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ARM Holdings PLC ADR (ARM)
NASDAQ:ARM
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ARM Holdings PLC ADR
(NASDAQ:ARM)
69Neutral
Positive Factors
Financial Performance
ARM reported a better than expected quarter, with revenue and EPS exceeding estimates and consensus.
Product Demand
Arm is expected to benefit from the rising demand for more powerful v9 cores and increased demand for devices like PCs, smartphones, and IoT devices, which are mostly Arm-based.
Royalty Growth
In FY26, royalty growth is forecasted to accelerate to over 30% helped by the rebound from inventory corrections in IoT and networking, and Arm's increasing share of cloud compute.
Negative Factors
Market Recovery
Royalties are expected to see a slight sequential decline as generally end markets are still in recovery mode.
Operating Expenses
Operating expenses are expected to remain elevated due to increased R&D, leading to lower earnings projections.
Valuation Concerns
Arm is now trading at 79x 2-Y forward PE, with an enormous premium to the SOX, NASDAQ, and comparables.
ARM Holdings PLC ADR (ARM) vs. S&P 500 (SPY)
Market Cap
$125.50B
Dividend YieldN/A
Average Volume (3M)5.02M
Price to Earnings (P/E)157.1
Beta (1Y)3.48
Revenue Growth25.73%
EPS Growth865.12%
CountryUS
Employees7,096
SectorTechnology
Sector Strength51
IndustrySemiconductors
Share Statistics
EPS (TTM)0.76
Shares Outstanding1,051,000,000
10 Day Avg. Volume4,487,174
30 Day Avg. Volume5,022,269
Financial Highlights & Ratios
PEG Ratio0.18
Price to Book (P/B)N/A
Price to Sales (P/S)77.28
Price to Cash Flow (P/CF)N/A
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$179.00Price Target Upside50.33% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering22
ARM Holdings PLC ADR Business Overview & Revenue Model
Company DescriptionArm Holdings plc architects, develops, and licenses central processing unit products and related technologies for semiconductor companies and original equipment manufacturers rely on to develop products. It offers microprocessors, systems intellectual property (IPs), graphics processing units, physical IP and associated systems IPs, software, tools, and other related services. Its products are used in various markets, such as automotive, computing infrastructure, consumer technologies, and Internet of things. The company operates in the United States, the People's Republic of China, Taiwan, South Korea, and internationally. The company was founded in 1990 and is headquartered in Cambridge, the United Kingdom. Arm Holdings plc operates as a subsidiary of Kronos II LLC.
How the Company Makes MoneyARM Holdings makes money primarily through licensing its intellectual property to semiconductor companies and device manufacturers. The company's revenue model is based on licensing fees and royalties. When companies use ARM's architecture to design their chips, they pay an initial license fee, followed by ongoing royalties based on the number of chips produced or sold. ARM's key revenue streams include the mobile and computing markets, where its technology is integral to the function of smartphones, tablets, and increasingly, laptops. Additionally, ARM has significant partnerships with major technology companies and silicon manufacturers, which contribute to its earnings through collaborative design and innovation projects. The company's strategic focus on expanding its presence in the IoT and automotive sectors is also a growing source of revenue.
ARM Holdings PLC ADR Financial Statement Overview
Summary
ARM Holdings PLC ADR is in a strong financial position with impressive profitability and efficient operations, bolstered by a solid balance sheet. While cash flow metrics are strong, the decline in free cash flow growth rate indicates potential areas for enhancement. The company is well-positioned in the semiconductors industry but should focus on improving its ROE and managing operational costs to maintain its growth trajectory.Income Statement
ARM Holdings PLC ADR demonstrates robust financial performance with a TTM gross profit margin of 94.69% and net profit margin of 21.82%, indicating strong profitability. The revenue growth rate from the previous annual period to TTM is 14.25%, showcasing healthy growth. Both EBIT and EBITDA margins are solid, at 11.99% and 16.65% respectively, reflecting operational efficiency. However, a decline in EBIT margin from the earlier periods suggests rising operational costs or competitive pressures.85
Very Positive
Balance Sheet
The balance sheet reflects a strong financial position with a low debt-to-equity ratio of 0.04, indicating minimal leverage. The equity ratio is high at 75.55%, highlighting financial stability. Return on Equity (ROE) is 12.56%, which is decent but has room for improvement. The company benefits from solid equity backing but should aim to enhance ROE to maximize shareholder value.78
Positive
Cash Flow
The cash flow analysis shows a stable cash generation with a TTM free cash flow of $626 million. The operating cash flow to net income ratio is 1.00, demonstrating effective conversion of income to cash. The free cash flow to net income ratio stands at 0.78, indicating a significant portion of net income is translated into free cash flow. However, the free cash flow growth rate compared to the previous period is -33.90%, suggesting a need for improvement.82
Very Positive
| Breakdown | ||||
| TTM | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 3.69B | 3.23B | 2.68B | 2.70B | 2.03B | Gross Profit |
| 3.50B | 3.00B | 2.57B | 2.57B | 1.88B | EBIT |
| 443.00M | 111.00M | 671.00M | 633.00M | 239.00M | EBITDA |
| 615.00M | 279.00M | 855.00M | 865.00M | 443.00M | Net Income Common Stockholders |
| 806.00M | 306.00M | 524.00M | 549.00M | 388.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 2.67B | 2.92B | 2.21B | 1.64B | 0.00 | Total Assets |
| 8.50B | 7.93B | 6.87B | 6.51B | 0.00 | Total Debt |
| 271.00M | 226.00M | 219.00M | 261.00M | 0.00 | Net Debt |
| -1.76B | -1.70B | -1.33B | -743.00M | 0.00 | Total Liabilities |
| 2.08B | 2.63B | 2.81B | 2.96B | 0.00 | Stockholders Equity |
| 6.42B | 5.29B | 4.05B | 3.55B | 0.00 |
| Cash Flow | Free Cash Flow | |||
| 626.00M | 947.00M | 646.00M | 383.00M | 1.07B | Operating Cash Flow |
| 806.00M | 1.09B | 739.00M | 458.00M | 1.23B | Investing Cash Flow |
| -17.00M | -516.00M | -138.00M | -619.00M | -340.00M | Financing Cash Flow |
| -296.00M | -208.00M | -42.00M | -32.00M | -789.00M |
ARM Holdings PLC ADR Technical Analysis
Neutral
119.07
Price Trends
141.89
Negative
140.33
Negative
142.73
Negative
Market Momentum
-6.54
Negative
46.90
Neutral
74.74
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ARM, the sentiment is Neutral. The current price of 119.07 is below the 20-day moving average (MA) of 122.10, below the 50-day MA of 141.89, and below the 200-day MA of 142.73, indicating a neutral trend. The MACD of -6.54 indicates Negative momentum. The RSI at 46.90 is Neutral, neither overbought nor oversold. The STOCH value of 74.74 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for ARM.
