Shares of Arm Holdings PLC (NASDAQ:ARM) fell nearly 8% in extended trading on Wednesday after the British chip designer issued a full-year forecast that came in well below Wall Street expectations, overshadowing better-than-expected fourth-quarter earnings.
Arm projected fiscal 2026 revenue in the range of $3.94 billion to $4.04 billion, significantly lower than analysts’ average estimate of $4.91 billion, according to LSEG data. The company also guided adjusted earnings per share between $1.56 and $1.64, trailing the consensus estimate of $2.03.
For the current quarter, Arm expects revenue between $1 billion and $1.1 billion, with adjusted EPS of $0.30 to $0.38—both below analysts' expectations.
Despite the weaker outlook, the SoftBank-backed company reported strong growth for the March quarter, with revenue rising 34% year-over-year to $1.24 billion, beating the $1.23 billion estimate. Adjusted earnings rose 53% to $0.55 per share, while adjusted operating income jumped 68% to $655 million.
CEO Rene Haas said the company delivered “record-breaking results” and noted demand for Arm's chip designs is being driven by the accelerating shift to AI and energy-efficient computing.
“Arm is uniquely positioned to lead this shift from cloud to edge, as more software is being written first for Arm-based chips,” Haas said in a statement.
Royalty revenue rose 18% to $607 million, benefiting from adoption of its Armv9 architecture, particularly in smartphones, where royalty revenue increased 30% year-over-year despite modest unit growth. Licensing and other revenue surged 53% to $634 million.
The company also highlighted recent design wins with NVIDIA, Google, and Microsoft, and noted its first automotive license for a custom system-on-chip platform.
Arm ended the quarter with $2.83 billion in cash and short-term investments and reported free cash flow of $163 million.