Members of Arm management; Chief Commercial Officer Will Abbey, CEO René Haas, CFO Jason Child and Automotive Managing Director Dipti Vachani ring the opening bell, as chip design company Softbank’s Arm holds an initial public offering ( IPO) on the Nasdaq market site in New York, in September. 14, 2023.
Brendan McDermid | Reuters
Shares of chip designer Arm soared 48% on Thursday after the chip design company reported better-than-expected earnings and issued strong profit guidance for the current quarter.
The stock rally added about $38 billion to Arm’s market capitalization, with more than $34 billion going to SoftBank, which owns 90% of the company.
Arm’s chip design technology is found in most smartphones and many PCs. The company reported adjusted earnings per share of 29 cents, above analysts’ average estimate of 25 cents, according to LSEG, formerly known as Refinitiv. Revenue rose 14% to $824 million, beating the average estimate of $761 million.
For the current quarter, Arm expects earnings per share of between 28 and 32 cents on revenue of between $850 million and $900 million. Analysts had expected a profit of 21 cents per share on revenue of $780 million. At the midpoint of its revenue range, Arm expects revenue growth of 38% this quarter.
Founded in 1990 and acquired by Masayoshi Son’s SoftBank in 2016 for $32 billion, Arm went public on Nasdaq in September. The company sold its shares at $51 apiece in its IPO and was trading above $122 on Thursday. Son remains chairman of the company and is joined on the board by SoftBank’s Ron Fisher.
Arm makes money through royalties, when companies pay for access to build Arm-compatible chips. This usually represents a small percentage of the final token price.
Arm said its customers shipped 7.7 billion Arm chips in the September quarter, the most recent period for which figures are available. The number of arms Apple, Google, Microsoft And Nvidia as customers, and the company is riding the wave of artificial intelligence as more businesses need heavy-duty processors to run their workloads.
“We see demand for Arm technology to enable AI everywhere, from the cloud to the edge devices in your hand,” Arm wrote in its letter to shareholders for the quarter. “The most demanding AI applications already run on Arm today.”
Due to SoftBank’s overwhelming control over the stock, Arm’s stock remains thinly traded relative to other large-cap companies. That could change in the coming months after the post-IPO lockup period ends in March and insiders, including SoftBank, will finally be able to sell shares.
SoftBank showed a strong recovery in its Vision Fund investment group on Thursday due to a recovery in the value of technology companies. The Vision Fund, known in part for its notorious bad bet on WeWork, recorded an investment gain of 600.7 billion Japanese yen ($4.02 billion), its biggest increase since March 2021.
SoftBank’s flagship technology investment arm had a tough time in the fiscal year that ended in March last year, posting a record loss of around $32 billion amid falling prices. technology stock prices and deterioration of some of the company’s bets in China. The company’s cumulative loss on WeWork exceeded $14 billion.
— CNBC’s Arjun Kharpal contributed reporting.
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