ARM Holdings PLC ADR Risk Analysis
ARM Holdings PLC ADR disclosed 88 risk factors in its most recent earnings report. ARM Holdings PLC ADR reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
ARM Holdings PLC ADR Peers Comparison
Overall Rating
UnderperformOutperform
Sector (58)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $173.44B | 16.76 | 41.96% | 2.14% | 12.13% | 36.17% | |
75 Outperform | $2.87T | 40.06 | 119.18% | 0.03% | 114.20% | 146.26% | |
73 Outperform | $172.48B | 106.10 | 2.89% | ― | 13.69% | 91.75% | |
69 Neutral | $125.50B | 157.11 | 14.11% | ― | 25.73% | 865.12% | |
65 Neutral | $162.88B | 34.45 | 28.25% | 2.97% | -10.72% | -26.60% | |
58 Neutral | $22.11B | 10.47 | -17.86% | 2.40% | 4.75% | -24.81% | |
54 Neutral | $105.05B | ― | -18.31% | 2.06% | -2.08% | -1212.72% |
* Technology Sector Average
Performance Comparison
ARM
ARM Holdings PLC ADR
124.85
-13.46
-9.73%
AMD
Advanced Micro Devices
113.85
-64.78
-36.26%
INTC
Intel
24.22
-17.18
-41.50%
NVDA
Nvidia
121.41
26.44
27.84%
QCOM
Qualcomm
160.08
-4.15
-2.53%
TXN
Texas Instruments
185.51
19.31
11.62%
ARM Holdings PLC ADR Earnings Call Summary
Earnings Call Date: Feb 5, 2025 | % Change Since: -31.28% | Next Earnings Date: May 7, 2025
Earnings Call Sentiment Positive
Arm demonstrated strong financial performance with record revenues and growth in key areas, particularly in AI and data centers. However, challenges such as flat Armv9 contribution and increased operating costs present areas of concern.Highlights
Record-Breaking Revenue and Growth
Arm reported record total revenue of $983 million for Q3, a 19% year-on-year increase, and record royalty revenue of $580 million, up 23% year-on-year, exceeding expectations.
Strong Demand for v9 and CSS
There was strong adoption of Armv9 and CSS technologies across all end-markets, including smartphones, data centers, networking, and automotive, contributing significantly to revenue growth.
Data Center and AI Expansion
Arm gained market share in the data center with AWS Graviton, Microsoft Cobalt, Google Axion, and NVIDIA's Grace ARM-based chips. Notable projects include NVIDIA's Project DIGITS and Stargate with OpenAI and SoftBank.
Positive Outlook and Guidance
For Q4, Arm expects revenue between $1.175 billion and $1.275 billion, representing a 32% year-on-year growth at the midpoint. Full-year revenue is expected to grow by about 24% year-on-year.
Lowlights
Flat Armv9 Contribution
Armv9 adoption as a percentage of total royalties remained flat at 25% for several quarters, not meeting initial expectations of a 5% increase each quarter.
Increased Operating Costs
Non-GAAP operating expenses reached a high of $522 million in Q3, driven by increased R&D investments, with expectations of further increases to $590 million in Q4.
Licensing Revenue Growth Slowdown
Annualized contract value (ACV) growth slowed to 9% year-on-year, below recent run rates, though above long-term expectations.
Company Guidance
In the recent fiscal 2025 Q3 earnings call, Arm reported record revenues, with total revenue reaching $983 million, marking a 19% year-on-year growth, and royalty revenue hitting a record $580 million, up 23% year-on-year. The company's strong performance was driven by increased adoption of Armv9 technology and Compute Subsystems (CSS), especially in smartphones, data centers, and IoT devices. The call also highlighted Arm's strategic investments in AI and CSS, with expectations to continue this trend into fiscal 2026. For the upcoming Q4, Arm provided guidance for revenue between $1.175 billion and $1.275 billion, representing a 32% year-on-year growth at the midpoint. Additionally, for the full fiscal year, Arm expects total revenue to reach approximately $4 billion, with a royalty revenue growth rate in the high-teens and license revenue expected to grow around 30% year-on-year. Non-GAAP operating expenses are projected to be about $2.1 billion, reflecting a 21% increase, and non-GAAP EPS is anticipated to be between $1.56 and $1.64.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.