Arm Rides AI Wave to Record Revenue, Stock Jumps More Than 20%

Arm Holdings Plc (ARM) stock soared more than 20% in after-hours trading Wednesday after reporting strong earnings and a rosy outlook amid increasing demand for artificial intelligence processing.

The British semiconductor designer reported fiscal 2024 third-quarter adjusted earnings per share of 29 cents, up from 22 cents a year earlier. Revenue rose 14% to $824 million as the company gained market share in the cloud and automotive space, and as AI boosted its licensing revenue. The top and bottom line figures both exceeded guidance provided by the company in November.

Arm said that the better-than-expected performance of its licensing business, which allows chipmakers to buy designs that work with their products, was due to “strong demand for more advanced Arm CPUs as companies increase investment in AI across all end markets.” Arm’s license revenue rose 18% over the previous year to $354 million.

“We expect next quarter to be even better and yet another record,” Chief Executive Officer Rene Haas and Chief Financial Officer Jason Child said in a letter to shareholders. “We have delivered these results through the combination of our focus on growing royalty revenue, the need for more compute and AI across all markets, demand from customers for our platforms, as well as our unrivaled developer ecosystem.” 

Arm now expects fiscal fourth-quarter revenue of between $850 million and $900 million, which would push full fiscal 2024 revenue to as much as $3.2 billion. In November, the company had projected fiscal 2024 revenue of between $2.96 billion and $3.08 billion.

The company was spun off of Japan’s SoftBank and began trading American depository shares (ADS) on the Nasdaq in September. The company’s initial public offering was the largest in the U.S. since 2021.

About three hours after the earnings release, Arm shares were trading at $94.00, up 22% from Wednesday’s close. The stock had risen as much as 40% earlier in after-hours trading.