Arm Shares Skyrocket by Over 30% Following Upbeat Sales Forecast

Arm, the chip designer, experienced a remarkable surge in its share price, surpassing 30% on Wednesday, fueled by quarterly sales and profit forecasts that exceeded Wall Street’s expectations. The impressive performance in Arm’s stock lifted its market capitalization by approximately $26 billion, marking a substantial increase.

Arm’s shares have witnessed a doubling in value since its initial public offering (IPO) in September, jumping from the set price of $51 to the current $102.11. The positive momentum also had a cascading effect on its parent company, SoftBank Group Corp., whose shares rallied nearly 10% in response to Arm Holdings Plc’s optimistic earnings forecast. Early Tokyo trading saw SoftBank’s share price surging as much as 9.6%.

During the December quarter, Arm shares experienced a notable 40% increase, potentially elevating SoftBank’s net asset value to over ¥18 trillion ($121 billion). SoftBank retained a substantial stake of around 90% in Arm when the chip designer went public in 2023.

Arm’s fourth-quarter sales and adjusted profit forecasts, with midpoints of $875 million and 30 cents per share, respectively, outperformed estimates of $780.3 million and 21 cents per share, according to data from LSEG, as reported by Reuters. The company raised its guidance by approximately $100 million, citing strong markets in automotive and artificial intelligence (AI) for the fiscal fourth quarter.

For the entire fiscal year, Arm anticipates revenue of $3.18 billion and adjusted earnings of $1.22 per share, exceeding analysts’ expectations of $3.05 billion and $1.07 per share. The company underscores the significance of licensing revenue for chips powering AI in various devices, with smartphones now constituting 35% of overall units shipped.

Arm’s finance chief, Jason Child, highlighted the positive impact of AI on sales, particularly in data centers, phones, and PCs. The company revealed ongoing efforts to develop new laptops and smartphones capable of handling AI features like chatbots. Arm’s revenue model involves licensing deals for its intellectual property and royalties charged for each chip incorporating its technology that is sold.

In a statement, Arm executives emphasized that their expansion strategy is yielding positive results, with customers increasingly opting for Arm-based central processors to complement Nvidia’s chips for AI work in data centers. The company’s commitment to innovation extends to the development of devices equipped to handle advanced AI capabilities.