Arm Holdings Earnings Miss, Stock Drops 12% Amid Exploration of New Chip Designs

Arm Holdings' shares dropped 12% after releasing underwhelming earnings guidance for Q2. The company's adjusted EPS is expected to range between $0.29 and $0.37, slightly below forecasts. CEO Rene Haas' comments on exploring its own processor design added to investor concerns, with analysts noting that developing its own chips could significantly alter Arm's cost structure.

Arm Holdings (NASDAQ: ARM) experienced a significant 12% intraday drop in its stock price on July 31, 2025, following the release of its Q2 earnings report and strategic announcements. The company's adjusted EPS is expected to range between $0.29 and $0.37, slightly below Wall Street's $0.35 expectation [1].

CEO Rene Haas' comments on the company's plans to explore its own processor design added to investor concerns. This strategic shift marks a departure from Arm's traditional business model of licensing chip designs to other companies. Haas stated that Arm is considering developing chiplets or even full solutions, which could put the company in direct competition with some of its customers [4].

Analysts have expressed skepticism about Arm's ability to balance innovation with profitability in the competitive semiconductor landscape. Needham analysts Charles Shi and Ross Cole noted that the move to develop chips is a "bigger leap" than Arm's previous transition from selling process core IP to selling CSS, and it will likely come with a bigger price [3].

The stock's sharp decline underscores market skepticism about Arm's ability to navigate the complexities of chip development and maintain profitability. The company's 200-day average is currently at $136.78, below the current price of $144.3, signaling potential oversold conditions [2].

Investors should closely monitor Arm's performance against key support levels, such as the 200-day moving average at $136.05 and the $144.109-$144.756 range. A breakdown below the lower end of the support range could indicate a bearish pivot [2].

In conclusion, while Arm Holdings' stock may have experienced a significant intraday drop, historical patterns suggest a potential for recovery. Investors should closely monitor the stock's performance against key support levels and consider the broader market and sector trends when evaluating its future trajectory.

References:
[1] https://finance.yahoo.com/video/arm-holdings-slips-guidance-abbvie-161852873.html
[2] https://www.ainvest.com/news/arm-holdings-plunges-11-01-ai-chip-powerhouse-losing-momentum-2507/
[3] https://seekingalpha.com/news/4475626-arm-plummets-but-analysts-urge-investors-to-remain-on-board-amid-business-shift
[4] https://theoutpost.ai/news-story/arm-holdings-shifts-strategy-plans-to-design-own-processors-challenging-industry-dynamics-18461/