Arm Reports Record Earnings Amid Growth and Regulatory Risks
On July 29, Arm (ARM) reported a record quarter with revenue of $1.29 billion, up 22% year-over-year, and non-GAAP earnings per share rising by 29%. Free cash flow surged 343% to $665 million. Despite these strong results, the stock continued its decline due to concerns over a high valuation—trading at more than 200 times forward earnings. Management revised down full-year royalty growth expectations citing soft smartphone demand and rising memory costs but highlighted robust data center royalties that doubled year-over-year. Arm also announced stronger-than-expected demand for its new AGI CPU, which competes with companies like Amazon (AMZN), Alphabet (GOOG) (GOOGL), and Nvidia (NVDA). This has triggered an antitrust probe by the FTC over potential conflicts of interest. The company maintains a long-term growth target of more than 20% royalty growth through fiscal 2029. While Arm's financials are strong, with $3.6 billion in cash and low debt, its high valuation leaves little room for error.
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Topics: antitrust probe Arm data center growth forward earnings multiple stock price reaction