The arm’s share price rose more than 30% on Wednesday after the company’s quarterly sales and profit forecast beat Wall Street expectations.
The rise in Arm’s share price lifted its market capitalization by about $26 billion, Reuters reported.
Arm shares have doubled from the price of $51 set in its September initial public offering (IPO) to $102.11 now.
Meanwhile, its parent company, SoftBank Group Corp.’s shares also rose nearly 10% after Arm Holdings Plc’s bullish earnings forecast. Softbank’s share price was trading 9.6% higher in early Tokyo trading.
In the December quarter, Arm shares jumped 40%, likely boosting SoftBank’s net worth to more than ¥18 billion ($121 billion). SoftBank held a roughly 90% stake in Arm when the chipmaker went public in 2023.
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The midpoints of Arm’s Q4 sales and adjusted profit forecasts range from $875 million and 30 cents per share, respectively, beating estimates of $780.3 million and 21 cents per share, according to LSEG data, Reuters reported.
It raised its guidance by about $100 million because markets such as automotive and AI will be strong in the fiscal fourth quarter, chief financial officer Jason Child told Reuters.
For the full fiscal year, Arm expects $3.18 billion in revenue and adjusted earnings of $1.22 per share, both above analysts’ estimates of $3.05 billion and $1.07 per share.
The company expects licensing revenue for chips that power AI in data centers, phones and computers to be a major factor.
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Smartphones now represent 35% of total units shipped, versus between 60% and 70% in 2016, Child said. He also said that AI has driven more sales, but mostly indirectly.
Arm executives said on Wednesday that the expansion strategy is starting to pay off, with customers flocking to Arm-based central processors to complement Nvidia’s chips for AI work in data centers, Reuters reported.
They also said they are working on new laptops and smartphones that can handle chatbots and other AI features.
Arm makes money through licensing agreements for its intellectual property and royalties charged for every chip sold that uses its technology.
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(With inputs from Reuters)
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Published: 08 Feb 2024, 08:40 IST