The logo of semiconductor design firm Arm on a chip.
Jakub Porzycki | Nurphoto | Getty Images
Shares of British chip designer Arm fell 8.8% in premarket trading on Thursday, as lackluster revenue guidance clouded a positive sales quarter driven by demand for artificial intelligence applications.
Arm reported fourth-quarter revenue of $928 million Wednesday, marking a 47% year-over-year rise.
Performance was driven by Arm’s licensing business, which grew 60% to $414 million in the quarter. The firm cited “multiple high-value license agreements being signed” for AI chips.
Arm’s royalty revenues, meanwhile, grew 37% year-over-year to $514 million, with the company citing increasing penetration of its recently introduced Armv9-based chips.
But it was Arm’s guidance that left investors unimpressed. For the 2025 fiscal year, Arm said it expects revenue to come in between $3.8 billion and $4.1 billion. Analysts were expecting revenue of $3.99 billion for the full year, according to LSEG data.
For the 2025 fiscal first quarter — the current quarter — the company said it expects sales of $875 million to $925 million, compared with estimates of $857.5 million.
Citi analysts led by Andrew Gardiner noted that although Arm’s results for the fourth quarter beat expectations for the third straight quarter, the full-year guidance midpoint was slightly below consensus.
However, they stressed the importance of the strength of Arm’s licensing business looking ahead.
“Licensing upside both in F4Q and for FY25, which is being driven by the combination of AI needs and Arm’s provision of higher value v9 and Compute Subsystem solutions, is a positive leading indicator for future royalties,” they wrote in a note Thursday.
“The key for future royalty growth is upside from licensing today,” they added, reiterating their “buy” rating on the stock.
Correction: This story has been updated to correct the revenue estimates for the 2025 fiscal first quarter.