Shares of Arm Holdings (ARM +2.71%) whipsawed last night on the chip design company's fourth-quarter earnings report.
The stock initially popped after the results came out as Arm beat estimates on the top and bottom lines, and showed off strong growth in the data center, echoing reports from peers like Intel and AMD.
However, the stock turned negative during the earnings call as the company called out supply chain risks for its new Arm AGI CPU chip, which marks the first time the company is selling its own silicon, rather than collecting revenue from licensing and royalties on its designs.
As of 11:28 a.m. ET, the stock was down 8.8%.
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Arm's wild ride
Arm has soared in recent weeks, first on the announcement of the new AGI CPU chip, and more recently as it becomes clear that CPU demand is climbing due to agentic AI, so today's pullback should be viewed in that context.
The company reported 20% revenue growth to $1.49 billion, with royalty revenue up 29% and licensing revenue up just 11%, due to weakness in the smartphone market. The overall number beat the consensus at $1.47 billion.
On the bottom line, adjusted earnings per share increased from $0.55 to $0.60, ahead of expectations at $0.58.
The stock was up initially on those numbers, but pulled back after it said it may not be able to secure enough chip supply to meet demand. While that's a good problem to have, in the context of a high-priced growth stock, it's enough to trigger a sell-off.
NASDAQ: ARM
Key Data Points
What's next for Arm
Arm's fiscal first-quarter guidance called for $1.21 billion-$1.31 billion in revenue and adjusted earnings per share of $0.36-$0.44.
Still, the main story to watch is the AGI CPU. The company expects $15 billion in annual revenue from the chip in 2031, with the bulk of that growth expected to come later between 2029 and 2031.
Now that Arm has entered the CPU market, investors should keep an eye on any updates as its success with the new chip is likely to be a major determinant in the performance of the stock.
