Arm Holdings Stock Update: A Closer Look at Thursday's Movement

Arm Holdings Plc (NASDAQ: ARM) saw its shares dip initially on Thursday following the release of its second-quarter financial results. However, the stock quickly rebounded as positive revisions from analysts came into play. Here’s an overview of what happened.

Financial Highlights

Arm reported its second-quarter adjusted earnings at 30 cents per share, surpassing analyst expectations of 26 cents per share, according to data from Benzinga Pro. The company also announced a revenue of $844 million for the quarter, exceeding the forecasted $808.37 million.

Breaking down the revenue, Arm generated $330 million from licensing and other sources, while royalties accounted for $514 million. Notably, royalty revenue rose by 23% compared to last year, driven by the increasing adoption of the Armv9 architecture and a recovery in the smartphone market.

In terms of cash flow, Arm recorded $475 million in trailing 12-month free cash flow and finished the quarter with $2.36 billion in cash, cash equivalents, and short-term investments.

Rene Haas, CEO of Arm Holdings, expressed confidence in the company’s performance, stating, "Demand for our high-performance Armv9 and CSS compute platforms continues to exceed expectations, contributing to our licensing and royalty revenue growth. The rise of AI is creating new opportunities for the Arm compute platform across various sectors, from cloud computing to edge applications."

Future Projections

Looking forward, Arm provided guidance for the third quarter, projecting revenue between $920 million and $970 million, with adjusted earnings per share anticipated to be between 32 cents and 36 cents. For the full fiscal year 2025, the company expects revenue to range from $3.8 billion to $4.1 billion and adjusted earnings per share between $1.45 and $1.65.

Analyst Ratings Adjustments

Following the earnings announcement, several analysts revised their price targets for Arm shares:

• Mark Lipacis from Evercore ISI Group maintained an Outperform rating and increased the price target from $173 to $176.
• Blayne Curtis of Barclays upheld his Overweight rating, raising the price target from $125 to $145.
• Chris Rolland from Susquehanna kept a Neutral rating while boosting the price target from $115 to $118.
• Toshiya Hari of Goldman Sachs sustained a Buy rating and raised the price target from $144 to $159.
• Harlan Sur from JP Morgan maintained an Overweight rating and increased the target from $140 to $160.
• Charles Shi from Needham reiterated a Hold rating.

Strategic Partnership Announcement

On the same day, Arm announced a notable partnership with Panasonic Automotive Systems. The goal of this collaboration is to standardize automotive architecture specifically for software-defined vehicles. The companies plan to implement and expand the VirtIO device virtualization framework, which aims to separate automotive software development from hardware, thereby accelerating development cycles within the automotive industry.

Current Stock Performance

As of the latest data, Arm shares are trading approximately 4.01% higher, coming in at $150.48.

Arm, Stock, Earnings