From Nasdaq: 2025-02-13 04:15:00

Arm Holdings (NASDAQ: ARM) disappointed investors with its fiscal Q3 results, causing a 3% drop in stock. Despite beating revenue and earnings estimates, the outlook fell short of expectations. However, Arm’s guidance for Q4 suggests potential growth acceleration, with revenue and earnings expected to increase by 32% and 44% year-over-year, respectively.

Arm is targeting the AI chip market with its Armv9 architecture, seeing increased adoption for smartphone and cloud computing chips. The architecture commands higher royalties, attracting more licensees. Microsoft and Alphabet using Arm architecture for custom processors could boost royalty revenue. Arm’s Total Access licensing model saw a jump in users, indicating strong demand for its IP.

Arm’s updated earnings forecast points to a 26% increase in bottom-line growth for the current fiscal year. The growing number of licensees using Arm architecture is expected to drive royalty revenue growth, with a 23% increase year-over-year in the latest quarter. The higher royalty rate from Armv9 is improving profitability, with potential for strong earnings growth in the future.

Investors eyeing long-term growth can consider buying Arm stock, as the company has the potential to keep growing steadily. Arm’s premium valuation may be justified by new business opportunities like the Stargate project, backed by major tech players. The company’s focus on AI chips and royalty revenue growth make it an attractive investment option for growth-oriented investors.



Read more at Nasdaq: Is Arm Holdings Stock a Buy Now?