Arm Holdings Stock Slides On Q3 Earnings: Revenue Beat, EPS Beat, Revised Guidance And More

Arm Holdings Plc ARM announced its financial results for the third quarter of fiscal year 2025 after market close on Wednesday. Let's take a closer look at the report.

Q3 Earnings: Arm reported third-quarter revenue of $983 million, surpassing analyst expectations of $946.73 million. The chip designer also reported adjusted earnings of 39 cents per share, exceeding the predicted 34 cents per share. These highlights indicate a strong performance for the company.

Overall revenue increased by 19% year-over-year, primarily due to record royalty revenue and sustained growth in license revenue. Royalty revenue experienced a remarkable 23% year-over-year growth, largely attributed to the ongoing adoption of Armv9 architecture and increased utilization of Arm chips in data centers and improvements in Internet of Things (IoT) applications.

The company also reported an annualized contract value (ACV) rising 9% year-over-year to $1.27 billion. In terms of cash flow, Arm's free cash flow for the quarter amounted to $349 million. By the end of the quarter, the company had $2.67 billion in cash, cash equivalents, and short-term investments.

Rene Haas, CEO of Arm Holdings, remarked, "Arm delivered record third-quarter revenue driven by continued strong adoption of Armv9 and CSS compute platforms. With our high-performance, energy-efficient, flexible technology, Arm is a key enabler in advancing AI innovation and transforming the user experience, from the edge to the cloud."

Guidance: Looking ahead, Arm expects fourth-quarter revenue to range between $1.175 billion and $1.275 billion. The anticipated adjusted earnings for the fourth quarter are projected to be between 48 cents and 56 cents per share.

The company also refined its full-year guidance, now anticipating total revenue of $3.94 billion to $4.04 billion and adjusted earnings for the full year of $1.56 to $1.64 per share.

Arm executives are scheduled to discuss the quarterly results in detail during a call with investors and analysts at 5 p.m. ET.

ARM Price Action: Following the earnings announcement, Arm shares fell by 6.99%, trading at approximately $161.25 in after-hours sessions.

Conclusion: Despite strong revenue and earnings beats, Arm's stock price saw a significant drop. Investors will be watching closely as the company navigates the remainder of the fiscal year.

Earnings, Stocks, Guidance