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08 February 2024 – Arm Holdings surges almost 60% after earnings
Arm Holdings (ARM.US), UK-based chip and software designer, is one of the best performing Wall Street stocks today. Share price surges almost 60% after the company reported fiscal-Q3 2024 earnings yesterday after the close of the Wall Street session.
Company, which had IPO in 2023 and is still in 90% owned by SoftBank Group, reported much better-than-expected results for October – December 2023 period. Sales and profits turned out to be higher, while operating expenses were lower than expected. A strong free cash flow generation also highlights how successful the company was. Arm’s executives said that its expansion beyond smartphone chips has been very successful, with smartphone-related products accounting for just a third of total sales. The company is expanding into data-center and automotive markets. Customers are using more and more chips from Arm Holdings per device and it helps fuel royalty revenue growth.
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This positive outlook for the business translated into surprisingly bullish forecasts for fiscal-Q4 2024 and full fiscal-2024. This, in turn, is fuelling a massive share price gain during today’s Wall Street session.
Fiscal-Q3 2024 earnings (October – December 2023)
- Revenue: $824 million vs $760 million expected
- License and other revenue: $354 million vs $311.8 million expected
- Royalty revenue: $470 million vs $448.9 million expected
- Annualized contract value: $1.16 billion vs $1.11 billion expected
- Adjusted gross profit: $797 million vs $746.1 million expected
- Adjusted gross margin: $96.7% vs 96.4% expected
- Adjusted operating expenses: $459 million vs $461 million expected
- Adjusted operating income: $338 million vs $274.4 million expected
- Adjusted operating margin: 41.0% vs 35.7% expected
- Adjusted net income: $305 million vs $262 million expected
- Adjusted EPS: $0.29 vs $0.25 expected
- Adjusted free cash flow: $724 million vs $126 million expected
Fiscal-Q4 2024 forecast (January – March 2024)
- Revenue: $850-900 million vs $778 million expected
- Adjusted operating expenses: ‘about $490 million’ vs $524 million expected
- Adjusted EPS: $0.28-0.32 vs $0.21 expected
Full-year fiscal-2024 forecast (April 2023 – March 2024)
- Revenue: $3.16-3.21 billion, up from previous guidance of $2.96-3.08 billion
- Adjusted operating expenses: ‘about $1.70 billion’, down from previous guidance of ‘about $1.77 billion’
- Adjusted EPS: $1.20-1.24, up from previous guidance of $1.00-1.10
Arm Holdings (ARM.US) surges almost 60% today following the release of fiscal-Q3 2024 earnings. Stock trades over 100% above IPO price from mid-September 2023 ($51 per share). Source: xStation5
Please be aware that information and research based on historical data or performance does not guarantee future performance or results. Past performance is not necessarily indicative of future results, and any person acting on this information does so entirely at their own risk.
14 September 2023 – ARM stock opens above 10% IPO price
SoftBank’s Arm Holdings (ARM.O) made a robust debut on the Nasdaq, achieving a valuation of nearly $60 billion, with the chip designer’s shares surging 10% above their initial offer price on Thursday 14th September.
Its American Depositary Shares (ADS) began trading at $56.1 each, surpassing the initial public offering (IPO) price of $51, signaling optimism for other firms contemplating public listings.
Arm had priced its IPO at the upper boundary of the range, resulting in a valuation of $54.5 billion on Wednesday. This move generated $4.87 billion for SoftBank, which continues to hold a substantial 90.6% stake in the company.
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11 September 2023 – Arm has the potential to achieve a valuation as substantial as $52 billion in its forthcoming IPO
Arm, the chip designer owned by the Softbank Group, has the potential to achieve a valuation as substantial as $52 billion in its forthcoming initial public offering on the Nasdaq exchange, as indicated by an updated filing released on Tuesday.
Arm is closing in on securing the level of investor support required to achieve its fully diluted valuation target of $54.5 billion, as initially sought in its forthcoming initial public offering (IPO). People familiar with the matter revealed on Sunday that, given robust investor interest, Arm is now contemplating the possibility of requesting an even higher valuation from potential investors.
