Arm Tumbles After Spending Surge Weighs on Profit Forecast

Bloomberg

Jul 31, 2025

Arm Holdings Plc, which provides the most widely used technology in computing chips, gave a lower-than-expected profit forecast for the current period after ramping up spending on new products.Fiscal ...

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Analysts had projected 35 cents on average. Revenue will be $1.01 billion to $1.11 billion, compared with an estimate of $1.06 billion.The outlook jarred investors, who sent Arm shares down about 8% in extended trading. Qualcomm Inc., another chip company focused on smartphones, also declined after posting its own results.Arm is increasing expenditures to better capitalize on the artificial intelligence boom. The company is committed to making technologies that can better position Arm in that area, Chief Executive Officer Rene Haas said in an interview.The spending surge is affecting profit in the short term, but will help the company grow more strongly over time, he said. “We’ve made a very conscious decision to invest more heavily,” he said. “We’re accelerating investment in R&D.”The report follows disappointing outlooks from chip companies such as Intel Corp. and Texas Instruments Inc., and investors have grown worried that a boost from AI-related demand will be undermined by the impact of tariffs. Arm hasn’t seen any pull-forward of demand related to tariffs, Haas said. He remains “pretty confident” that the spending on AI infrastructure remains strong.Arm shares had earlier ended regular trading at $163.33, leaving them up 32% in 2025. They were part of a run-up in chip stocks that investors have identified as beneficiaries of AI spending.Under Haas, Arm is trying to remake itself as a more complete provider of semiconductor designs, particularly ones for data centers. It looks to grab a bigger share of the growing spending on AI infrastructure.On a conference call with analysts, Haas pointed to the opportunity provided by the Stargate AI project. That effort — backed by OpenAI and Arm parent SoftBank Group Corp. — will include a massive build-out of data centers. Arm, as a technology partner, can provide full chip designs for those new facilities.The CEO said that work on designing the chips is already underway. But he declined to provide further details, including the kinds of semiconductors involved or when they might be announced.Arm gets paid in two ways: licenses the allow customers to use its designs and standards, and royalties paid per unit when the resulting chips are shipped.First-quarter revenue rose 12% to $1.05 billion, the company said. Profit was 35 cents a share in the period, which ran through June. That matched both analyst estimates.Licensing revenue was $468 million, down 1% from a year earlier. That compared with an average estimate of $456 million. Royalty contributed $585 million, an increase of 25% from the same period in 2024. Analysts projected $595 million.Arm’s technology has long been popular because it allows companies to build low-power chips. That made it a natural fit for the phone market, where a large chunk of its royalties have come from. Analysts have traditionally used its earnings as a window into demand in the smartphone industry.Now, though, some of the largest companies in technology are trying to make themselves more independent and build unique capabilities by designing their own data center chips. Many of them are Arm licensees.The Cambridge, UK-based company has shifted from providing the building blocks to chipmakers — and licensing the rights to use fundamental technology — to trying to offer more complete blueprints. It’s trying to make its offerings more useful to large companies such as Amazon.com Inc.’s AWS and Microsoft Corp. But the move also means encroaching on the turf of chipmaker customers such as Qualcomm.","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"movement,express","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"}}}