British microchip architect Arm Holdings PLC (NASDAQ:ARM) has posted a bullish set of second-quarter results that have pushed shares higher despite a momentary pre-market blip.
Arm, whose microchip blueprints are used in effectively every smartphone across the globe, has two main revenue buckets- licensing and royalties.
Licensing revenues are realised when a company pay Arm for access to its microchip blueprints, while royalty revenues are realised whenever a device containing Arm technology is sold.
Royalty revenue had a bumper second quarter, surging 23% year on year to $514 million. Arm attributed this to a recovery in the global smartphone market, with Apple Inc (NASDAQ:AAPL, ETR:APC)’s iPhone 16 launch undoubtedly a catalyst.
But Arm is increasingly complementing its smartphone monopoly with a greater share of the home PC market thanks to cornerstone customer Qualcomm, which (despite legal wranglings between the two) has adopted Arm blueprints for its Snapdragon laptop processors.
Licensing was not as strong for Arm in the second quarter, with segment revenue declining 15% year on year to $330 million.
Arm chalked this up to “normal fluctuation in timing and size of multiple high-value license agreements and contributions from backlog”.
Thrown together, Arm’s second-quarter revenue increased 5% to $844 million, which exceeded internal guidance of between $780 million and $830 million.
Cost of sales improved by 30%, leading to a 7% gross margin improvement and a net profit of $107 million compared to a $156 million loss in the last second quarter.
Arm has made no changes to its full-year revenue guidance of between $3.8 billion and $4.1 billion.
In short, it was a solid second-quarter performance for Arm.
Pre-market trades did not appear to reflect this, as Arm shares fell more than 3%. But that was a short-lived blip, with shares surging nearly 4% higher once trading commenced.
Arm’s valuation is currently up 145% since its successful Nasdaq debut last September.