AI summary
Summary of article:
ARM announced that its revenue outlook for the quarter was generally in line with expectations, but it declined more than 1% after markets opened due to higher expectations. The company also emphasized that AGI CPU orders and data center AI demand are strong, and has cooperated with TSMC to ensure production capacity.
chip industrya mother (Arm’s) revenue forecast for the quarter was in line with market expectations, but failed to meet some investors’ high expectations. Following the release of the financial report, the share price fell more than 1% after the market closed.
Arm said in a statement on Wednesday (4th) that it expects revenue to be about US$1.54 billion in the third quarter of its fiscal year ending in December. Analysts’ average estimate was $1.53 billion, while some market forecasts were closer to $1.7 billion, according to data compiled by Bloomberg.
Arm’s share price fell 1.7% to US$191.80 per share in after-hours trading, indicating that investors had originally expected greater growth returns from expanding the company’s AI business.
As AI infrastructure continues to expand, data center operators and their suppliers are rapidly increasing their spending on Arm chip architecture design and licensing. ARM’s architecture is known for its high energy efficiency, an advantage that will become increasingly important as companies seek to control the energy and cooling costs required to run large AI models. On the other hand, Arm is facing the challenge of slow growth in the smartphone market.
Under the leadership of CEO Haas, Amou announced in March that it had entered the full chip business from original semiconductor architecture design and authorized supplier, launched its own central processing unit (CPU) specifically to support the operation of AI data centers, and said that the AGI CPU had received orders worth US$1 billion at the time of its launch.
“We are seeing significant growth in demand for data center-related technologies,” Haas told Reuters in an interview.
Haas said ARM currently expects AGI CPU sales to reach $2 billion in the 2027 and 2028 fiscal years. To ensure it can produce US$2 billion worth of chips, ARM has collaborated with TSMC and other chip suppliers to ensure it gets enough material.
“We think we now have a very good chance of achieving the $2 billion target,” Haas said.
Arm said that in 2025, its server chip architecture will account for more than 50% of deployments by major cloud service providers, and it is expected to exceed 60% by the end of 2026. The main business model adopted by ARM is to license processor architectures and collect royalties.
Haas pointed out that ARM is taking market share from the x86 architecture used by Intel and AMD in standard CPU server racks used in enterprise data centers like Oracle.
The CEO said the ARM architecture is also gaining more market share because AI chip servers also need a CPU to help manage data traffic, and more and more such processors are starting to use ARM technology.
Google has started using Axion chips based on Arm architecture in its Tensor Processing Unit (TPU) AI systems.
ARM’s royalty revenue last quarter rose 8% from the same period last year to US$670 million, falling short of analysts’ forecast of US$720.8 million. This revenue is the fee that ARM charges for each chip shipped using its technology.
