U.S.-listed shares of chip designer Arm Holdings fell 6 per cent premarket after its quarterly forecast disappointed investors, who had high expectations due to AI-driven interest in chip companies.
The Cambridge, England-based company, whose chip designs power nearly every smartphone in the world, has seen its share price more than double since its initial public offering last September, driven by bets that it will benefit from a surge in AI computing.
Arm’s revenue forecast for the current fiscal third quarter is between $920 million and $970 million, the midpoint of which is in line with analyst estimates of $944.3 million, as per data compiled by LSEG.
The company derives revenue from licensing fees for its chip designs and collects a royalty for each chip sold that uses its technology.
Morgan Stanley 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. In its second-quarter results, Arm’s revenue rose 5 per cent to $844 million, beating analyst estimates of $808.4 million.
Year-to-date, Arm’s stock has surged 92.5 per cent, outperforming its peers. In contrast, Advanced Micro Devices is down 1.6 per cent and Qualcomm is up 19.7 per cent.
Arm’s forward price-to-earnings ratio is 75.4, higher than AMD’s 30 and Qualcomm’s 14.9.