The stock of Arm Holdings Plc (ARM) surged over 20% in after-hours trading on Wednesday following robust earnings and an optimistic outlook amid rising demand for artificial intelligence processing.
The British semiconductor designer posted adjusted earnings per share of 29 cents for the third quarter of fiscal 2024, up from 22 cents in the previous year. Revenue climbed 14% to $824 million as the company expanded its market share in cloud and automotive sectors, fueled by growing AI adoption driving licensing revenue.
Both revenue and earnings surpassed the company's guidance issued in November. Arm attributed the outperformance in its licensing segment to heightened interest in advanced Arm CPUs amid increased AI investments across various industries. Licensing revenue grew by 18% to $354 million year-over-year.
In a letter to shareholders, CEO Rene Haas and CFO Jason Child expressed optimism for the upcoming quarter, anticipating another record-breaking performance driven by royalty revenue growth, escalating demand for compute and AI solutions across markets, customer demand for Arm platforms, and the company's robust developer ecosystem.
Arm now anticipates fourth-quarter revenue to range between $850 million and $900 million, potentially elevating full-year fiscal 2024 revenue to $3.2 billion. Initial projections in November had estimated revenue between $2.96 billion and $3.08 billion.
Following its IPO on the Nasdaq in September, Arm's ADS trading under the ticker symbol "ARM" has seen significant growth, marking the largest IPO in the U.S. since 2021.
Approximately three hours after the earnings report, Arm shares were trading at $94.00, up 22% from the previous close, with a peak surge of 40% during after-hours trading.