On Monday (NASDAQ:MNDY), Loop Capital maintained a positive outlook on Arm Holdings (NASDAQ:ARM) shares, increasing the price target to $180 from the previous $130 while keeping a Buy rating on the stock. The firm's decision followed Arm Holdings' earnings report for the September quarter, released last Thursday.
The analyst from Loop Capital highlighted several growth avenues for Arm Holdings in the coming years. The sectors include Smartphones, which account for 30% to 40% of revenue, Data Center, expected to reach 10% to 15% of revenue, and the potential expansion into the PC market.
Despite a general slowdown in the smartphone market, Arm's royalties grew by 40% year-over-year, outpacing the industry due to higher content per device and increased royalty rates.
In the Data Center segment, the analyst anticipates significant growth through the calendar year 2025 as partnerships and product launches, such as NVDA's ARM-based Grace CPU, gain traction. The forecast suggests that NVDA could ship approximately 2.0 million Blackwell GPUs in 2025, which would be a portion of the overall 6.5 million Data Center GPUs projected for that year.
The report also points to potential growth from ARM-based Hyperscale silicon, which is currently limited by TSMC's production capacity. However, it is expected that TSMC could increase wafer capacity through 2026 and into 2027, offering another growth opportunity for Arm Holdings.
The analyst's commentary underscores Arm Holdings' strategic positioning across different sectors and the potential for increased market share, especially as technological advancements and partnerships come to fruition in the near future.
In other recent news, Advanced Micro Devices (NASDAQ:AMD) has seen significant market share growth in the third quarter, according to a recent analysis by Bank of America (BofA). The report indicates AMD's shipments rose by 15% quarter-over-quarter, while rival Intel Corporation (NASDAQ:INTC) experienced a decrease.
According to BofA, AMD's growth is attributed to its larger mix of consumer and desktop products in Western markets. Furthermore, the firm projects that AMD's market share will continue to rise, reaching approximately 27% of total CPU revenue share by 2026.
In parallel, Arm Holdings, a semiconductor and software design company, reported robust second quarter financial results for fiscal year 2025. Total (EPA:TTEF) revenue reached $844 million, surpassing expectations, largely due to a 23% year-over-year increase in royalty revenue.
Driven by a 40% rise in smartphone royalties following the adoption of its Armv9 technology, the company's performance exceeded expectations despite a 15% decline in licensing revenue.
BofA maintains a "Buy" rating on AMD and an "Underperform" rating on Intel. Meanwhile, Arm Holdings anticipates strong growth in AI and licensing activities, projecting a 40-45% increase in licensing revenue for the fiscal year, and a continued 23% year-over-year growth in royalties across various sectors. These recent developments underscore the strategic focus both companies have on expanding their reach across various sectors.
InvestingPro Insights
The recent analysis by Loop Capital aligns with several key metrics and insights from InvestingPro. Arm Holdings' strong market position and growth potential are reflected in its impressive financial performance. According to InvestingPro data, ARM's revenue growth stands at 24.56% for the last twelve months, with a remarkable gross profit margin of 95.98%. This robust financial health supports the optimistic outlook presented in the article.
InvestingPro Tips highlight that ARM's net income is expected to grow this year, and 9 analysts have revised their earnings upwards for the upcoming period. These tips corroborate the positive sentiment expressed by Loop Capital and suggest a promising future for the company.
The article's focus on ARM's expansion into various sectors, including smartphones, data centers, and potentially PCs, is further supported by the company's strong return over the last year, as noted in another InvestingPro Tip. This diversification strategy appears to be paying off, with ARM's stock price showing a total return of 182.15% over the past year.
It's worth noting that InvestingPro offers 13 additional tips for ARM, providing investors with a comprehensive analysis of the company's prospects. To gain access to these valuable insights and make more informed investment decisions, consider exploring the full range of tips available on InvestingPro.
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