Shares of chip designer Arm Holdings (NASDAQ:ARM) spiked nearly 20% in Wednesday’s after-hours of trading. The company delivered better-than-expected Q3 results. It witnessed strong momentum and tailwinds from Artificial Intelligence (AI)-led demand, which drove its overall sales and earnings forecast.
ARM facilitates AI deployment across various platforms, extending from cloud infrastructure to handheld devices. Notably, Arm’s processors are already powering numerous AI applications from technology giants like Nvidia (NASDAQ:NVDA) and Alphabet (NASDAQ:GOOGL).
ARM’s Q3 Performance
The company delivered strong revenue and earnings for the third quarter. Its revenue of $824 million surpassed its guidance of $720 million to $800 million and increased 14% year-over-year. Moreover, it exceeded the Street’s projection of $762 million.
Meanwhile, Arm delivered adjusted earnings of $0.29 per share, up 32% year-over-year and above the analysts’ consensus estimate of $0.25 per share.
ARM Lifts Full-Year Forecast
Thanks to the solid demand, Arm expects its royalty revenues to grow 30% year-over-year in Q4. Moreover, royalty revenues are expected to mark mid-single digits sequentially. The strong growth reflects higher royalty rates on its products. Consequently, Arm projects its Q4 revenue to range between $850 million and $900 million in Q4, significantly surpassing the consensus estimate of $779 million.
As for the full year, ARM expects to deliver revenue in the range of $3.155 billion to $3.205 billion, up from its earlier guidance of $2.96 billion to $3.08 billion. Moreover, it now expects its adjusted EPS to be between $1.20 and $1.24, up from $1 to $1.10.
What is the Future of Arm Stock?
Arm stock is trading about 51% and 8% higher from its IPO price of $51 and analysts’ average price target of $71, respectively. Moreover, analysts are cautiously optimistic about its prospects.
ARM stock has a Moderate Buy consensus rating based on 11 Buy, five Hold, and one Sell recommendations.
