Why Arm Stock Absolutely Destroyed the Market Today


Actions of Arm holds (ARM 56.17%)the semiconductor company went public last September, had a day to remember today as the stock soared following the release of its third quarter results.

The company easily beat revenue and profit estimates, and its figures indicate it would begin to benefit from the artificial intelligence (AI) boom, as it said it would bring AI to billions of Arm-based devices.

The stock was up 57.4% as of 11:22 a.m. ET on the news.

Image source: Getty Images.

Arm jumps on the AI ​​bandwagon

Amid the widespread slowdown in the semiconductor industry, Arm reported solid revenue growth of 14% to $824 million, well ahead of the consensus of $761.6 million .

Royalty revenue increased 11% to $470 million, driven by the recovery of the semiconductor sector and the rise of Armv9-based chips, which typically generate a higher royalty rate. Licensing revenue was also better than expected, increasing 18% to $354 million, driven in part by demand for advanced Arm processors due to its partners' growing investment in AI.

Ultimately, growth was also strong, with adjusted operating profit up 17% to $338 million, giving it an adjusted operating margin. Adjusted earnings per share rose to $0.29 from $0.22, beating the consensus of $0.25.

CEO René Haas said:

Arm achieved another record quarter of revenue, driven by continued adoption of the world's most popular computing platform. More customers moving to higher value Armv9 technology, combined with market share gains in cloud servers and automotive, has driven strong royalty growth. The AI ​​wave has driven licensing growth as these new devices require Arm's high-performance, energy-efficient computing platform.

Can Arm continue to climb?

Looking ahead, Arm's guidance for the fiscal fourth quarter was also better than expected, with revenue of $850 million to $900 million, reflecting 38% growth at the midpoint and comparable to analyst consensus of $780.3 million.

Ultimately, the company expects adjusted earnings per share of $0.28 to $0.32, compared to the consensus of $0.21.

With the current boom, Arm has become the latest winner of the AI ​​boom. Given that we still appear to be in the early stages of AI deployment, Arm stock could easily go higher from here.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the securities mentioned. The Motley Fool has a disclosure policy.



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