Chip Designer Arm Gives Tepid Annual Revenue Forecast

Revenue could be at 3.8 to $4.1 billion. Analysts had been predicting a total of just over $4 billion. We’re seeing quite a big drop though in after hours trading. Yeah, I mean look the reported quarter in the guide, we’re pretty solid and strong. We think the long term sort of AI story and the fundamental drivers remain intact. The, the driver for the miss, light miss in the fiscal year guidance was coming really from two major areas. One is networking and the other is the industrial IoT which most of the semiconductor companies exposed to this are seeing weakness here. So that’s not company specific, it’s just that end market is going to a cyclical bottom, there’s higher inventory reason the demand is weak. So that’s what sort of caused the shortfall versus what consensus had. But the drop sort of you’re seeing in the stock, the reaction is driven. We have seen that for a couple of other AI exposed names, this earnings. One example would be AMD where you know investors have these really lofty and ambitious expectations that these names sort of have to come and beat and raise their total revenue and EPS growth numbers above street. So which didn’t end up happening hence what you’re seeing in the stock price direction. Yeah, Kunjan because that’s right. I mean we it was just a slight miss here on on the forecast, but it’s it’s quite a steep drop here nearly 10% at this point in time. So is it the case, yes, the, the expectations are just too high from Wall Street or is it a real concern here that AI spending that spree could be slowing? I think it’s the first, I mean look we didn’t see any data points for Arms specific AI revenue projections. In fact we they actually gave outlook for fiscal 26 and fiscal 27 for growth above 20%. The street averaged slightly below 20% there. So that was according to us a pretty robust sign that they have strong visibility into almost two years out road map, which is mostly driven by the new design engagements coming from AI and their higher V9 architecture and sub subsystem. So again, there was no sort of weakness in the AI story per SE, but overall just the Wall Street and investors have been just set up this expectation that you just have to come in every quarter and beat your own sort of high already high ambitious projections. And Joe, we’re also seeing weakness when it comes to trading in Intel, right. That’s about almost a year low for trading in Intel’s share price. The expectation that revenue will fall below that midpoint of 12 1/2 to 13 1/2 billion dollars. How much of this is on, you know again the the announcement of the revoking of licenses from China, the the Huawei issues there. Yeah, well most of it is from that Huawei restriction and you know they should have press released after the the news broke out. And but again in a bigger picture look we expect this to be a few $100 million of impact which which will impact the next quarter guide as they’ve said. But however we think you know for the rest of the year this sort of what they could have shipped here could have been picked up with other with the other customers. So we don’t see that as a significant impact when we look at the fiscal year numbers and going forward other than Intel, you know there was also talk about Qualcomm, Qualcomm however even before this restriction was the revenues that they’re collecting from Huawei which is purely really on 4G products would have as such fallen off after this year. So we don’t see this really a material impact to either of these names on the long term, but does it complicate, do you think Intel’s turn around plan at all? Not really. Like I said, the product look when you look at the amount of laptops or desktops that Huawei was using Intel chips in and shipping and when you think about it, it’s less than low single digits in terms of the total market. So it really doesn’t move the needle that much for Intel turnaround plan.