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Arm Holdings shares saw a remarkable surge yesterday, shooting up 48% to a new record high after a surprisingly optimistic forecast. The company's expansion beyond smartphones has significantly contributed to its growth and profitability.
In its latest numbers, licensing sales surged by 18% to reach $354 million, while royalty revenue increased by 11% to $470 million. They predicted revenue of $850 million to $900 million for the three months ending in March, surpassing analysts' estimate of $778 million. Earnings are expected to be around 30 cents per share, excluding certain items, exceeding the 21-cent forecast.
Arm plans to develop more server chips, where the AI juice is at. Notably, the smartphone industry now represents approximately one-third of the company's sales.
Advancements in Arm technology embedded in smartphones have led to higher royalty payments. Their new V9 chips are selling well at higher rates.
Finally, Arm has gained market share in data centers and car markets. Arm's joint venture in China also delivered positive results, accounting for 25% of total revenue.
Arm is vastly smaller than Nvidia, our preferred semiconductor stock. But their pivot towards areas of potential is impressive. Arm is probably just at the beginning of its growth trajectory.
