NEW YORK: Arm Holdings forecast second-quarter (2Q) revenue above Wall Street estimates, signalling strong demand for its energy-efficient chip designs for artificial intelligence (AI) data centres (DCs).
Arm shares were choppy in after-hours trading and down about 0.8%.
Demand for Arm’s chip architecture has surged as companies such as Alphabet and Amazon.com build custom AI chips, boosting the company’s licensing revenue and royalties as more complex chips are shipped to DCs.
Arm sells intellectual property that other chip companies license and pay royalties on for each unit shipped, but has recently decided to make its own central processing unit for the DC.
Higher demand from big tech company chips, along with new entrants such as Nvidia and its Vera processor, helped the company report higher-than-expected revenue, Arm chief executive officer (CEO) Rene Haas told Reuters.
Qualcomm also launched its C1000 DC chip, which does not contribute to Arm revenue now but will in the future, he said.
Haas said the company has shipped 1.5 billion Arm cores – an important data-crunching portion of each chip – in the last six years.
However, about 30% were shipped in the last nine months.
“Growth is accelerating,” Haas said.
Revenue from royalties rose 22% to US$715mil in the 1Q, while licensing revenue increased 23% to US$574mil.
Arm’s chip designs are prized for their power efficiency, a critical advantage for DC operators looking to manage the soaring energy costs and heat generated by running massive AI models.
Its AGI CPU, a new AI DC unveiled in March, is exceeding initial expectations, with demand surpassing US$2bil across fiscal years 2027 and 2028, the company said.
It has already delivered the product to multiple customers.
Cloud firm Oracle has agreed to buy the new chip, acccording to Haas.
The CEO did not disclose the contract value.
“We have new customers in North America and China,” Haas said
He added that the company can now secure supply for more than US$1bil worth of chips.
“I feel better about (supply) than I did 90 days ago,” he said.
Jefferies analysts forecast sales of the new chip reaching US$18bil in fiscal 2031, surpassing the chip designer’s own projection of US$15bil.
Haas said the company was not changing any forecasts on Wednesday.
Arm projected 2Q revenue of US$1.38bil, above analysts’ average estimate of US$1.34bil, according to data compiled by the London Stock Exchange.
The British chip designer expects second-quarter profit of 47 US cents per share, adjusted for stock compensation, among other things, compared with analysts’ expectations of 43 US cents per share.
The company reported revenue of US$1.29bil and adjusted per-share earnings of 45 US cents for the 1Q.
Analysts expected revenue of US$1.26bil and adjusted profit of 40 US cents a share. —Reuters
