Arm’s Earnings Beat Expectations But Stock Drops 5%

Chip design leader Arm (NASDAQ:ARM) reported better-than-expected second-quarter earnings, yet its stock declined more than 5% in pre-market today. The company posted adjusted earnings per share of $0.30, outperforming the $0.26 analyst consensus, and revenue reached $844 million, ahead of the expected $744.31 million.

Arm’s revenue saw a 5% year-over-year increase, bolstered by record royalty income and strong licensing momentum. Royalty revenue jumped 23% to $514 million, driven by rising adoption of Armv9 technology and a rebound in the smartphone sector. However, license and other revenue dropped 15% from the prior year to $330 million, attributed to typical variations in the timing and value of major agreements.

Key metrics showed growth with annualized contract value rising 13% year-over-year to $1.253 billion, and remaining performance obligations up 10% from the previous quarter, reaching $2.385 billion.

For the third quarter, Arm projected earnings per share of $0.32 to $0.36 and revenue between $920 million and $970 million, aligning closely with Wall Street expectations at the midpoint.