Arm Holdings PLC (NASDAQ:ARM) shares jumped in early trading on Thursday, after the company reported upbeat quarterly results.
• ARM Holdings shares are climbing with conviction. Why is ARM stock surging?
Here are the key analyst insights:
- JPMorgan analyst Harlan Sur reiterated an Overweight rating, while cutting the price target from $180 to $145.
- Rosenblatt Securities analyst Kevin Cassidy reiterated a Buy rating, while trimming the price target from $180 to $175.
- KeyBanc Capital Markets analyst John Vinh maintained an Overweight rating, while lowering the price target from $200 to $170.
- Benchmark analyst Cody Acree reaffirmed a Hold rating on the stock.
Check out other analyst stock ratings.
JPMorgan: Arm Holdings reported revenues of $1.242 billion for the fiscal third quarter, up 9% sequentially and 26% year-on-year, above consensus of $1.23 billion, Sur said in a note. The company’s revenues were driven by better royalty revenues from smartphones and cloud data centers, he added.
Management guided to revenues of $1.470 billion at the midpoint, representing 18% sequential and year-on-year growth, the analyst stated. The guidance came slightly higher than consensus estimates, “on strong licensing revenues,” with continued strength in datacenter momentum and data center royalty revenue doubling year-on-year, he further wrote.
Rosenblatt Securities: Arm Holdings reported non-GAAP earnings of 43 cents per share, topping consensus of 41 cents per share, Cassidy said. The outperformance was driven by higher royalty revenues and slightly lower operating expenses, he added.
The company’s royalty revenue grew by 27% year-on-year to $737 million in the quarter, the analyst stated. “Management highlighted CSS as a key structural tailwind, noting continued traction as it helps customers shorten time-to-market and reduce integration complexity, which increases value per chip and supports royalty expansion,” he further wrote.
KeyBanc Capital Markets: Arm Holdings reported higher-than-expected royalty upside, driven by higher smartphone royalties and strong data center demand, Vinh said. He added that management indicated:
- Smartphone royalty rates per chip grew faster than the market
- Data center royalties grew more than 100% year-on-year
- The company gained share in the datacenter market
- Auto market grew by double-digits
Benchmark: Arm Holdings’ shares fell around 8% in after-hours trading on Wednesday, “as the investors struggled to square the company’s relatively modest upside results and guidance with its premium valuation,” Acree wrote in a note.
He further stated that the company’s projection of annual royalty growth slowing in the fiscal fourth quarter to the low-teens “versus its prior mid-20% growth rate over the past few quarters” added to the pressure.
The recent cautious comments from Qualcomm Inc (NASDAQ:QCOM), several peer component vendors and smartphone OEMs also led to investors considering the negative impact on handset units of component supply constraints and rapidly increasing memory prices, the analyst said.
ARM Price Action: Shares of Arm Holdings had risen by 7.76% to $113.04 at publication on Thursday.
Photo: Piotr Swat via Shutterstock
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