🥇 First rule of investing? Know when to save! Up to 55% off InvestingPro before BLACK FRIDAYCLAIM SALE

Arm Holdings shares fall as revenue forecast fails to impress investors

Published 11/07/2024, 05:49 AM
Updated 11/07/2024, 09:50 AM
© Reuters. A screen displays the logo of Softbank's Arm, chip design firm, during the company’s initial public offering (IPO) at Nasdaq Market site in New York, U.S., September 14, 2023. REUTERS/Brendan McDermid/file Photo
QCOM
-
AMD
-

(Reuters) -Arm Holdings shares fell 2% on Thursday after the chip firm's in-line quarterly revenue forecast disappointed investors looking for a bigger boost from the generative AI boom.

The British company's share price has more than doubled since its initial public offering last September, driven by bets that it will benefit from a surge in AI computing.

But unlike AI chip designers Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD), Arm does not directly benefit from more silicon sold for use in the sprawling data centers that power AI.

It develops the blueprints that are used by other chipmakers to design central processing units. AI applications use such CPUs along with Nvidia processors, but in fewer quantities.

For Nvidia's upcoming Blackwell series, one CPU based on Arm's tech is included alongside two AI chips.

Arm forecast fiscal third-quarter revenue of $920 million to $970 million. Its midpoint is in line with analysts' estimates of $944.3 million, according to data compiled by LSEG.

The company generates revenue from licensing fees for its chip designs and collects a royalty for each chip sold that uses its technology.

Morgan Stanley (NYSE:MS) expects Arm to "at least meet expectations through this year, given a broad range of drivers".

The average Wall Street rating of 36 analysts on the stock is "buy", with a median price target of $145.

© Reuters. A screen displays the logo of Softbank's Arm, chip design firm, during the company’s initial public offering (IPO) at Nasdaq Market site in New York, U.S., September 14, 2023. REUTERS/Brendan McDermid/file Photo

Arm's stock has surged 92.5% this year, outperforming its peers. In contrast, Advanced Micro Devices is down 1.6% and Qualcomm (NASDAQ:QCOM) is up 19.7%.

Arm's forward price-to-earnings ratio is 75.4, higher than AMD's 30 and Qualcomm's 14.9.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.