ARM Earnings: Arm Holdings Tops Forecasts on the Top and Bottom Lines

British microchip company Arm Holdings (ARM) has reported Fiscal third-quarter financial results that topped Wall Street forecasts across the board.

The chipmaker announced earnings per share of $0.39, which beat the consensus estimate among analysts of $0.34. Revenue in the period came in at $983 million, which was above Wall Street forecasts that called for $949 million.

Arm also guided for sales of $1.175 billion to $1.275 billion in the current quarter, which surpassed the $1.22 billion estimate of analysts who track the company’s progress. Despite the strong results and guidance, ARM stock is down 6% in after hours trading. Analysts were quick to attribute the drop to profit taking after the company’s share price gained more than 130% in the last 12 months.

AI-Driven Growth

Management of Arm Holdings attributed the strong results largely to artificial intelligence (AI) demand. “With our high-performance, energy efficient, flexible technology, Arm is a key enabler in advancing AI innovation and transforming the user experience, from the edge to the cloud,” said CEO Rene Haas.

Arm Holdings makes money by licensing its microchip designs to semiconductor companies and smartphone makers. Arm’s latest advanced microchip, the “Armv9,” generates significantly higher royalty rates than its predecessors. The company is also making inroads in high-end cloud server processors through customers such as Microsoft (MSFT).

Is ARM Stock a Buy?

The stock of Arm Holdings has a consensus Moderate Buy rating among 19 Wall Street analysts. That rating is based on 15 Buy, three Hold, and one Sell recommendations issued in the last three months. The average ARM price target of $162.20 implies 6.38% downside from current levels.

Read more analyst ratings of ARM stock