With strong demand from investors, Arm appears poised to price the IPO at or above the upper end of its previously indicated range of $47 to $51 per share. This development comes as the underwriters prepare to close their books on Wednesday, marking the most significant U.S. stock market debut in two years. In light of the IPO’s oversubscription, Arm is engaged in discussions about potentially raising the price range, aiming for a valuation surpassing $54.5 billion, according to insider sources. Alternatively, Arm is considering maintaining the existing price range but pricing the IPO above that range on Wednesday, which would also result in a valuation exceeding $54.5 billion.
It’s important to note that Arm does not intend to offer additional shares in the IPO, as SoftBank intends to maintain its planned 90.6% stake in Arm, even after the approximately $5 billion IPO, as per the original plan.
What is Arm Holdings?
Arm Holdings is a British semiconductor company that designs microprocessors and other intellectual property (IP) for the computing, networking, and embedded markets. The company was founded in 1990 as a joint venture between Acorn Computers, Apple Computer (now Apple), and VLSI Technology and has since been acquired by SoftBank Group in 2016. Its designs are used by a wide range of companies, including Apple, Qualcomm, and Samsung.
What do we know about the Arm IPO?
Arm is planning to go public in the United States through an initial public offering (IPO) in early September 2023. The IPO is expected to be one of the largest of the year, with Arm reportedly seeking a valuation of up to $70 billion. The IPO is expected to take place on the Nasdaq stock exchange with Arm reportedly planning to sell between $8 billion and $10 billion of shares in the IPO.
ARM stands for “Advanced RISC Machines” and refers to a type of computer architecture that uses a simplified instruction set. This makes ARM processors more efficient and power-saving than other types of processors, such as x86.
The company’s processors are used in a wide variety of devices, including smartphones, tablets, laptops, and embedded systems. Therefore, it is highly likely that any device you have used has utilised ARM’s processor. They are also increasingly being used in servers and high-performance computing applications.
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One of the unique features of ARM processors is that they are often integrated into a single chip, called a system-on-a-chip (SoC). This makes them ideal for small, portable devices where space and power consumption are at a premium.
Arm’s chips are well-suited for AI applications, so if investor interest in AI is high, it could boost the demand for Arm shares. Arm is moving away from licensing its designs to chipmakers and towards selling its own chips. If Arm is successful in this transition, it could boost the value of the company.
According to Goldman Sachs Research, it is estimated AI investment could approach $100 billion in the U.S. and $200 billion globally by 2025.
When is Arm’s IPO date?
A precise date has not yet been determined, however, early September is what has been reported for ARM’s IPO. Per the F-1 filing the date will be released “As soon as practicable after this registration statement becomes effective.”
How to buy into Arm’s IPO?
ARM has not been listed on the stock market yet, however, you will be able to trade it the same way as any other stock on the market once it goes live.
If you have thoroughly researched and understand the company and its prospects and are interested in purchasing shares in the ARM IPO, here is what you should do:
- Open a brokerage account. You will need a brokerage account to buy shares in the Arm IPO. At XTB we request clients to fill out an online application form either through the website or the mobile app.Upon successful completion of the application and your KYC documents your trading account will be established.
- Fund your brokerage account. You will need to fund your brokerage account with enough money to buy the number of shares of Arm you want.
- Set a stop loss order. A Stop-Loss Order is a type of closing order, allowing the trader to specify a specific level in the market where if prices were to hit, the trade would be closed out by our systems automatically, typically for a loss.
- Open a demo-account. If you aren’t ready to trade yet why don’t you start your trading journey by creating a demo account? XTB offers a demo account for 30 days where you can trade with fake money and explore your trading skills and platform.
Once the Arm IPO is announced, you will be able to place a stop order to buy shares. The price of the shares in the IPO will be determined by supply and demand, so it is impossible to say for sure how much they will cost. However, you can use your limit order to ensure that you do not pay more than you are willing to pay for shares in the company.
It is important to remember that investing in IPOs is a risky proposition. The price of shares in an IPO can be volatile, and there is no guarantee that you will make money. You should only invest in an IPO if you are comfortable with the risk involved. Don’t invest more than you can afford to lose.
