Arm Holdings Plunges 10.75% on Weak Outlook
1min read On May 8, 2025, arm holdings experienced a significant drop of 10.75% in pre-market trading, reflecting investor concerns over the company's recent financial performance and future outlook.
Arm Holdings reported its fourth-quarter earnings, revealing a beat on both earnings and revenue estimates. The company achieved record licensing revenue and delivered record royalty revenue exceeding $600 million in the fourth quarter. CEO Rene Haas highlighted the company's record-breaking results, driven by increased deployment of its CSS platforms across AI data centers, cloud compute, and mobile. However, the company's outlook for fiscal 2026 was less optimistic, with earnings per share (EPS) projected to be in the range of $1.56 to $1.64, significantly below the $2.03 estimate, and revenue expected to be between $3.94 billion and $4.04 billion, compared to the $4.91 billion analyst estimate.
Arm Holdings' decision to withhold full-year guidance due to global trade and economic uncertainties has added to investor apprehension. The company cited the unpredictable nature of its business, which is heavily reliant on licensing fees from smart devices, as a reason for not providing a full-year forecast. This move comes amid broader economic concerns and stricter export controls on advanced semiconductors to China, which could impact Arm's business.
Despite the company's strong fourth-quarter performance, the first-quarter forecast fell short of analyst expectations. arm predicted revenue of $10 billion to $11 billion, with adjusted EPS of $0.30 to $0.38, both below consensus estimates. CEO Rene Haas attributed this to a potential delay in a large licensing deal, although he noted that licensing revenue growth would still be robust.
Arm's stock decline also reflects broader concerns about the semiconductor industry. The company's technology is integral to nearly all smartphones globally, and it is expanding into data centers and other markets. However, trade policy changes and economic uncertainties could dampen consumer demand, particularly for high-end smartphones that use Arm's technology. Research firms have warned that these factors could lead to a decline in the smartphone market this year.
