UK chip designer Arm’s shares fall after disappointing revenue forecast

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Shares of UK chip designer Arm fell after its revenue forecast for the current quarter left Wall Street underwhelmed, in its first earnings report since going public in September.

Arm on Wednesday forecast revenue of between $720mn-$800mn for the quarter, falling short of analyst expectations. It anticipates between $2.96bn and $3.08bn in full-year revenue.

The shares were 7 per cent lower in after-market trading following the earnings release, taking it below its $51 a share initial public offering price.

The Cambridge-based company reported a $110mn loss in the three months ending September 30, as it revealed it had to pay out more than $500mn of remuneration costs following its listing in New York. When it went public, Arm had to settle shares that had been previously granted to employees.

The one-time expense offset better than expected revenue during the quarter as a result of its long-term licensing agreements with tech groups, as well as increased royalties on its intellectual property.

Arm’s revenue rose 28 per cent from a year ago to $806mn in the quarter, beating expectations of $746.5mn by analysts polled by Bloomberg.

Increased investment in artificial intelligence by Arm’s customers helped drive license revenue up 106 per cent year over year, the company said. 

The company’s IPO in September was the largest US listing in two years and raised almost $5bn, a move that fuelled hopes of a resurgence in the flagging listings market. Since then its shares have fluctuated.

SoftBank holds more than 90 per cent of shares in Arm. It acquired the business for $32bn in 2016. 

Arm is hoping a boom in AI will help fuel higher revenues as it seeks to shift away from its dependency on the cyclical smartphone market.