How does Arm Holdings make money?
In 2022, Arm Holdings generated $2.68 billion in revenue. Of this, $1.98 billion came from licensing its processor designs, $335 million came from selling software development tools, $230 million came from providing technical support, and $120 million came from selling other IP.
Arm Holdings’ business model is unique in the semiconductor industry. Most semiconductor companies design and manufacture their own chips. Arm, on the other hand, focuses on designing processor designs and licensing them to other companies. This allows Arm to reach a wider market and generate more revenue.
Let’s delve into the categories we mentioned above a bit more. Arm Holdings makes money through a variety of ways, including:
- Licensing its processor designs. Arm Holdings licences its processor designs to chipmakers, who then manufacture and sell chips based on those designs. Arm charges a royalty fee for each chip that is sold.
- Selling software development tools. Arm sells software development tools that help chipmakers design and develop chips based on its processor designs.
- Providing technical support. Arm provides technical support to chipmakers who use its processor designs. This support can include helping chipmakers debug their designs and optimise their chips for specific applications.
- Selling other intellectual property (IP). Arm also sells other IP, such as graphics processing units (GPUs) and machine learning accelerators.
The Arm business model has been very successful. Arm Holdings is the world’s leading semiconductor IP company, and its designs are used in billions of devices around the world. The company is well-positioned to continue to grow in the years to come, as the demand for energy-efficient processors continues to increase.
Who owns Arm Holdings?
Arm Holdings is currently owned by SoftBank Group. SoftBank acquired Arm Holdings in 2016 for $32 billion. SoftBank Group is expected to retain a majority stake in the company after the IPO.
As of August 2023 SoftBank has a market cap of $66.82 Billion. This makes SoftBank the world’s 233th most valuable company by market cap according to companiesmarketcap.com.
The market capitalisation, commonly called market cap, is the total market value of a publicly traded company’s outstanding shares and is commonly used to measure how much a company is worth.
SoftBank Group Corp. is a Japanese multinational investment holding company headquartered in Minato, Tokyo, which focuses on investment management. The group primarily invests in companies operating in technology that offer goods and services to customers in a multitude of markets and industries ranging from the internet to automation. With over $100 billion in capital at its onset, SoftBank’s Vision Fund is the world’s largest technology-focused venture capital fund. Fund investors included sovereign wealth funds from countries in the Middle East.
SoftBank Corporation, its spun-out affiliate and former flagship business, is the third-largest wireless carrier in Japan, with 45.621 million subscribers as of March 2021.
Key facts about SoftBank
SoftBank was founded in 1981 by Masayoshi Son, a Japanese entrepreneur. Son is known for his aggressive investment style and his willingness to take risks. SoftBank has invested in a wide variety of companies, including Alibaba Group, Uber, and WeWork.
SoftBank’s investments have been both successful and unsuccessful. The company’s investments in Alibaba and SoftBank Vision Fund have been very successful, generating billions of dollars in profit for SoftBank. However, SoftBank’s investments in WeWork and other companies have been less successful, resulting in billions of dollars in losses for the company.
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Despite its ups and downs, SoftBank remains one of the most active investors in the world. The company is well-positioned to continue to grow in the years to come, as the technology industry continues to expand.
Here are some of the key businesses under SoftBank Group:
- SoftBank Corp.: The original mobile phone carrier business of SoftBank Group. It is the third-largest wireless carrier in Japan, with 45.621 million subscribers as of March 2021.
- SoftBank Vision Fund: A $100 billion technology-focused venture capital fund. It is the world’s largest technology-focused venture capital fund.
- Arm Holdings: A British semiconductor and software design company. It designs and licences processor cores based on the ARM architecture.
- SoftBank Latin America Fund: A $5 billion fund that invests in technology companies in Latin America.
- SoftBank Investment Advisers: An investment management company that manages SoftBank’s assets.
Who are the anchor investors of Arm Holdings?
The anchor investors in Arm’s upcoming IPO are not yet publicly known. However, it is expected that some of the anchor investors will be major technology companies that use Arm’s processor designs, such as Apple, Qualcomm, and Samsung.
