Arm Holdings Shares Fall Amid Weak Smartphone Royalty Growth Despite Strong AI CPU Outlook
Arm Holdings (ARM) shares experienced a significant sell-off, dropping 13% following its fiscal second-quarter earnings report. While the company beat consensus estimates for both total revenue ($1.44 billion) and adjusted earnings per share ($0.52), investors reacted negatively to sluggish royalty revenue growth of 8%, which was hampered by a stagnant smartphone market. Despite the immediate disappointment in royalties, Arm's long-term outlook is bolstered by its transition into silicon design with the new Arm AGI CPU. Partnering with Meta Platforms, the company expects massive demand for this high-performance data center chip. Arm has raised its revenue guidance for this specific chip business from $1 billion to $2 billion through fiscal 2028, with a long-term target of $15 billion in annual revenue by fiscal 2031.