Arm CEO Is Confident About Their Growth Rate

There does seem to be a worry about your full year forecasts. Are you being cautious? Well, thanks both for having me, Ed and Caroline. We just came off a record year in terms of revenue. We were up 20%, a little bit over 20% our fiscal 23 to from 2022 and we’re actually forecasting even higher growth this year north of 20%. And we also signaled to the markets yesterday that in 252627 we see that growth continuing. So we have incredible visibility to our business and we’re very, very confident of this growth rate going forward. We’re just seeing your shares actually ticking to positive territory, Renee up now 6/10 of 1%. The underlying story is the build out in in AI infrastructure, right. We’re talking about data centre powered GP by GP US. Your numbers were good. Tell me about the underlying demand then about the long term and the addressable market you think is either intact or is not. Well, I think this, this AI build out as you described or maybe said another way, just expanding capacity to run these foundation models to do more and more training, to do more and more inference. We really are only at the very beginning because when you start to think about the capabilities that this could unleash, whether it’s around healthcare, pharma, research, productivity gains, call centers, we’re still in the very, very early days. That all starts with having to do this level of training and inference in the cloud. But it ultimately will find itself into every single Edge device, whether that’s APC, your smartphone, your car, and whether it’s all those devices I’ve mentioned from the data center to the edge devices, they all run unarmed. So we have incredible visibility to where this is all going, which is why we’re very confident in the growth rates. They’re also one of the big problems you’ve got with all of these AI data centers is around energy and power. So power efficiency being so key, it’s what ARM is really good at. Increasingly, we’re seeing the most complex applications moving to ARM and most sophisticated training chip on the planet that was just announced Grace Blackwell, well, that’s based on ARM, OK. So you’re managing to really think that you’re going to be the server play as well as the PC play, the cell phone play. And I want to focus in on the cell phone play, Renee, because that’s been where your bread and butter has been in history. How are we looking from a smartphone perspective? Is the market looking strong to you? We’ve had many a mixed message coming from China demand for example. Overall, what we’ve seen the smartphone market particularly for ARM has been quite a good growth rate in terms of royalties. Our version 9, which is now being used in many of the premium mobile phones, that drives a higher royalty rate for ARM. There’s also more complex CPUs that go into that, that’s also better for ARM. And going forward, Caroline, one of the things that we’re seeing, and it’s not just in smartphones, is that as these AI models are moving so fast, the hardware can’t keep up with the software. The software innovation is happening so quickly that by the time the hardware is ready to run those models, everyone wishes they had, they had more performance, they had more efficiency. So what does that mean for ARM? It’s driving growth in our licensing activity. People are looking to do more and more design ships, faster and faster, and that’s all all good for us going forward. So I think going forward, you’re going to see more and more innovation happening, not only the smartphones but across all these Edge devices. What’s interesting Renee, is it’s hard to keep up with the pace of geopolitical change as well. The latest news coming that Huawei of course is not going to have access to Qualcomm to Intel chips. You are of course a UK based company, but are affected by US policies. Has this impacted your business, the limitations of Huawei’s access to chip designed to chip technology to licenses? Yeah. So that that issue that you’re referring to specifically was when Huawei was placed on the entity list, I think 2019-2020 companies had to apply for a license to exempt them to ship to Huawei. So a number of companies asked for those licenses, they got those licenses. Now those licenses are being revoked. We don’t fall in that category in any way, shape or form. We didn’t apply for any licenses at the time to ship. We complied with the export controls as they were laid out. So there’s really it’s a non event for us in terms of the what you’re seeing with Qualcomm and or Intel. We’re speaking live to the Arms CEO, Renee Hass, we’re on the ground here at Bloomberg Tech in San Francisco last week. Renee Cristiano Amon was on the show telling Caroline and I, this is the year of the AIPC. You were asked about that on your earnings call last night and you gave a slightly different answer. Maybe it’s not the year of the AIPC, more than 12 to 36 month window and you don’t want to see just one PC supplier. You said you’d like to see two or three. What’s your beef with Qualcomm? You know, when I look at the the PC ecosystem, one large ecosystem has already moved to ARM in a very big way. Apple is now 100% based on ARM. All the Apple silicon is based on ARM. And you see amazingly good products relative to what they’ve delivered. Fantastic battery life. Performance thin and light. No fans. When you think about the Windows market, it’s a very different market. It’s highly fragmented. You have lots of different players. The ecosystem matters, The channel matters, Price points matter. High end gaming machines versus low end devices that are like cloud enabled. So what does all that mean? It generally has meant that ref vendor choice, multiple options to provide a full scope is what matters. And what I’m hearing is over the next couple of years, the Windows ecosystem is going to be able to afford that. And I think over the next 2-3 years, I do believe Windows Unarmed will be will be real. I think you’ll see multiple players, multiple price points, multiple units and I think you’ll see meaningful market share that we start to gain. The kind of performance you see in the other ecosystem, I think will find its way into the Windows ecosystem. Renee, I wanted to talk about geography really quick. We’re here in San Francisco, right? There’s a lot about America’s R&D focus on AI related chips. Are you seeing this sort of equivalent activity in Europe, for example, Any of your customers outside of those markets? Yeah, well, I’m in San Francisco today too, so I will see you a little bit later. But in general, I think the geopolitics are something that all tech CEOs are now having to figure out and work with. AI models, foundation models, sovereign clouds, thinking about what level of training takes place in a country versus outside the country where the weights sit, etcetera. These are all the kind of things that politicians have never really had to think about in the past. So we’re involved in a lot of those conversations, Ed, whether that’s in the United States, whether that’s in Europe. And really just trying to understand it because I think the lawmaker is in, in all these jurisdictions are just trying to figure it all out. And as I mentioned before, as the software and models are moving so fast, it’s difficult for everyone to keep up. But we are, we are central to all those discussions, Renee, what’s been keeping up is your valuation boy. I mean, do you think there’s too much exuberance around AI valuations out there? Are you going to make the most of it by what we’ve talked to one point of listing in the UK too? Yeah. You know I I don’t think about the valuations as much as I just think about the AI opportunity which I frankly believe is is under called in terms of just what it’s going to mean relative to society and what it can do for our planet. I think again we are in very, very early days in terms of the capabilities of what this can unleash for our society, incredibly excited to be part of it. But I don’t think we’re part of a a hype cycle at all. I think there’s a lot of innovation taking place and you know, frankly, the innovation that’s taking place, any inventions that we’re seeing, it’s just breathtaking. So no, I don’t personally view it as a hype cycle at all.