(Bloomberg) — Shares of Arm Holdings Plc fell after the chip designer gave tepid revenue forecasts for the fiscal year, sparking concerns that the tech industry’s spending on artificial intelligence is slowing.
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For fiscal 2025, which ends next March, revenue will be between $3.8 billion and $4.1 billion, the company announced Wednesday. Earnings will be $1.45 to $1.65 per share. Analysts were forecasting a total of $4.01 billion, a gain of 26%, and earnings of $1.53 per share.
Shares fell 10% to $95.25 in late trading after the report was released. Three months ago, optimistic forecasts sent its shares soaring and helped make the company an AI darling on Wall Street. The stock was up 41% this year through Wednesday’s close.
Arm’s licensed chip designs and standards are already essential technology for most smartphones. Under the leadership of its CEO René Haas, the UK-based company is trying to turn that position into a greater presence in data center hardware, where AI demands are driving major upgrades. As part of this initiative, Arm is offering more comprehensive technology plans to companies such as Amazon.com Inc.’s AWS.
In an interview, Haas said Arm remains “very confident in long-term growth.”
“A lot of the strategies we put in place a few years ago are all coming to fruition,” he said.
The company estimates it will post a revenue growth rate of at least 20% in fiscal 2026 and 2027, Chief Financial Officer Jason Child said on a conference call with analysts.
Sales will be between $875 million and $925 million in the June quarter, the chip designer said. That compares to an average analyst estimate of $868 million. Earnings per share, less certain items, will be 32 cents to 36 cents. Wall Street predicted 31 cents.
During the fiscal fourth quarter, ended in March, revenue was $928 million. Excluding certain items, profit was 36 cents per share. That compares to average estimates of $880.4 million and earnings of 30 cents per share.
Arm plays an unusual role in the semiconductor industry. It enables the fundamental set of instructions that software uses to communicate with chips. The company also provides design blocks that companies such as Qualcomm Inc. use to build their products.
Arm is moving towards providing more complete configurations that can be passed directly to the manufacturing stage. The change makes it more of a competitor to customers like Qualcomm, but more valuable to others, including owners of large data centers.
Arm, based in Cambridge, England, is still 90% owned by SoftBank Group Corp., which acquired the company in 2016 for $32 billion. A 2023 IPO raised $4.9 billion, marking the largest debut on a U.S. stock exchange that year.
Arm’s licensing sales rose 60% to $414 million last quarter, and royalty revenue rose 37% to $514 million.
Licensing revenue is an indicator of “R&D and investment confidence” by…
