MW Arm's stock falls after earnings, showing how high the bar is for AI companies now

By Britney Nguyen and Emily Bary

Arm says memory shortages could impact its business, but to a small degree

Arm CEO Rene Haas says the company can benefit from the growth of inference AI workloads.

Upbeat results weren't enough to lift Arm Holdings' stock on Wednesday, showing how investors are taking a tougher look at artificial-intelligence companies in today's technology trade.

The British chip designer reported revenue of $1.24 billion for the fiscal third quarter, up 26% from the previous year, and just ahead of the $1.23 billion that analysts tracked by FactSet had been expecting. Adjusted earnings per share came in at 43 cents, above the FactSet consensus of 41 cents.

Arm also forecast first-quarter revenue of $1.47 billion at the midpoint, versus the $1.44 billion FactSet consensus.

But investors perhaps wanted bigger beats, especially as the AI trade has gotten more discerning. Prior to the report, BofA analyst Vivek Arya said there's been "indiscriminate" selling of chip stocks recently.

See more: Nvidia's stock gets swept up in software selloff, but this analyst says that makes no sense

Arm's stock $(ARM)$ was falling 9% in the extended session on Wednesday.

Like other technology companies, Arm acknowledged that memory shortages could be a hinderance but that customers seem driven to protect the high end of their smartphone businesses.

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"On the very bottom end of the segment, that's where most of the the supply-chain constraints will probably be felt for us," CFO Jason Child said on the earnings call.

But he added that the products Arm designs for that part of the market come with "dramatically smaller royalties," which mitigates the potential impact on Arm's business.

Hypothetically, "if you were to say 'what if there's a 20% reduction in volumes next year for us?' that would translate to probably somewhere around a 2% or 4%, at worst, impact on smartphone royalties," Child said.

Arm CEO Rene Haas said in a statement that the December quarter was driven by accelerating AI demand. The company's royalty revenues, which are made up of per-chip payments from chip makers who use Arm's designs, "reflect the growing scale of our ecosystem" as customers integrate Arm-based architecture into next-generation chips, he said.

Arm's royalty revenue came out on top of expectations, up 27% from the previous year to $737 million, while the consensus on FactSet had been for $708 million. The "licensing and other" segment missed estimates, however, coming in at $505 million for the quarter, while analysts had been looking for $520 million, according to FactSet.

On the call, Arm pointed to opportunities around central processing units as AI moves from the process of training models to inference, which is when AI technologies predict things based on new information.

AI agents that talk to other AI agents is a use case that is "very, very well suited for CPUs because CPUs are very, very power efficient, always on, [with] very, very fast latency," Haas said, and Arm plays into this market.

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-Britney Nguyen -Emily Bary

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February 04, 2026 18:54 ET (23:54 GMT)

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