The chip technology provider became the latest company in the semiconductor industry to report weak quarterly revenue and profit forecasts due to global trade tensions, and its shares fell more than 10% in premarket trading on Thursday.
Earlier, customers including Apple and peer Advanced Micro Devices said that comprehensive U.S. tariffs and tighter restrictions on the export of advanced semiconductors to China will bring additional costs.
Arm CEO Rene Haas told Reuters that the lower-than-expected performance guidance was due to a large licensing deal that may not be completed in the first fiscal quarter.
Unlike chip designers such as Nvidia and Advanced Micro Devices, the UK-based company makes money through licensing agreements for its intellectual property and royalties collected on each chip that uses its technology.
“Royalties may face tariff-driven end-demand headwinds, but this will be partially offset by Arm’s strong pricing/royalty rate inflation,” Citigroup analysts said in a report.
Arm’s chip architecture is widely used in smartphones and data center industries. The company forecast first-quarter revenue of between $1 billion and $1.1 billion, with the midpoint below the expected $1.1 billion. Fourth-quarter revenue was slightly above expectations.
Counterpoint Research said in April that it expects the smartphone market to decline this year due to economic uncertainty caused by tariffs.
“We remain focused on the LT (long-term) story, but caution that higher consumer exposure makes the company particularly vulnerable to macro impacts,” said Barclays analysts.
At least three brokerages cut their price targets on the stock after the results, with the median falling to $144.5, according to data compiled by the London Stock Exchange.
ARM shares trade at 58.76 times its earnings estimates for the next 12 months, while Nvidia trades at 24.49 and AMD trades at 20.96.
ARM has risen nearly 1% so far this year, while Nvidia and AMD have fallen nearly 13% and 17%, respectively, over the same period.
Related topics:
