Arm Holdings on Wednesday forecast third-quarter revenue marginally ahead of Wall Street estimates as the company continues to benefit from the boom in AI spending, but the outlook was not enough to satisfy investors hoping for more.
The company said sales would be about $1.54 billion in the quarter running through December, plus or minus $50 million. Analysts surveyed by Bloomberg had expected $1.53 billion on average, although some projections neared $1.7 billion. Arm also expected adjusted earnings of 56 cents a share, plus or minus 4 cents, for the quarter.
Arm shares were choppy in extended trading on Wednesday, falling about 1% as the conference call with analysts began, after the company reported second-quarter results that beat expectations. Revenue rose 27% to $1.44 billion, beating Wall Street's projection of $1.38 billion, while adjusted profit was 52 cents a share against expectations of 47 cents.
Licensing sales rose 50% to $773 million, while royalty sales climbed 8% to $670 million. Royalty revenue, which Arm collects on each chip shipped using its technology, came in below estimates of $720.8 million, reflecting a slowdown in the smartphone market, its biggest source of revenue, where memory chip shortages hurt production and raised handset prices.
Arm Chief Executive Rene Haas said the company now expects it will sell $2 billion worth of its central processing unit, the AGI CPU, in its fiscal years 2027 and 2028. The company unveiled its own CPU, designed to help run AI data centers, as part of its push beyond its traditional smartphone business.
