Arm shares slip as smartphone royalties disappoint

Published On: August 1, 2025

Chip technology firm Arm reported revenue that missed analysts’ expectations.
Shares dipped as much as 9% in after-hours trading on the results.
Arm’s CEO said the company is considering designing its own chips.

Following the release of Arm Holdings’ first-quarter earnings results on Wednesday, the company’s stock fell as much as 9% in after-hours trade.

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The company’s performance in comparison to the projections of analysts surveyed by LSEG is as follows:

Earnings per share

: 35 cents adjusted vs. 35 cents expected
Revenue

: $1.05 billion vs. $1.06 billion expected

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According to the company, its second-quarter revenue is likely to be between $1.01 billion and $1.11 billion, which is consistent with the $1.05 billion that analysts tracked by LSEG predicted.

From $223 million, or 21 cents per share, a year earlier, net income dropped 42% to $130 million, or 12 cents per share.

Arm is a semiconductor technology company that supplies the architecture needed to create chips that power billions of devices, such as those made by Qualcomm and Apple. But in an interview with Reuters on Wednesday, CEO Rene Haass stated that the business was “consciously deciding to invest more heavily” in technologies “beyond designs,” indicating that it is thinking about creating its own CPUs.

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During an earnings call, executives warned investors that the move would result in “execution risk.” Nearly all of the leading chip designers already purchase technology from Arm, and if Arm introduces its own finished chiplets or semiconductors, its clients may become rivals.

CSPs, or cloud service providers, such as Microsoft and Amazon, are among Arm’s clients and are creating custom chips based on Arm. Original equipment manufacturers, or OEMs, are businesses that create their own computer designs, such as Apple.

During Wednesday’s results call, Haas stated, “One of the things that we’re seeing with newer customers such as CSPs and OEMs and even traditional customers, has asked for a better starting point.”

According to Hass, Arm may create whole chiplets that may be incorporated into a unique chip or it may create the semiconductor itself.

“We’re looking now at the viability of moving beyond the current platform to additional subsystems, chiplets or possibly full solutions,” Hass stated.

However, according to Arm CFO Jason Child, the company’s biggest client, royalties for utilizing its most fundamental technology in smartphone chips, was unimpressed in the interim.

“The growth wasn’t quite as strong in the smartphone sector as maybe we’d expected,” Child stated.

Considering that its primary business is licensing, Arm stated that it anticipates “limited direct impact on our royalty and licensing revenues” but that it has “less visibility into the indirect impact on end demand,” should tariffs lead sales of goods using Arm technology to be slowed.

“In licensing, customers have historically invested through near term slowdowns given lengthy chip development timelines,” Child stated.

Trump stated that he would probably apply that flat tariff rate to shipments from nations that have not established separate trade deals with the United States. However, Wall Street isn’t as frightened these days.

During Wednesday’s earnings call, SoftBank said that it had extended its licensing arrangement with Arm. About 90% of Arm is owned by SoftBank, which went public in 2023.

Child cited a $500 billion U.S. plan with OpenAI to develop AI infrastructure known as Stargate when questioned about the extended arrangement. “Stargate is looking to scale up over the next years,” Child stated. “That’s a lot of compute and huge potential for lots of design opportunities.”