Arm CEO Rene Haas talks the impact of AI and smartphone demand

Here joining us now is ARM CEO, Renee Haas. Renee, it's great to have you on. Thanks for being here. Thank you so much. So you did just start trading in the NASDAQ 100. You went public back in September. We just talked about some of the stats, but the valuation of the company has tripled since that IPO valuation in September. Has the market reaction surprised you? You know, I don't know that I would say I'm surprised by the markets. I would say in general, we had a lot of confidence about our business going forward, particularly given the fact that we have such good visibility relative to our business model that when we reentered the public markets, we felt really, really good about our our financial performance. And and happily we've been able to consistently prove that. OK. So we know you're big in the mobile market, you're expanding further into PCs, You're working with not just the hyperscalers, but pretty much every one of the mega cap companies that are tech companies that are investing lots of money into custom silicon right now. Just last week, Massa, son of SoftBank, which still owns the vast majority of ARM, laid out his vision for the future of AI investing and talked a lot about the opportunity in robotics and data centers, autonomous driving in the role that ARM could potentially play in that. How do you see this new AI era evolving and what do you see as the greatest growth opportunities for ARM in it? Well, you know, ARM is the foundation of every electronic device that we use every day, whether it's your automobile, obviously the data center, when you connect to the cloud, your PC, your mobile phone, security cameras, they are all ARM based in some way. 70% of the world's population uses ARM. So when you think about the fact that we have such a broad reach in the platform and AI is going to find its way into literally every device I just mentioned, ARM is going to be the center of AI undoubtedly. So we are very excited candidly about all those markets I just mentioned because we're seeing strong demand for AI capability in each one of those. Renee, good to see you. So part of the case that you're making and that you made on the last earnings call is that your licensing revenue is going to accelerate because AI software is running ahead of hardware. It all kinds of upgrade cycles are going to have to to drive in order for the hardware to catch up with people and and the AI that they want to run. How should we expect to see that play out as investors are watching from the sidelines? Is it phones 1st and these AIPCSI mean things like cars and and washer dryers. They have longer upgrade cycles. It's happening really fast, John. And if I think if you think about mobile phones, for example, right when when Gemini was introduced last fall, the mobile phones that were designed to run Gemini, they didn't know about Gemini. That was two years prior to the product being designed, the Gemini came out. So what we're seeing from whether it's phones or PCs or automobiles or data center, everybody's trying to future proof because everyone knows that these AI capabilities are going to come, these devices, they undoubtedly need more and more compute capability. They need to be power efficient. That's all good for ARM. And I think something that sometimes is lost on folks is that this AI capability is being added on to the functionality that's already in these devices. It's not like you can throw away iOS or Android or Windows. You're you're still running those workloads, but now on top of that, you're running AI. So that is really just causing an insatiable demand for all things compute. Yeah, but where where should we expect to see it in part because will this just drive the premium end of the market? We see what Apple is doing with the high end phones being the ones that have the AI capability. ARM is a is a mass market royalty and and license player. Are those capabilities going to affect the broader ecosystem and and drive more licensing revenue across the whole thing or mainly just the premium side? I think so, John. I think so because the the premium market is typically the market first, it drives these features. But these AI capabilities, people are going to want them in the mid range and even in the low end. And in the phone market for example, as you mentioned iterates very fast annually as does PCSI expect over the next number of years that the vast majority of PCs will be what's called Aipcs, meaning they have to have some level of of capability. So starts in the premium segment, but waterfalls its way down. There's been some talk that perhaps you would start making your own AI chips that you would sell out into the market as well. Can you confirm that? Masa was asked the same question last Friday and I can't comment on any future road map products unfortunately.