A screen displays the logo of Softbank's Arm, chip design firm, during the company’s initial public offering (IPO) at Nasdaq Market site in New York, U.S., September 14, 2023. REUTERS/Brendan McDermid/file Photo
(Reuters) - U.S.-listed shares of chip designer Arm Holdings fell 6% premarket after its quarterly forecast disappointed investors, who had high expectations due to AI-driven interest in chip companies.
The Cambridge, England-based company, whose chip designs power nearly every smartphone in the world, has seen its share price more than double since its initial public offering last September, driven by bets that it will benefit from a surge in AI computing.
Arm's revenue forecast for the current fiscal third quarter is between $920 million and $970 million, the midpoint of which is in line with analyst estimates of $944.3 million, as per data compiled by LSEG.
The company derives revenue from licensing fees for its chip designs and collects a royalty for each chip sold that uses its technology.
Morgan Stanley expects Arm to "at least meet expectations through this year, given a broad range of drivers".
The average Wall Street rating of 36 analysts on the stock is "buy", with a median price target of $145. In its second-quarter results, Arm's revenue rose 5% to $844 million, beating analyst estimates of $808.4 million.
Year-to-date, Arm's stock has surged 92.5%, outperforming its peers. In contrast, Advanced Micro Devices is down 1.6% and Qualcomm is up 19.7%.
Arm's forward price-to-earnings ratio is 75.4, higher than AMD's 30 and Qualcomm's 14.9.
(Reporting by Kanchana Chakravarty in Bengaluru; Editing by Tasim Zahid)
