Arm Holdings’ (ARM) stock is down 9% after the British chipmaker issued worse-than expected revenue guidance
The company reported Fiscal fourth-quarter earnings per share (EPS) of $0.55, which beat the consensus estimate of $0.52. Revenue in the period totaled $1.24 billion, which was slightly ahead of the $1.23 billion that was forecast on Wall Street. It was the first time in the company’s 35 year history that its quarterly revenue surpassed $1 billion.
Despite the decent print, ARM stock is falling after management provided a disappointing outlook for the current quarter, saying they expect sales of $1.05 billion. That was below the $1.10 billion that analysts had penciled in for the company, sending its share price lower.
Arm Holdings cash flow. Source: Main Street Data
Tariff Concerns
Arm is different than other chipmakers in that it makes money by licensing its chip designs to semiconductor companies and smartphone makers such as Apple (AAPL), Qualcomm (QCOM) and others. The company’s most advanced chip called “Armv9” generates higher royalty rates than previous microchips and processors.
Until now, Arm appeared to be weathering the tariff volatility better than its American peers and rivals. Many analysts had been optimistic that Arm’s core customer base would remain steadfast despite the uncertainty caused by tariffs. But now, with the lowered sales guidance, it looks like tariffs and global trade tensions have caught up to Arm Holdings.
ARM stock is flat this year, having risen less than 1%.
Is ARM Stock a Buy?
The stock of Arm Holdings has a consensus Moderate Buy rating among eight Wall Street analysts. That rating is based on six Buy, one Hold, and one Sell recommendations issued in the last three months. The average ARM price target of $147 implies 18.74% upside from current levels. These ratings are likely to change after the company’s financial results.
