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Arm shares fell about 8% after the British chip designer issued a lackluster outlook for this year's revenue, raising concerns that spending on artificial intelligence hardware by tech companies could slow. Concerns grew.
The SoftBank-backed group has been one of the biggest beneficiaries of the AI spending boom since listing on the Nasdaq in September, with sales of $3.8 billion to $4.1 billion in the year to March 2025. It is predicted to be worth 1 billion dollars. Analysts had expected sales of $4.01 billion. .
The stock's decline in after-hours trading came even though Arm reported Wednesday that fourth-quarter sales rose 47% to $928 million. This resulted in annual sales exceeding $3 billion for the first time, exceeding the company's guidance of $850. million dollars and $900 million.
The result marks Arm's third U.S. listing in nearly two years, following its blockbuster IPO that valued the company at $65 billion. Since then, the company's market capitalization has skyrocketed, reaching a peak of about $117 billion in February. Its market value was $109 billion on Wednesday, before the earnings release.
CEO Rene Haas said AI software models such as OpenAI's ChatGPT and Meta's Llama are “getting bigger and smarter, demanding more compute with higher power efficiency.” “The requirements can only be realized through Arm.”
Sales were boosted by a surge in royalties for the V9 chip design, which is licensed to power smartphones, data centers and AI chips and run large language models made by companies such as Nvidia and Amazon. It was done. Arm sells chip design licenses to manufacturers and pays royalties on each unit shipped. Royalty revenue for the quarter increased 37% to $514 million. Arm said chips based on its V9 technology now account for one-fifth of its royalty revenue, up from 15% last quarter.
Arm raised its fourth-quarter revenue outlook in February after a surge in demand for new AI applications boosted demand for its chip architecture.
Shares of AI chipmakers such as Nvidia and AMD have risen this year as tech companies signaled plans to continue investing heavily in AI computing infrastructure, raising their 2024 capital spending forecasts by billions of dollars.