Shares of Arm Holdings (ARM) are down in after-hours trading after the chip maker reported earnings for its second quarter of Fiscal Year 2025. Earnings per share came in at $0.30, which beat analysts’ consensus estimate of $0.26 per share. Sales increased by 4.7% year-over-year, with revenue hitting $844. This also beat analysts’ expectations of $810 million.
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Looking forward, management now expects revenue and adjusted earnings per share for Q3 2025 to be in the ranges of $920 million to $970 million and $0.32 to $0.36, respectively. For reference, analysts were expecting $950.1 million in revenue along with an adjusted EPS of $0.34.
Why Did ARM Shares Fall?
Some people might be wondering why shares fell. After all, the company beat on earnings and revenue while guidance met expectations. However, the stock was already trading at a lofty valuation and saw its price rally into earnings. Therefore, it’s likely that today’s results were already priced in, which caused investors to “sell the news” (selling when expected news is announced).
Interestingly, TipRanks’ Bulls Say, Bear Say tool had warned about the company’s valuation. Indeed, the Valuation Concerns heading pictured below states that “much of the company’s current fundamental potential is already reflected in its relatively premium share price.”
What Is the Future of Arm Holdings?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on ARM stock based on seven Buys, two Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 162% rally in its share price over the past year, the average ARM price target of $144.29 per share implies that shares are trading at their fair value. However, it’s worth noting that estimates will likely change following today’s earnings report.
