Arm Holdings PLC (NASDAQ:ARM)’s shares are set to open nearly 12% lower on the Nasda this Thursday despite topping quarterly profit and sales forecasts and achieving the fourth consecutive quarter of record revenues.
First-quarter earnings were better than expected for the Cambridge-based, SoftBank owned microchip maker, while second-quarter guidance also came in ahead of guidance.
Yet investors’ expectations of chipmakers’ revenues have gone sky-high as a result of the artificial intelligence boom.
While this has resulted in rocketing company valuations, it has also caused share price volatility should these chipmakers fail to match these elevated expectations.
Earlier this week, Microsoft Corp (NASDAQ:MSFT)’s valuation was pummelled for $81 billion after its Azure cloud-computing segment came in a fraction below Street forecasts.
As the primary supplier of microchip architecture to the global smartphone industry, Arm is less exposed to the AI boom, although an increasing need for edge-computing applications has increased the demand for Arm’s Compute Subsystems (CSS) product.
"AI demand and rising CSS adoption across major market segments drove record revenue," said Arm’s chief executive Rene Haas. "As the energy needs of AI continue to escalate, so does the demand for the high-performance, power-efficient Arm compute platform."
True though that may be, Arm’s earnings guidance still does not appear to be universally robust enough for some investors.