Arm reported a 47% year-over-year rise in fourth-quarter revenue of $928 million, with growth driven by demand for artificial intelligence applications. The company’s licensing business saw a 60% increase to $414 million, thanks to multiple high-value license agreements for AI chips. Royalty revenues also grew by 37% to $514 million, attributed to the increasing use of Armv9-based chips. Despite these positive figures, Arm’s stock fell 8.8% in premarket trading due to lackluster revenue guidance for the 2025 fiscal year, ranging between $3.8 billion and $4.1 billion.
Analysts had been expecting revenue of $3.99 billion for the full year, according to LSEG data. For the current quarter, Arm anticipates sales of $875 million to $925 million, compared to estimates of $857.5 million. While the company’s fourth-quarter results exceeded expectations for the third consecutive quarter, the full-year guidance midpoint fell slightly below consensus. However, analysts emphasized the strength of Arm’s licensing business as a positive indicator for future royalty growth. The combination of AI demand and Arm’s higher value v9 and Compute Subsystem solutions are expected to drive licensing upside and contribute to future royalties.
Citi analysts led by Andrew Gardiner reiterated their “buy” rating on Arm stock, citing the importance of licensing upside for future royalty growth. They noted that the company’s ability to meet AI needs and provide advanced solutions positions it well for increased revenue from licensing agreements. Although the revenue guidance for the 2025 fiscal year was lower than expected, analysts believe that the continued growth in Arm’s licensing business will drive future success. The company’s focus on providing valuable solutions for AI chips and advanced technologies is seen as a key factor in driving revenue growth and positioning Arm for continued success in the market.
Despite the drop in premarket trading due to revenue guidance concerns, analysts remain optimistic about Arm’s long-term prospects. The company’s performance in the fourth quarter, driven by strong results in the licensing business and growth in royalty revenues, demonstrates its ability to capitalize on the increasing demand for AI applications. With a solid foundation in licensing agreements and a focus on providing high-value solutions, Arm is well-positioned to benefit from future opportunities in the market. The combination of AI needs and Arm’s technological innovations bodes well for continued growth and success in the semiconductor industry.
Overall, Arm’s fourth-quarter results reflect a positive trend in revenue growth driven by demand for AI applications. Despite concerns about revenue guidance for the 2025 fiscal year, analysts see the company’s licensing business as a key driver of future royalty growth. With a focus on providing advanced solutions and meeting the needs of the AI market, Arm is primed for continued success and growth in the semiconductor industry. Investors may have been initially unimpressed with the revenue guidance, but the strength of Arm’s licensing business and strategic positioning for future growth are viewed as positive indicators for the company’s long-term prospects.
