ARM Live: Complete Coverage Of ARM’s Q2 Earnings

Wells Fargo tried poking at demand beyond 2026 today on Arm’s call and here’s what the company’s CFO had to say:

Joseph Quatrochi Wells Fargo Securities, LLC, Research Division

And just as a follow-up, maybe one for Jason. I know you’re not giving fiscal ’27 commentary today, but just — how do we think about the puts and takes of just royalty revenue growth and the risks that are associated with the potential like demand destruction that we’re seeing in consumer electronics potentially from memory?

Jason Child Chief Financial Officer

Yes. Yes, that’s — it’s a great question and something we spend a lot of time looking at. So in particular, I think MediaTek last night talked about something like around a 15% reduction in unit volume for next year.

And that’s pretty consistent with what we’ve heard from other smartphone and handset providers around what they think the memory supply chain constraints could provide. And so we’ve done our own kind of analysis of it. And what’s interesting is we’re hearing from [ abrades partners ] that they’re really trying to make sure that they protect the high end of the market, so the premium and flagship portion of the market, which is great for us because that’s for all of our CSS and V9 royalties are, so the highest by a significant margin.

And then on the very bottom end of the segment, that’s where most of the supply chain constraints will probably be felt. For us, that’s v8 and even older generations that are dramatically smaller royalties. So I think if you were to say, what if there’s a 20% reduction in volumes next year, for us, that would translate to probably somewhere around a 2% or 4% at worst impact on smartphone royalties. If you then project that across the whole business, it’d be a 1%, maybe 2% negative impact on total royalties. The good news is, because, as Rene mentioned, the cloud AI or infrastructure business has been continuing to grow ahead of our expectations.

It’s actually growing at a level that’s more than compensating for those kind of risks on the memory and mobile side. So I think we have a very good setup for next year, and not too concerned about at least the royalty revenue impacts that we might see from these unit volume and supply chain constraints.

Here’s what Arm’s CEO had to say about data center demand on the company’s conference call:

“In cloud AI, the shift towards inference is reshaping data center design. And increasingly, that inference is agent-based. These workloads are persistent, always-on and power constrained. This is a fundamental change in how AI systems operate.

This is because agent-based AI requires coordination across many agents running continuously, and that the CPU can only do coordination. As this model scales, customers need CPU chips with higher core counts and better power efficiency to operate continuously within tight power and cost constraints. This trend directly benefits Arm. Arm-based CPU chips deliver industry-leading performance per watt, enabling customers to scale core counts and run always-on AI workloads.

We’re now seeing this trend play out in the market where Neoverse CPUs have surpassed 1 billion cores deployed, and Arm’s share amongst the top hyperscalers is expected to reach 50%. “

Arm Holdings shares are still down around 8% and have seen little movement during their earnings call. We’re reviewing it and will post highlights shortly.

Arm’s conference call is now live, we’ll post updates if anything material is said.

Simply leave this live blog open and new updates will post automatically. 

Arm’s conference call is starting at 5 p.m. ET.

If you’d like to listen in you can at this link.

Arm’s guidance is for $.58, which is a slight beat versus expectations.

Wall Street is warming up to the company’s earnings, shares are now down 6.4%, which is an iimprovement from where shares originally traded after the report.

Arm’s guidance calls EPS of $.56, which is largely inline. Revenue guidance is above consensus.

Yet, if there’s one number Wall Street is likely disappointed in its that EPS guidance. That’s driving the after-hours disappointment in shares. 

Arm’s earnings look fairly strong, but investors initially sold the stock off. Arm is currently down about 8%.

That has trimmed some early losses, but is still a fairly harsh reaction.

Here’s what Arm Holdings reported in Q4:

• Revenues: $1.24 billion
• EPS: $.43

As a reminder, here’s what Wall Street was expecting from Arm Holdings’ earnings:

It’s been a brutal day for chip stocks and stocks in the AI trade, but Arm shares are outperforming strongly. They’re up about 1.85% in late trading.

Elsewhere in the semiconductor space, NVIDIA is down 2.7%, Broadcom is down 3.8%, and AMD has dropped 16.5% after issuing guidance that disappointed Wall Street.