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Arm stock soars 20% as chip maker sees ‘signs of recovery’ in its market, raises guidance for the year

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U.S.-listed shares of Arm Holdings PLC rallied 20% in extended trading Wednesday after the chip designer raised its guidance for the year, saying it is seeing green shoots in the semiconductor market.

Arm
ARM,
+5.52%

amassed higher royalty rates for its latest chip, which the company said were “typically at least double” the royalty rates for its predecessor. It also gained market share in the cloud-server and automotive markets, garnering new royalty streams, it said.

“Lastly, the broader semiconductor market is showing signs of recovery, particularly in smartphones, which returned to strong growth in [the third quarter],” Arm executives said in a letter to investors accompanying results. “We are only at the beginning.”

AI was also a factor, the company said, as Arm saw “increasing demand for new technology driven by all things AI.”

The chip designer earned $87 million in the December quarter, or 8 cents a share, compared with $182 million, or 18 cents a share, in the year-ago period.

Revenue jumped 14% to $824 million.

Analysts polled by FactSet expected Arm to report earnings of 25 cents a share on sales of $762.5 million.

Arm guided for fiscal 2024 revenue between $3.155 billion and $3.205 billion, compared with a previous guidance of revenue between $2.960 billion and $3.080 billion.

The company estimated per-share earnings of between $1.20 and $1.24 for the year, compared with its prior guide of EPS between $1 and $1.10.

The analysts surveyed by FactSet expect fiscal 2024 EPS of $1.06 on sales of $3.015 billion.

Arm also forecast slightly lower operating expenses for the year, to about $1.7 billion from an earlier forecast of $1.765 billion.

Arm’s U.S.-listed shares have gained 2.5% so far this year, compared with gains of around 5% for the S&P 500 index
SPX.
Arm went public in September.

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