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## Arm Holdings Plc Shares Tumble on Lukewarm Revenue Forecast

(Bloomberg) – Arm Holdings Plc shares took a hit after the chip designer announced a less-than-enthusiastic revenue forecast for the fiscal year, sparking concerns about the slowdown in the tech industry’s artificial intelligence spending boom.

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For fiscal 2025, which concludes next March, Arm Holdings anticipates revenue between $3.8 billion and $4.1 billion, alongside a profit per share of $1.45 to $1.65. While analysts had projected total revenue of $4.01 billion – reflecting a 26% increase – and a profit of $1.53 per share.

The company’s shares plummeted by 10% to $95.25 in late trading following the announcement. Just three months ago, a positive forecast had sent the stock soaring, positioning the company as an AI frontrunner on Wall Street with a 41% increase in share value by Wednesday.

Arm, under the leadership of CEO Rene Haas, is leveraging its chip designs and licensing standards to solidify its presence in data center hardware, catering to the escalating AI demands driving major upgrades. By offering comprehensive technology blueprints to key players like Amazon.com Inc.’s AWS, Arm aims to expand its footprint in the industry.

In an interview, Haas expressed confidence in Arm’s long-term growth, attributing the convergence of strategic initiatives laid out in previous years to the company’s success.

The company anticipates a revenue growth rate of at least 20% in fiscal 2026 and 2027, as stated by Chief Financial Officer Jason Child during the call with analysts.

Arm projects sales of $875 million to $925 million in the June quarter, surpassing the average analyst estimate of $868 million. Additionally, the company expects earnings per share, excluding certain items, to range between 32 cents and 36 cents, contrasting Wall Street’s forecast of 31 cents.

During the fiscal fourth quarter ending in March, Arm reported revenue of $928 million, with profit per share of 36 cents. This performance exceeded average estimates of $880.4 million in revenue and 30 cents per share in earnings.

Arm’s unique position in the semiconductor industry lies in licensing essential software instructions and providing design blocks utilized by companies like Qualcomm Inc. to develop their products. The company’s shift towards offering complete layouts streamlines the manufacturing process, positioning it as a more direct competitor to Qualcomm while enhancing its value to data center owners.

Headquartered in Cambridge, England, Arm remains predominantly owned by SoftBank Group Corp., with an IPO in 2023 raising $4.9 billion – marking the largest debut on a US exchange that year.

The quarter saw a 60% increase in licensing sales to $414 million, alongside a 37% rise in royalty revenue to $514 million. Haas views licensing revenue as indicative of tech companies’ commitment to research and development investments.

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(Updates with CFO’s prediction for long-term revenue growth in seventh paragraph.)
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