What are anchor investors?
Anchor investors are typically large institutional investors that commit to investing a significant amount of money in an IPO. They are often given preferential treatment, such as the ability to buy shares at a lower price than the public offering price.
The anchor investors in Arm’s IPO are likely to play a key role in the success of the IPO. Their investment will signal to other investors that Arm is a valuable company, and it will help to ensure that the IPO is well-subscribed.
Here are some of the potential anchor investors for Arm’s IPO:
- Apple
- Qualcomm
- Samsung
- Microsoft
- Intel
- Nvidia
- Amazon
- MediaTek
- MediaTek company logo
- Huawei
These companies are all major users of Arm’s processor designs, and they are likely to be interested in investing in the company. Their investment would be a vote of confidence in Arm, and it would help to ensure the success of the IPO.
Who are Arm’s competitors?
Intel: Intel is a major American multinational corporation and technology company headquartered in Santa Clara, California. It is the world’s largest semiconductor chipmaker by revenue. Intel designs and manufactures microprocessors, chipsets, motherboard chipsets, embedded processors, flash memory, graphic chips, network and communications chips, and other integrated circuits.
AMD: AMD is an American multinational semiconductor company based in Santa Clara, California. It develops computer processors and related technologies for both consumer and commercial markets. AMD competes with Intel in the microprocessor market.
RISC-V: RISC-V is an open-source instruction set architecture (ISA) for computer processors. It is a free ISA, which means that anyone can use it without paying royalties. RISC-V is a competitor to the ARM architecture, and it is gaining popularity in the embedded systems market.
Qualcomm: Qualcomm is an American multinational corporation headquartered in San Diego, California. It develops, manufactures, and markets wireless telecommunications products and services. Qualcomm is a major supplier of mobile phone processors, and it is a competitor to Arm in the mobile market.
MediaTek: MediaTek is a Taiwanese multinational fabless semiconductor company headquartered in Hsinchu, Taiwan. It designs and manufactures integrated circuits for consumer electronics, communications, and computing products. MediaTek is a major supplier of mobile phone processors, and it is a competitor to Arm in the mobile market.
However, Arm no longer has any significant competition in the smartphone chip space.
In the graphics processing unit (GPU) space, Arm faces competition from Nvidia, Qualcomm, and Intel. It’s important to note that these companies have mostly combined their proprietary GPUs with Arm-licensed designs.
What factors caused the hype surrounding Arm?
The IPO hype surrounding Arm is due to a number of factors. First, Arm is a leading player in the semiconductor industry, and its designs are used in billions of devices around the world. Second, Arm is seen as a key player in the development of artificial intelligence (AI), as its chips are well-suited for AI applications. Third, the IPO market is currently strong, with investors eager to get in on the next big thing.
What are the risks associated with the Arm IPO?
There are also some risks associated with the Arm IPO. First, the semiconductor industry is cyclical, and Arm’s business could be affected by a downturn in the market. Second, Arm is facing increasing competition from rivals such as RISC-V. Third, Arm’s business model is changing, as it is moving away from licensing its designs to chipmakers and towards selling its own chips.
Overall, the Arm IPO is a highly anticipated event, and it is likely to be one of the most closely watched IPOs of the year. The success of the IPO will depend on a number of factors, including the strength of the semiconductor market, the level of investor interest in AI, and Arm’s ability to execute on its new business model.
Final Thoughts
The company is well-positioned to continue to grow in the years to come, as the demand for energy-efficient processors continues to increase.
The company’s technology is used in more than 250 billion chips that have been shipped to date.Arm Holdings has more than 5,900 employees and operates in over 40 countries with the company’s headquarters located in Cambridge, United Kingdom, but it also has offices in the United States, China, Japan, and other countries.
The Arm IPO is a significant event for the semiconductor industry, and it is likely to have a major impact on the market. The success of the IPO will depend on a number of factors, but it is clear that Arm is a major player in the industry, and its IPO is one of the most anticipated events of the year.
Source: https://t-tees.com
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