Arm shares slump as weak forecasts fuel investor worries

Arm Holdings shares sank more than 10% in premarket trade on Thursday after the chip tech provider became the latest in the semiconductor industry to provide a weak quarterly revenue and profit forecast due to global trade tensions.

The forecast comes after customers, including Apple and peer Advanced Micro Devices, flagged additional costs from the sweeping U.S. tariffs and tighter curbs on the export of advanced semiconductors to China.

Arm CEO Rene Haas told Reuters the below-expectations guidance is due to a large licensing deal that may not close during the fiscal first quarter.


Unlike chip designers like Nvidia and Advanced Micro Devices, the UK-based company makes money via licensing deals for its intellectual property and a royalty charged for each chip sold that uses its technology.

"Royalties will likely face tariff-driven end demand headwinds, offset somewhat by Arm's strong pricing/royalty rate inflation," Citigroup analysts said in a note.

Arm, whose chip architecture is used across the smartphone and data center industries, forecast first-quarter revenue of $1 billion to $1.10 billion, with its midpoint below expectation of $1.10 billion. Its fourth-quarter revenue slightly beat estimates.

Counterpoint Research in April said it expects the smartphone market to decline this year due to economic uncertainty from tariffs.

"We remain engaged on the LT (long term) story but caution that the high consumer exposure leaves the company particularly vulnerable to the macro," Barclays analysts said.

At least three brokerages cut their price targets on the stock following the results, bringing the median to $144.5, according to data compiled by LSEG.

ARM shares trade at 58.76 times the estimates of its earnings for the next 12 months, compared with Nvidia's 24.49 and AMD's 20.96.

So far this year, ARM has gained nearly 1%, compared with Nvidia and AMD's loss of nearly 13% and 17%, respectively, in the same period.