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Arm CEO Rene Haas cheers as Arm holds an initial public offering on the Nasdaq MarketSite in New York on September 14, 2023.
Brendan Mcdermid | Reuters
Semiconductor technology company Arm on Wednesday reported its first post-initial IPO earnings that topped Wall Street revenue expectations and showed the company’s lucrative licensing business has doubled in size over the past year.
Arm shares fell more than 7% in extended trading after the company’s revenue expectations fell short of expectations.
Here’s how the semiconductor licensing company fared, compared to consensus expectations from LSEG, formerly known as Refinitiv, for Arm’s second fiscal quarter ended September 30:
- Profit per share: 36 cents, adjusted
- Gain: $806 million versus $744.3 million expected
Arm said it expects earnings per share of between 21 cents and 28 cents on revenue of between $720 million and $800 million in the current quarter. That’s slightly lighter than what Wall Street was looking for, at 27 cents per share on revenue between $730 million and $805 million.
Arm reported a net loss of $110 million, or 11 cents per share. The company said the loss was due to more than $500 million in one-time stock-based compensation resulting from the recent IPO, and that stock-based compensation would reach between $150 million and $250 million in coming quarters.
Total revenue rose 28% year over year during the quarter.
Arm’s intellectual property is in almost every smartphone, many PCs and other miscellaneous chips. Arm says it shipped more than 7.1 billion Arm-based chips during the quarter.
It makes money through royalties, or when chipmakers pay Arm for access to build Arm-compatible chips, typically a small percentage of the final chip price. It also sells licenses for more complete chip designs, saving chipmakers time and effort, which is recorded as licensing revenue.
Arm royalty income was $418 million, down 5% from the same period last year. But Arm license sales totaled $388 million, up 106% from the same period last year. It’s a sign that Arm may be able to sell increasing amounts of technology to its current customers, which is a key metric watched by analysts.
Arm attributed license sales to multiple long-term deals with technology companies, suggesting the segment’s growth could continue in coming quarters, but cautioned that the broader economy could impact future license growth.
Arm went public in an initial public offering in September. Previously, it was owned by SoftBank, which reached a deal to sell the company Nvidia before the transaction was called off by regulators in 2022. It was founded in 1990 to develop technology for low-power chips.
Arm said companies included Googling, Meta And Nvidia were developing chips with its technology that are suitable for artificial intelligence.
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