Arm issues light earnings guidance as the company stops disclosing number of chips reported as shipped

Arm
shares
fell
more
than
13%
in
extended
trading
on
Wednesday
after
the
chip-architecture
maker
issued
light
earnings
guidance
for
the
current
quarter
and
the
full
fiscal
year.

Here’s
how
the
company
did
in
the
fiscal
first
quarter
compared
with
LSEG
consensus:

• 
  Earnings
  per
  share:
  40
  cents
  adjusted
  vs.
  34
  cents
  expected
• 
  Revenue:
  $939
  million
  vs.
  $902.7
  million
  expected

Arm’s
revenue
grew
39%
year
over
year
in
the
quarter,
which
ended
on
June
30,
according
to
a

shareholder
letter.
Net
income
came
to
$223
million,
or
21
cents
per
share,
up
from
$105
million,
or
10
cents
per
share,
in
the
year-ago
quarter.

But
Arm
maintained
its
full-year
view
of
$1.45
to
$1.65
in
adjusted
earnings
per
share
on
$3.8
billion
to
$4.1
billion
in
revenue.
Analysts
surveyed
by
LSEG
had
been
looking
for
$1.58
in
adjusted
earnings
per
share
and
revenue
of
$4.02
billion.

The
middle
of
the
revenue
guidance
range
factors
in
a
growth
rate
from
royalties
in
the
low
twenties,
down
from
a
forecast
from
April
in
the
mid
twenties,
Jason
Child,
Arm’s
finance
chief,
said
on
a
conference
call
with
analysts.

For
the
fiscal
second
quarter,
Arm
sees
adjusted
earnings
of
23
to
27
cents
per
share
on
$780
million
to
$830
million
in
revenue.
That
would
imply
no
growth
at
the
middle
of
the
range.
Analysts
polled
by
LSEG
had
expected
27
cents
per
share
and
$804.1
million
in
revenue.

Revenue
from
royalties
—
a
percentage
of
average
selling
price
or
a
set
amount
per
chip
when
they
ship
—
totaled
$467
million.
That
was
up
17%,
but
it
was
lower
than
the
$486.6
million
consensus
among
analysts
polled
by
StreetAccount.

License
and
other
revenue,
at
$472
million,
was
up
72%
and
above
the
$418.3
million
LSEG
consensus.

The
company
said
that
as
of
this
quarter,
it
is
no
longer
reporting
the
number
of
Arms-based
chips
that
were
reported
as
shipped.

“We
previously
considered
the
number
of
chips
reported
as
shipped
by
our
customers
as
a
key
performance
indicator
because
it
represented
the
acceptance
of
our
products
by
companies
who
use
chips
in
their
products
(e.g.,
our
customers’
customers),”
Child
and
Arm
CEO
Rene
Haas
wrote
in
the
letter.

“As
we
shift
our
focus
to
higher-value,
lower-volume
markets
such
as
data
center
servers,
AI
accelerators
and
smartphone
applications
processors,
the
number
of
chips
reported
as
shipped
is
less
representative
of
our
performance
as
the
growth
in
royalty
revenue
is
concentrated
in
a
smaller
number
of
chips.”

In
the
fiscal
fourth
quarter,
Arm
had
7
billion
chips
reported
as
shipped,
which
were
down
10%
year
over
year.
Previously
management
blamed
the
trend
on
an
inventory
correct
in
industrial
internet
of
things
chips,
which
are
high
in
volume
but
relatively
low
in
value.

The
company
is
now
investing
in
Arm
Compute
Subsystems
that
will
lower
development
costs
and
accelerate
time
to
market,
Haas
and
Child
wrote.
They
said
the
technology
also
can
boost
royalty
revenue
fees
per
chip.

Arm
added
two
high-value
Arm
Total
Access
licenses
in
the
quarter,
bringing
the
total
to
33.

During
the
quarter,


Microsoft
started
selling

Surface
PCs
that
draw
on


Qualcomm’s
Arm-based
chips.

Before
Arm
issued
the
results,
its
stock
had
risen
93%
so
far
this
year,
well
ahead
of
the
S&P
500
index,
which
has
gained
16%
in
the
same
period.

WATCH:

Arm
CEO
Rene
Haas
talks
the
impact
of
AI
and
smartphone
demand