Arm Holdings surges almost 60% after earnings

Arm Holdings (ARM.US), UK-based chip and software designer, is one of the best performing Wall Street stocks today. Share price surges almost 60% after the company reported fiscal-Q3 2024 earnings yesterday after the close of the Wall Street session. 

Company, which had IPO in 2023 and is still in 90% owned by SoftBank Group, reported much better-than-expected results for October - December 2023 period. Sales and profits turned out to be higher, while operating expenses were lower than expected. A strong free cash flow generation also highlights how successful the company was. Arm's executives said that its expansion beyond smartphone chips has been very successful, with smartphone-related products accounting for just a third of total sales. The company is expanding into data-center and automotive markets. Customers are using more and more chips from Arm Holdings per device and it helps fuel royalty revenue growth.

This positive outlook for the business translated into surprisingly bullish forecasts for fiscal-Q4 2024 and full fiscal-2024. This, in turn, is fuelling a massive share price gain during today's Wall Street session.

Fiscal-Q3 2024 earnings (October - December 2023)

• Revenue: $824 million vs $760 million expected
  • License and other revenue: $354 million vs $311.8 million expected
  • Royalty revenue: $470 million vs $448.9 million expected
• Annualized contract value: $1.16 billion vs $1.11 billion expected
• Adjusted gross profit: $797 million vs $746.1 million expected
• Adjusted gross margin: $96.7% vs 96.4% expected
• Adjusted operating expenses: $459 million vs $461 million expected
• Adjusted operating income: $338 million vs $274.4 million expected
• Adjusted operating margin: 41.0% vs 35.7% expected
• Adjusted net income: $305 million vs $262 million expected
• Adjusted EPS: $0.29 vs $0.25 expected
• Adjusted free cash flow: $724 million vs $126 million expected

Fiscal-Q4 2024 forecast (January - March 2024)

• Revenue: $850-900 million vs $778 million expected
• Adjusted operating expenses: 'about $490 million' vs $524 million expected
• Adjusted EPS: $0.28-0.32 vs $0.21 expected

Full-year fiscal-2024 forecast (April 2023 - March 2024)

• Revenue: $3.16-3.21 billion, up from previous guidance of $2.96-3.08 billion
• Adjusted operating expenses: 'about $1.70 billion', down from previous guidance of 'about $1.77 billion'
• Adjusted EPS: $1.20-1.24, up from previous guidance of $1.00-1.10

Arm Holdings (ARM.US) surges almost 60% today following the release of fiscal-Q3 2024 earnings. Stock trades over 100% above IPO price from mid-September 2023 ($51 per share). Source: xStation5