of $1.24 billion, topping analyst estimates of $1.22 billion. Adjusted earnings came in at 43 cents per share, ahead of the 41 cents analysts were expecting, according to Benzinga Pro.
The year-over-year comparison looks even better. Total revenue climbed 26%, with royalty revenue surging 27% to $737 million. That growth came from exactly where you'd want it—AI and general purpose data centers, smartphones, and both physical AI and edge AI applications. Licensing revenue wasn't slouching either, growing 25% year-over-year to $505 million.
"Demand for the Arm platform is strong as more leading companies signed high-value licenses for next generation technologies," the company told shareholders.
Annualized contract value jumped 28% year-over-year to $1.62 billion. The company generated $365 million in operating cash flow and $169 million in adjusted free cash flow during the quarter, ending the period with $3.54 billion in cash, cash equivalents and short-term investments.
"Arm delivered a record revenue quarter as demand for AI computing on our platform continues to accelerate," said Rene Haas, CEO of Arm Holdings. "The fundamentals of the Arm business have never been stronger."
So Why Did the Stock Drop?
The culprit appears to be forward guidance that didn't quite wow investors. Arm expects fourth-quarter revenue between $1.42 billion and $1.52 billion versus estimates of $1.44 billion. The company's adjusted earnings guidance of 54 cents to 62 cents per share straddles the analyst estimate of 57 cents per share.
In other words, the guidance ranges include the Street's numbers, but they also include scenarios where Arm comes in below expectations. After a strong rally in the stock, investors seem to be demanding more certainty.
ARM shares were trading at $96.47 in after-hours action, down 8.04% from the regular session close.
More News

Oil Breaks $100 on Iran Strike Fears as Energy ETF XLE Hits an All-Time Record

Trump Loosens 50% Canada Tariffs Days Before Midterms as Susan Collins Fights for Her Seat

Tech-to-Defensive Rotation, GM Stock Logs Worst Week Since 2023: This Week on Wall Street

First Russian Diesel Tanker Heads to New York Under Trump-Putin Deal as Fuel Prices Stay High

P&G's Turnaround Is Working, but $113 Oil Could Ruin the Party

TSMC Stock Climbs As Moody's Hands Out An Upgrade And The Chipmaker Quietly Rethinks Rare Earths

The AI Boom Isn't 1999, and Big Tech's Cash Returns Could Soften a Crash, This CEO Says

Gas Prices Aren't Coming Down Before the Midterms, Expert Warns: 'It's STILL Not Over'
Get Arm Holdings Alerts
Real-time alerts on price moves, news, and trading opportunities.
Join 20,000+ investors. No spam, ever.
Featured Articles
View all news
Oil Breaks $100 on Iran Strike Fears as Energy ETF XLE Hits an All-Time Record

Trump Loosens 50% Canada Tariffs Days Before Midterms as Susan Collins Fights for Her Seat

Tech-to-Defensive Rotation, GM Stock Logs Worst Week Since 2023: This Week on Wall Street

First Russian Diesel Tanker Heads to New York Under Trump-Putin Deal as Fuel Prices Stay High

P&G's Turnaround Is Working, but $113 Oil Could Ruin the Party

TSMC Stock Climbs As Moody's Hands Out An Upgrade And The Chipmaker Quietly Rethinks Rare Earths

The AI Boom Isn't 1999, and Big Tech's Cash Returns Could Soften a Crash, This CEO Says






