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.

Arm's leadership remains optimistic about demand, particularly in the data-center market, which is expected to become its largest segment within approximately two years. SoftBank Group Corp., the majority owner, has affirmed its commitment to its stake, with no immediate plans to divest. The UK-based company is focusing on becoming a more comprehensive semiconductor maker, aiming for higher-value offerings.