Arm Holdings Surpasses Q2 Earnings Estimates, Stock Declines in After-Hours Trading

Arm Holdings Q2 Earnings Exceed Expectations Despite After-Hours Stock Dip

Q2 Performance Highlights
Chipmaker Arm Holdings reported robust second-quarter earnings, surpassing Wall Street expectations. The company posted adjusted earnings per share (EPS) of $0.30, beating the forecast of $0.26. Revenue reached $844 million, exceeding the projected $744.31 million and marking a 5% year-over-year increase.

Revenue Drivers
Arm’s revenue growth was propelled by record royalty earnings, particularly from its advanced Armv9 architecture and a recovering smartphone market. Royalty revenue rose by 23% to $514 million, while license revenue slightly declined by 15% to $330 million, due to typical fluctuations in large licensing agreements.

CEO Insights
Rene Haas, Arm’s CEO, highlighted the company's expanding influence in the AI sector. “Demand for our high-performance Armv9 and CSS compute platforms continues to exceed expectations,” Haas noted, adding that “AI’s growth presents new opportunities for the Arm platform from cloud to edge computing.”

Outlook for Q3
For the upcoming quarter, Arm forecasts EPS between $0.32 and $0.36 and revenue of $920-$970 million, aligning with analyst estimates of $0.34 EPS and $945 million in revenue. The company’s non-GAAP gross margin was an impressive 97.2%, though the operating margin fell to 38.6% due to engineering investments.

Key Metrics
Arm’s annualized contract value (ACV) grew 13% year-over-year to $1.253 billion while remaining performance obligations (RPO) rose 10% from the previous quarter to $2.385 billion.