Arm crushes earnings expectations, but stock falls as forecast lacks wow factor

By Emily Bary

Arm's full-year forecast merely brackets the consensus view, even though its view of the current quarter tops estimates

This story has been updated to correct a typo in the consensus forecast for Arm.

After a sharp run for Arm Holdings PLC shares recently, they looked set to give back some of their gains after Wednesday afternoon's earnings report.

The chip-design stock was falling 8% in premarket trading Thursday as the company walloped expectations with its latest quarterly results but delivered a full-year forecast that failed to pack the same extent of upside.

Arm (ARM) reported fiscal fourth-quarter net income of $224 million, or 21 cents a share, whereas the company essentially broke even on the metric a year before. On an adjusted basis, Arm earned 36 cents a share, compared with 2 cents a share a year before, while analysts were modeling 30 cents a share.

Revenue rose to $928 million from $633 million, whereas the FactSet consensus was for $866 million.

The company set a record for royalty revenue at $514 million, according to Arm's release. That total was up 37% from a year before and came in above the $495 million that analysts were forecasting.

Arm also hauled in $414 million in license revenue, up 60% from a year before. Analysts had been looking for $495 million.

For the fiscal first quarter, Arm models $875 million to $925 million in revenue, along with 32 cents to 36 cents in adjusted earnings per share. Analysts were looking for $866 million and 31 cents, respectively.

The company's view of the full fiscal year ahead lacked the same extent of upside, however, as it bracketed consensus expectations. Arm's full-year forecast calls for $3.8 billion to $4.1 billion in revenue, as well as $1.45 to $1.65 in adjusted EPS. Analysts had been calling for $4.0 billion and $1.54, respectively.

Arm shares have gained 41% so far this year.

-Emily Bary

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05-09-24 0625ET

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