ARM Holdings quarterly profit surges as full-year revenues remain in line

Shares in ARM Holdings surged after the chip designer posted a jump in third-quarter pre-tax profit as revenue grew on the back of premium chip pricing and the broadening adoption of its technology, and said it has entered the final quarter of the year with strong royalty momentum.

Third-quarter pre-tax profit rose 27% on a normalised basis from the same period last year to £128.4m, on revenue of £243.1m, up 24%.

Processor royalty revenue was up 37% on the year, while processor licensing revenue rose 5%.

Chief executive Simon Segars said: “Q3 has been another strong quarter for royalty revenue growth, driven by premium chip pricing and elevated royalty percentages from recently introduced ARMv8-A based chips.

“These new chips are now shipping in a wide range of devices including smartphones, enterprise equipment such as base stations and servers, and consumer electronics such as digital TVs.”

ARM said it has seen growth in the adoption of its processor technology, with 38 processor licences signed for a broad range of applications, from sensors to smartphones, to servers.

In addition, it said it has maintained momentum in the licensing of advanced technology, underpinning future royalty revenue growth.

The company also pointed to growth in shipments of chips based on ARM technology, with 3.6bn ARM-based chips shipped, up 20% year-on-year.

ARM, which designs chips for Samsung and Apple, said it expects group dollar revenues for the full year to be in line with market expectations.

Investec, which rates the stock at ‘buy’, said royalties were very strong, beating both its and consensus estimates of $169.4m and $167.7m, respectively.

“These results show the strength of the royalty model, and support our positive view on the stock,” said the brokerage.

At 1103 BST, ARM shares were up 7.5% at 1,035p.