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Arm posts record Q1 earnings but shares slide on outlook
- Arm Holdings reported record Q1 adjusted earnings of $0.45 per share on $1.29 billion in revenue, topping Wall Street estimates on both measures.
reuters - The company's AGI CPU demand has surpassed $2 billion, with Oracle agreeing to buy the new data center chip, according to CEO Rene Haas.
reuters - Shares fell in after-hours trading despite an above-consensus Q2 forecast, as some analyst estimates had reached nearly $1.5 billion, per Bloomberg.
bloomberg
Arm Holdings reported record first-quarter fiscal 2027 results on Wednesday that topped Wall Street expectations across the board, yet shares fell sharply as investors deemed the company's outlook insufficiently ambitious given its premium valuation.
Record Quarter, Muted Reaction
The British chip designer posted adjusted earnings of $0.45 per share on revenue of $1.29 billion, beating analyst estimates of $0.40 per share and $1.26 billion in revenue, respectively. Royalty revenue rose 22% to $715 million, with data center royalties more than doubling year over year, while licensing revenue climbed 23% to $574 million.benzinga+1
"Arm delivered a record first quarter, reflecting strong execution across our business and growing demand for the Arm compute platform as AI expands across cloud infrastructure, edge devices and the physical world," CEO Rene Haas said in a letter to shareholders.benzinga
Despite the beat, shares had already fallen 8.11% during the regular session amid a broader chip-sector selloff, and declined further in after-hours trading. Bloomberg reported that while the $1.38 billion second-quarter revenue forecast exceeded the consensus of $1.35 billion, some analyst estimates had reached nearly $1.5 billion.investing+2
AI and AGI CPU Momentum
Demand for Arm's architecture has surged as companies including Alphabet and Amazon Amazon.com, Inc. build custom AI chips. Haas told Reuters that higher demand from big tech, along with new entrants such as Nvidia and its Vera processor, helped drive results.reuters
The company's AGI CPU, an AI data center chip unveiled in March, is exceeding expectations, with demand surpassing $2 billion across fiscal years 2027 and 2028. Oracle has agreed to purchase the new chip, Haas said, without disclosing the contract value.reuters
Haas noted the company has shipped 1.5 billion Arm cores in six years, with roughly 30% shipped in just the last nine months. "Growth is accelerating," he said.aol
Elevated Expectations Meet Reality
Jefferies analysts forecast AGI CPU sales reaching $18 billion by fiscal 2031, above Arm's own $15 billion projection, though Haas said the company was not updating its forecasts. The disconnect between strong fundamentals and a stock trading at lofty multiples left investors wanting more — a dynamic that has increasingly defined earnings season for high-flying AI beneficiaries.reuters
Sources (10)
- 1 Arm forecasts quarterly revenue above estimates on AI-driven chip demand www.reuters.com
- 2 Arm Outlook Leaves Investors Unmoved Despite Topping Estimates www.bloomberg.com
- 3 Arm Delivers a Record Q1 — Earnings, Revenues Beat Estimates - ARM Holdings (NASDAQ:ARM) www.benzinga.com
- 4 Arm Holdings beats Q1 estimates, shares fall in after-hours By Investing.com www.investing.com
- 5 Arm Posts Higher Revenue, Profit as AI Demand Drives Growth www.wsj.com
- 6 Arm forecasts quarterly revenue above estimates on AI-driven chip demand - AOL www.aol.com
- 7 Arm Holdings ticks up as Q1 results, guidance top estimates (ARM:NASDAQ) seekingalpha.com
- 8 Arm Holdings (ARM) Is Down 15.5% After AI Server Share ... simplywall.st
- 9 ARM Holdings (ARM) Earnings: 1Q Results Exceed Estimates with Adjusted EPS at 45c, Revenue Surges to $1.29B www.smartkarma.com
- 10 Arm Beats Earnings, but Its Forecast Fails to Impress Investors www.tipranks.com
