Microprocessor designer Arm is up as much as 64% at the opening of the trading session this Thursday. Investors are celebrating that the company raised its profit forecasts this Wednesday after the market closed on demand for microprocessors due to the rise of artificial intelligence. The company's stock, which went public at $51 per share, reached a high of $126.58 per share, gaining about 148% in value in just under five months. The company controlled by Softbank already has a valuation of around 130 billion dollars (around 120 billion euros) on the stock exchange.
Shares rose more than 40% outside of regular session hours on Wednesday. With the opening of the Nasdaq session, the rise began to be a little more moderate, but then stocks skyrocketed. The shares of the Japanese group Softbank, which still controls 90% of the capital, rose by 11% this Thursday thanks to the revaluation of the subsidiary that it launched in the largest initial public offering in two years.
The company posted revenue of $824 million in its fiscal third quarter, up 14% from a year earlier, the U.S. Securities and Exchange Commission said Wednesday. Rights revenue rose 11% to a record $470 million, driven by a recovery in the semiconductor industry and most advanced chips. License billings rose 18% to $354 million, a significantly better figure than expected, driven by strong demand for computing capacity due to the boom in artificial intelligence investments.
These are the magic words for investors: artificial intelligence. The new technology has allowed Arm to raise its revenue forecasts for the full year (which in its case ends in March) from $2,960 million to $3,080 million to $3,155 million to $3,205 million. At the same time, the forecast for operating expenses will also be reduced from around 1,765 to around 1,700 million. This increases EPS guidance from $1.00-1.10 to $1.20-1.24, a 16% increase at the midpoint of the range. The improvement in full-year guidance is consistent with a further improvement in estimates for the current fiscal fourth quarter, in which the company expects earnings per share of 28 cents to 32 cents, above last year's range of 21 cents to 28 cents .
“We feel very, very well positioned for growth,” the company’s chief executive, Rene Haas, said in a conference with analysts where artificial intelligence acronyms were uttered thirty times. “Arm delivered another quarter of record sales, driven by continued adoption of the world's most ubiquitous computing platform,” he said. “The AI wave has driven license growth as these new devices require Arm’s powerful and energy-efficient computing platform,” he added.
“Arm technology is increasingly being used in chips. And as the amount of Arm technology in chips increases, so does the license fee. Approximately 35% of Arm's total rights revenue comes from smartphones, so we have benefited from the recovery in the smartphone market. But with 65% coming from markets beyond mobile, we see stronger revenue growth through share gains and market share growth outside of mobile,” explained CFO Jason Child at the same conference.
Haas and Child said customers are rolling out a new version of their technology called V9, which has twice as many usage rights as its predecessors. Microsoft's new server chips also use more Arm computing cores. The company is also gaining market share in other industries. “We see an increase in the market share of our products in general, especially in the area of automotive and data center infrastructure,” said Haas, who also allayed geographical concerns: “In China the growth is very good,” he assured.
Arm's microprocessor designs are used by major companies in the industry to make chips. Apple, Intel, AMD, Nvidia and Qualcomm, among others, use the British technology group's designs to develop their products. ARM processors (CPUs) run the vast majority of the world's software, including operating systems and applications for smartphones, tablets and PCs, data center and networking devices, and vehicles, as well as operating systems embedded in devices such as digital clocks, thermostats, drones and industrial robotics. Arm designs custom chips and acquires a percentage of the intellectual property.
The company is penetrating segments that continue to boom, such as cloud computing and smart cars. It now offers to move designs directly into the manufacturing phase, a system aimed at less specialized customers such as cloud computing companies.
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