Arm shares plunge as investors demand faster AI returns
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The news: Shares in British chip designer Arm Holdings plunged by up to 17.3% on Thursday, erasing over USD20 billion in market value, after the company beat earnings estimates but failed to boost its AI revenue outlook.
The numbers: Despite a 39% rise in Q1 revenue to USD939 million that exceeded expectations and was driven by high growth in licensing deals, investor confidence was shaken by Arm’s cautious full-year forecast after it flagged some areas of weakness. It said weaker end-markets and lower sales in China had capped sales.
The company’s full-year revenue forecast of USD3.8 billion was just short of the USD4.1 billion average analyst estimate, according to Bloomberg.
The context: The big drop after its post-market earnings release the previous afternoon highlights investor impatience for quick returns from the ongoing AI infrastructure investment boom.
What they said: "Despite Arm Holdings’ impressive earnings beat, their cautious (lukewarm) full year forecast has dampened spirits," Michael Schulman, the chief investment officer of Running Point Capital said in a note cited by Reuters. "Arm is still benefiting from the artificial intelligence spending explosion, but weakness in other markets, possibly from inventory gluts has caused management to temper lofty expectations."
