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.
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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.
