Revenue Forecast by Arm Holdings Dampens Investor Enthusiasm Despite AI Surge

Arm Holdings, a UK-based chip designer, has issued a revenue forecast that aligns with Wall Street targets but falls short of investor expectations accustomed to more optimistic projections. Despite a significant revenue surge in the first quarter, the company's cautious full-year outlook has tempered investor enthusiasm, resulting in a 9% drop in share prices.

Arm Holdings, the UK chip designer, set a revenue forecast that aligned with Wall Street targets but failed to meet investor expectations. Shares fell 9% despite climbing over 90% this year.

For the current fiscal second quarter, Arm forecast revenue between $780 million and $830 million, compared to analyst estimates of $804.1 million, while full-year guidance remains unchanged. This cautious approach negatively impacted investor sentiment despite a 39% surge in first-quarter revenue.

Michael Schulman, chief investment officer of Running Point Capital, attributed the tempered outlook to potential inventory gluts affecting other markets. Arm's unique business model generates revenue from licensing fees and royalties for chip designs, with a significant boost from recent AI-related deals.

(With inputs from agencies.)