Why did Arm Holdings' shares fall?

Arm Holdings' shares fell because its fiscal fourth-quarter sales forecast disappointed investors, with some projections exceeding the company's guidance.

What is Arm Holdings' outlook for data centers?

Arm Holdings expects data-center customers to become its biggest market within about two years and is working to become a more comprehensive semiconductor maker.

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Arm Sales Forecast Misses Mark, Shares Tumble

Q: What market challenges is Arm Holdings facing?

Arm Holdings is facing concerns about a slowdown in the smartphone market due to component shortages, although it is pivoting towards data-center customers.

5 Feb

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Summary

Arm's sales forecast disappointed investors anticipating higher figures.
Smartphone market slowdown and component shortages are growing concerns.
Data center growth is promising, but mobile devices still drive revenue.

Arm Sales Forecast Misses Mark, Shares Tumble

Arm Holdings Plc experienced a substantial share price decline in late trading following the release of its fiscal fourth-quarter revenue forecast. The company projected revenue of approximately $1.47 billion, which, while meeting some analyst predictions, fell below higher projections, causing investor disappointment. The stock saw a significant drop in extended trading after the report.

Several factors are contributing to this market reaction, primarily a perceived slowdown in the smartphone market due to component shortages. Although Arm is actively expanding its data-center business, a substantial portion of its revenue still originates from mobile devices. This concern is amplified by reports from other major chip manufacturers, such as Qualcomm Inc., which also issued weak forecasts citing increased memory chip costs.

In the third fiscal quarter, Arm reported a 26% increase in revenue to $1.24 billion, with royalties exceeding expectations. However, licensing revenue, an indicator of future product interest, came in below projections at $505 million. The company's CFO attempted to mitigate smartphone-related fears by highlighting a shift toward higher-end phones.