Arm Holdings PLC, a leading chip designer, announced its earnings for the fiscal second quarter of 2021. Despite posting a net loss of $110 million, or 11 cents per share, which was a decline from the previous year's earnings of $114 million, the company recorded an adjusted earnings per share of 36 cents, surpassing the FactSet consensus of 26 cents.
Revenue Growth and Record Quarter
Arm's total revenue for the quarter reached $803 million, compared to $630 million in the same period last year, exceeding analysts' expectations of $740 million. The company attributed this growth to its revenue sources, with $388 million generated from licenses and other sources and $418 million from royalties. Arm proudly declared that this was its highest-ever quarterly revenue total.
Strong Demand for AI-related CPUs
In their shareholder letter, Arm highlighted the growing demand for higher-performance CPUs driven by the increasing demand for artificial intelligence (AI) across various industries. They noted that companies are seeking to harness AI capabilities in cloud servers, smartphones, and automotive applications.
Challenges in Royalty Revenue
While Arm experienced success in its revenue growth, it also faced certain challenges. The company observed a 5% decline in royalty revenue compared to the previous year, primarily due to lower sales of smartphone chips.
Outlook for Q3 2021
Looking ahead, Arm forecasts revenue between $720 million and $800 million for the fiscal third quarter, with adjusted earnings per share ranging from 21 cents to 28 cents. Analysts had estimated $776 million in revenue and 27 cents in adjusted EPS.
Market Reaction
Following the earnings release, Arm's stock declined by 8% in late trading on Wednesday. It is important to note that Arm recently returned to the public markets in mid-September.
As AI continues to mature, Arm remains confident about its position in meeting the demand for higher-performance CPUs. The company expects further growth as industries increasingly invest in AI applications across various sectors.
