Arm stock falls 12% as weak smartphone royalties offset AI data centre growth

What happened

Arm shares fell around 12% in regular trading on Thursday after its fiscal second-quarter results. Revenue rose 27% to $1.44 billion and adjusted earnings were 52 cents per share, but royalty revenue increased only 8% to $670 million, below analysts’ estimates, as higher memory prices pressured smartphones.

Confirmed

Global impact / market context

Royalty fees depend on partners shipping or selling chips built with Arm’s designs, so slower smartphone activity can limit growth in that revenue stream. Strong overall sales and earnings did not prevent the share decline when investors focused on the weaker royalty result.

Analyst inference

The article describes a contrast between growth in AI data centres and pressure in Arm’s established smartphone business. Higher memory prices were cited as weighing on smartphones, while the weaker-than-expected royalty figure drew attention despite revenue and adjusted earnings exceeding forecasts.

Confirmed

What to watch

1. Watch for future royalty revenue growth: it reflects fees tied to partners’ chip shipments or sales, and further weakness could indicate continued pressure from smartphones. Analyst inference
2. Watch for updates on memory prices and smartphone demand; the article says higher memory prices affected the market and pressured Arm’s royalty growth. Confirmed
3. Compare data centre gains with smartphone-related royalty results in later reporting to see whether growth in one area offsets weakness in the other. Analyst inference

Evidence

• invezz.com