Microchip technology researcher ARM Holdings (NASDAQ:ARMH) this morning reported a mixed bag of first-quarter results [link opens in PDF]. Following the report, ARM shares are trading 2.8% lower on the London exchange while falling 4.4% in pre-market action on the NASDAQ.
Revenue increased 15.6% year-over-year, landing at $305 million. License sales jumped 37% higher, and now represent 43% of ARM's total sales. Royalty revenues increased by 3%, held back by a $5 million deduction to correct overreported royalties from a key customer in earlier periods. Without this adjustment, royalties would have grown 8%.
Earnings increased 16% from the year-ago period, stopping at $0.28 per American depositary share.
Stateside analysts expected the London-based company to report earnings of $0.27 per ADS on $309 million in sales. ARM beat the Street's earnings estimates but fell short on revenue.
Management expects sales to decline along normal seasonal lines in the second quarter, only to come back for a strong second half of the year. Analysts currently see ARM delivering $1.3 billion in full-year 2014 sales, and the company is comfortable with that estimate.
"Q1 was a good start to the year for ARM, with more customers choosing to license ARM technology for their future products, which helped drive ARM's revenues," said ARM CEO Simon Segars in a prepared statement.
"Licences are a precursor to future royalty revenues," Segars continued. "Our customers are signing licences with a view to designing ARM technology into an increasingly wide range of markets from servers and supercomputers to embedded sensors and enterprise networking applications and thereby underpinning ARM's future royalty opportunity."