Arm Holdings Slumps Despite Q2 Beat: What's Driving Chipmaker's Stock Lower

Shares of Arm Holdings plc ARM fell sharply in premarket trading on Thursday following the British chipmaker’s release of its quarterly results after the market closed on Wednesday.

Arm reported fiscal 2025 first-quarter results that bettered consensus estimates but royalty revenue from the sales of chips came in lighter than forecasts. The company maintained its full-year guidance that surrounded the consensus estimate. Arm also said beginning this quarter, it would not report unit chip shipment data given the lower relevance of the number as it shifts focus to low-volume, high-value chips.

Commenting on the results, Needham analyst Charles Shi said for the first time the company did not raise its outlook. “The lack of upside could be seen as a negative for the stock that trades at a sky-high valuation,” he said. The analyst said royalty revenue will likely grow in the low-20s percentage on a year-over-year basis. Licensing revenue is showing signs of a slowdown as remaining performance obligation declined for the first time since the company’s IPO, he said.

The implied book-to-bill ratio fell to 0.3x, he said. “While Arm is a solid business with great growth potential, we remain on the sidelines based on valuation,” he added.

Needham has a Hold rating on the stock.

In premarket trading, Arm shares fell 9.08% to $131.08, according to Benzinga Pro data.

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