Arm Holdings is set to report its first-quarter earnings for fiscal 2025 after the closing bell on Wednesday. Investors will be closely watching the chip designer’s revenue and earnings, which are expected to show growth compared to the year-ago period. Analysts are particularly interested in Arm’s royalty revenue, which is anticipated to be a key driver of growth. Additionally, there may be updates on the company’s reported development of an artificial intelligence (AI) chip.
Revenue and Earnings Growth
Arm Holdings is projected to report revenue of $909.34 million for the first quarter, representing a 34% increase from the year-ago period. This growth is a positive sign for the company and indicates its ability to generate higher sales. Net income is also expected to rise, with estimates at $154.13 million or 16 cents per share, up from $105 million or 10 cents per share in the previous year.
Key Metric: Royalty Revenue Growth
Investors will be closely monitoring Arm’s royalty revenue growth, as it plays a significant role in the company’s overall revenue. Arm earns a substantial portion of its revenue through the royalties it receives on its chip designs. In the prior quarter, Arm reported earnings and revenue that exceeded analysts’ estimates, driven by record-high royalty revenue of $514 million.
For the first quarter, Arm is expected to report royalty revenue of $489.9 million, which is a slight decrease compared to the previous quarter but still a significant 22% increase from the year-ago period. Analysts from Rosenblatt consider royalties as the key driver to watch for Arm’s performance.
Business Spotlight: Reported AI Chip
Arm could provide investors with insights about its reported development of an AI chip. The company is reportedly working on an AI chip, which could position it favorably as big tech companies like Microsoft, Meta, Alphabet, and Amazon invest in AI and build out data centers to support AI-related workloads. This development could open up new opportunities for Arm and contribute to its growth in the future.
Stock Performance and Outlook
Arm shares experienced a 5% decline, closing at $141.44 on Monday, following a downgrade from HSBC. However, even with this recent dip, the stock has nearly doubled in value since the beginning of the year. This indicates positive investor sentiment and confidence in Arm’s future prospects.
Conclusion
Arm Holdings’ first-quarter earnings report is highly anticipated by investors. The company’s expected revenue and earnings growth, particularly in royalty revenue, will be closely watched. Additionally, updates on the reported development of an AI chip could provide further insights into Arm’s future growth potential. Despite a recent downgrade, Arm’s stock has performed well this year, reflecting positive investor sentiment. As the chip designer continues to innovate and capitalize on emerging technologies, it is poised for continued success in the market.
