Shares of Arm Holdings (ARM) are down 10% after the British chipmaker issued forward guidance that disappointed analysts and investors.
The light guidance overwhelmed what was otherwise a strong second-quarter print from the company.
Arm reported earnings per share (EPS) of $0.40 U.S. versus $0.34 U.S. that had been forecast on Wall Street.
Revenue in the year’s second quarter totaled $939 million U.S., which beat consensus estimates of $902.7 million U.S. Arm’s revenue was up 39% from a year earlier.
Management said on an earnings call that the company continues to benefit from strong global demand for its microchips and processors that are used in smartphones and artificial intelligence (A.I.) applications.
However, despite the strong Q2 results, Arm Holdings maintained its full-year guidance that calls for $1.45 U.S. to $1.65 U.S. in earnings per share and $3.80 billion U.S. to $4.10 billion U.S. in revenue.
Analysts had $1.58 U.S. in earnings and sales of $4.02 billion U.S. penciled in for the company.
In addition to its guidance falling short of expectations, Arm also said that it is no longer going to report the number of microchips that it ships globally, starting in the current third quarter.
“As we shift our focus to higher-value, lower-volume markets such as data center servers, AI accelerators and smartphone applications processors, the number of chips reported as shipped is less representative of our performance,” said the company.
In this year’s second quarter, Arm reported shipping seven billion of its microchips, which can be found in nearly every smartphone.
However, the number of microchips shipped in Q2 of this year was down 10% from a year ago.
Going forward, Arm said it plans to focus more on the royalty revenue it generates from its microchips and processors.
The company currently has 33 microchip and semiconductor licenses that it earns regular royalty fees from.
The change in the company’s financial reporting structure has elicited a negative reaction from investors and analysts.
Prior to today (August 1), Arm’s stock had gained 137% since its initial public offering (IPO) last September and was trading at $144.17 U.S. per share
