By Tae Kim

Arm stock fell late Wednesday after the chip designer provided a worse-than expected revenue outlook.

The company reported fiscal fourth-quarter adjusted earnings per share of 55 cents, compared to Wall Street's consensus estimate of 52 cents, according to FactSet. Revenue came in at $1.24 billion, slightly above analysts' expectations for $1.23 billion.

But Arm offered a disappointing outlook for the current quarter, with sales of $1.05 billion at the midpoint of the company's forecast range, versus the $1.1 billion analysts' estimate.

Arm shares fell 8% following the report.

This is breaking news. Read a preview of Arm earnings below and check back for more analysis soon

Arm Holdings investors will focus on the chip designer's views about the future impact of tariffs on its customers when it reports earnings after Wednesday's market close.

The consensus among analysts is for Arm to report March quarter revenue of $1.23 billion with adjusted earnings per share of 52 cents. For the current quarter, analysts estimate revenue of $1.1 billion and earnings per share of 42 cents, according to FactSet.

U.K.-based Arm makes money by licensing its chip designs to semiconductor companies and smartphone makers such as Apple and Qualcomm. Arm's latest advanced chip technology, called Armv9, generates higher royalty rates than its previous Armv8. It is also making progress in high-end cloud server processors, including chip technology for Microsoft and Nvidia.

Any increase in tariffs could affect Arm's chip customers, making it more expensive for the companies to manufacture chips. The Trump administration has so far exempted semiconductors from tariffs. White House officials have said chips will be covered under a different sector tariff in the future.

Arm stock has weathered the tariff volatility better than its U.S. chip peers. Investors are optimistic that Arm's core customers in the smartphone and AI chip markets are doing better than the general semiconductor market. Shares are down about 1% this year at roughly $122, compared with the 13% decline for the iShares Semiconductor exchange-traded fund.

KeyBanc analyst John Vinh on Friday reaffirmed his Overweight rating and $195 price target on Arm. The analyst expects results that won't miss expectations.

"We expect ARM to post in line to slightly higher results and in line guidance, driven by stronger sell-through of China Android demand and ARM server CPU gains in cloud," he wrote.

Write to Tae Kim at tae.kim@barrons.com

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May 07, 2025 16:16 ET (20:16 GMT)

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