Investing.com -- Arm Holdings on Wednesday delivered softer-than-expected guidance that overshadowed better-than-expected quarterly results, sending its shares tumbling over 11% in the premarket trade.
The chip designer's guided fiscal Q2 adjusted earnings between $0.23 and $0.27 a share, missing analyst estimates of $0.28. Revenue was forecasted in a range of $780M to $830M, or $805M at the midpoint, also falling shy of Wall Street estimates of $812.8M.
The company reported fiscal Q1 adjusted earnings of $0.40 a share on revenue of $939 million, beating estimates of $0.35 and $906.5M respectively.
The better-than-expected results were driven by a 39% surge in revenue in Q2 from a year earlier, underpinned by "record license revenue and strong growth in royalty revenue," the company said.
"The proliferation of AI everywhere is driving more companies to make broad and long-term commitments to use Arm’s power-efficient technology in their future products," the company said in its quarterly earnings statement released Wednesday.
Full-year guidance for adjusted EPS of $1.45 and $1.65 on revenue of $3.80B to $4.1B was unchanged. That compared with analyst estimates for adjusted EPS of $1.57 on revenue of $3.99B.
"While we still see the future of Arm as one we’d like to be a part of, we acknowledge the questions that might be raised after this print," Guggenheim analysts said in a post-earnings note.
"Nevertheless, we expect Armv9 to continue to drive outsized growth to be aided by CSS next year, and while we believe there are few clear beneficiaries to the AI story beyond Nvidia (NASDAQ:NVDA), we believe that Arm shares that spotlight," they added, maintaining a Buy rating on the stock.
Separately, despite a mixed report, Mizuho analysts highlighted strong AI handset adoption from ARM's print, which they believe is "key to driving handset refresh and ARM outlook."
"ARM was off in after-hours as company as maintained guide for a premium valuation stock given high Networking/IoT inventory, but key we believe is handset AI and Custom Si ramps ahead," they noted.
Yasin Ebrahim contributed to this report.