ARM Holdings PLC ADR ((ARM)) has held its Q3 earnings call. Read on for the main highlights of the call.
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In its latest earnings call, Arm Holdings PLC ADR presented a strong financial performance characterized by record revenues and notable growth in sectors such as AI and data centers. The overall sentiment was positive, driven by exceptional revenue figures, though it was tempered by concerns over flat contributions from Armv9 technology and rising operating costs.
Record-Breaking Revenue and Growth
Arm reported a record total revenue of $983 million for the third quarter, marking a 19% increase compared to the previous year. The company also saw record royalty revenues amounting to $580 million, a 23% year-on-year increase, which surpassed market expectations.
Strong Demand for v9 and CSS
There was significant adoption of Armv9 and Compute Subsystems (CSS) technologies across various markets, including smartphones, data centers, networking, and automotive, which played a crucial role in driving revenue growth.
Data Center and AI Expansion
Arm’s market share in data centers expanded with partnerships involving AWS Graviton, Microsoft Cobalt, Google Axion, and NVIDIA’s Grace ARM-based chips. Key projects included NVIDIA’s Project DIGITS and Stargate collaborations with OpenAI and SoftBank.
Positive Outlook and Guidance
Looking ahead to the fourth quarter, Arm anticipates revenues between $1.175 billion and $1.275 billion, reflecting a 32% year-on-year growth at the midpoint. For the full fiscal year, Arm expects about 24% growth in total revenue.
Flat Armv9 Contribution
Despite the strong demand, the contribution of Armv9 technology to total royalties remained flat at 25% for several quarters, falling short of the expected 5% increase per quarter.
Increased Operating Costs
Operating expenses reached $522 million in the third quarter, primarily due to rising R&D investments. The company forecasts these expenses to rise further to $590 million in the fourth quarter.
Licensing Revenue Growth Slowdown
The growth of annualized contract value (ACV) slowed to 9% year-on-year, which is below recent trends but still above long-term expectations.
In summary, Arm Holdings PLC ADR’s earnings call highlighted a robust performance with record revenues and growth in AI and data centers. The company remains optimistic about future growth, despite challenges like flat Armv9 contributions and rising operating costs, painting a promising picture for the forthcoming quarters.
