Core Insights - Arm Holdings has been one of the top-performing AI stocks over the past year, with a trading increase of 119% [1] Revenue Model - Arm does not generate revenue like typical semiconductor companies; it licenses its CPU architecture to partners such as Nvidia and Apple, collecting royalties when products are sold [2] - The two main sources of revenue for Arm are licensing and royalties, with royalties generally being the larger source [2][4] License Revenue - License revenue is crucial as it provides an early indication of future business performance, although it can be inconsistent from quarter to quarter [4] - In the most recent fiscal second quarter, license revenue decreased by 15% to $330 million due to a large prior license agreement [4] - Arm reports license revenue as annualized contract value (ACV), which increased by 13% to $1.25 billion in the second quarter [4] Royalty Revenue - Royalty revenue is a better reflection of current business performance and the adoption of new technologies, such as the Armv9 CPU architecture, which has a royalty rate approximately double that of the previous generation [5] - In the second quarter, royalty revenue rose by 23% to $514 million, significantly outpacing total revenue growth of only 5% [6] - Royalty revenue is influenced by the royalty rate charged and the number of products sold, indicating the market impact of Arm's technology [6] Future Outlook - Overall revenue may remain volatile in the upcoming quarters, but royalty revenue will provide a clearer picture of the business's strength [7]

This account is managed by Noah's Arc Capital Management. Our goal is provide Wall Street level insights to main street investors. Our research focus is mainly on 20th century stocks (old economy) undergoing a 21st century transformation, but occasionally we'll write on companies that help transform 20th century firms as well. We look for innovations in a business model that will cause a stock to change dramatically. Associated with SA contributors Thomas Potter and Elijah Buell.Analyst’s Disclosure: I/we h ...

Core Insights - Arm Holdings has experienced a significant stock price surge of 134% year-to-date, followed by a recent decline of approximately 16% within a month, raising questions about potential buying opportunities or underlying difficulties [3][4]. Company Overview - Arm operates under a unique licensing model, focusing on licensing CPU architectures rather than manufacturing chips, which provides predictable revenue streams, reduced capital expenditure, and a focus on continuous innovation [4][5]. - The company has established a dominant position in the mobile market and is making strong inroads into high-growth sectors such as AI, IoT, and the automotive industry [4][5]. Financial Performance - In Q2 FY2025, Arm reported total revenue of $844 million, a 4.7% year-over-year increase, surpassing analyst expectations of $810.03 million [8]. - Royalty revenue surged by 23% to $514 million, driven by the adoption of the Armv9 architecture in smartphones [8]. - Conversely, licensing and other revenue declined by 15% to $330 million, attributed to the timing of large licensing deals [9]. - Non-GAAP diluted EPS reached $0.30, exceeding forecasts of $0.26, while operating income was $326 million, with an operating margin contraction to 38.6% from 47.6% year-over-year [9]. Market Dynamics - The semiconductor industry is undergoing significant changes, with surging demand for AI processing power tempered by supply chain constraints and a global economic slowdown affecting consumer spending [5][6]. - Geopolitical factors, including trade tensions and export controls, add complexity to the market environment for companies like Arm [5][6]. Analyst Sentiment - Analyst consensus remains a Moderate Buy, with price targets ranging from $100 to $190, and an average target of $147.95, indicating a potential upside of approximately 16% from the current price [10][14]. - The stock trades at a high trailing P/E ratio of 213.40, suggesting that the market has high expectations for future growth, which could lead to significant downside risks if earnings growth disappoints [11][12]. Investment Considerations - The recent price correction presents a complex investment scenario, with strong fundamentals suggesting long-term potential, but high valuation and recent volatility warrant careful consideration [12][15]. - For long-term investors with high risk tolerance, the dip may present a compelling opportunity, while those with lower risk tolerance may prefer to wait for a more favorable entry point [14][15].

Core Viewpoint - The article discusses three discounted growth stocks that present potential buying opportunities despite recent market challenges, emphasizing their long-term bullish outlooks. Group 1: Roku - Roku's third-quarter sales and EBITDA increased year over year, surpassing expectations, but the guidance for the current quarter was disappointing, forecasting revenue of $465 million against a consensus of $477 million and EBITDA of $30 million versus $36.2 million expected [3][4] - Roku holds a dominant position in the North American connected television market with a 37% market share, significantly ahead of Amazon's FireTV at 15% [5] - The Roku Channel is reportedly more watched in the U.S. than HBO Max or Paramount+, highlighting its strong presence in the streaming content landscape [6] - The streaming industry is projected to grow at an average annual rate of 21% through 2034, benefiting Roku's business model [7] Group 2: Plug Power - Plug Power's stock experienced a significant decline, dropping 97% from its 2021 peak, despite initial optimism about hydrogen fuel technology [8][10] - The company's recent Q3 results showed revenue of $173.7 million, down 12% year over year, and below the expected $207.8 million [9] - Hydrogen fuel cells are considered a key component of future energy solutions, with the global fuel cell market expected to grow at an annualized rate of nearly 26% through 2032 [11][12] Group 3: Arm Holdings - Arm Holdings is gaining traction as an alternative to traditional chip manufacturers like Intel and Qualcomm, particularly for applications requiring power efficiency, such as mobile devices and AI [14] - The company is increasingly being used in data centers, with major players like Apple designing their own silicon based on Arm's architecture [15] - Arm generates consistent, high-margin revenue as a licensor of intellectual property, with about half of all processors globally being Arm-based [16][17]

Group 1 - Arm Holdings is positioned as a strong beneficiary of elevated AI spending, particularly in the infrastructure layer such as data centers [1] - The company operates in the semiconductor sector, which is a key area of focus for growth-oriented investment analysis [1] Group 2 - The analyst, Uttam, has extensive experience in technology firms, including leadership roles at Apple and Google, which enhances the credibility of the research [1]

Nvidia (NVDA -3.26%) first disclosed a stake in fellow semiconductor company Arm Holdings (ARM -5.59%) in the fourth quarter of 2023. The position was valued at $147 million at the time, but a recently filed Form 13F shows the position is now worth more than $280 million and accounts for about 65% of Nvidia's $433 million stock portfolio.To be clear, Nvidia has not added to its stake this year. Instead, Arm shares have surged on expectations that the company will benefit from artificial intelligence (AI). I ...

Shares of Arm Holdings plc (ARM) have experienced a notable decline, down 10.7% in the past month, while the broader industry has risen 14.2%.In the most recent trading session, ARM closed at $136.35, which is 28% below its 52-week high of $188.75. Despite the recent dip, ARM's stock has still surged an impressive 81% year to date, indicating that the current downturn may be part of a market correction.Image Source: Zacks Investment ResearchWith this recent drop in ARM's share price, investors might be wond ...

This company plays an important role in the global chip market and recently delivered better-than-expected results.Arm Holdings (ARM 0.93%) stock has been in sizzling form on the stock market in 2024, rising nearly 90% as of this writing thanks to a string of solid results in recent quarters that have bested Wall Street's expectations, and the company's latest quarterly results have further boosted investors' confidence in this British company's growth prospects.Arm released fiscal 2025 second-quarter resul ...

Arm posted modest growth in its recent earnings report, but there's a good reason for that.Arm Holdings (ARM -0.61%) has been one of the biggest winners in the artificial intelligence (AI) boom. The company was late to the party, going public in September 2023, nearly a year after ChatGPT launched, but the stock has tripled from its initial public offering (IPO) price.Arm is a semiconductor company, and it makes money by licensing chip designs, typically for CPUs, to companies like Nvidia, and collects roya ...

The semiconductor industry has surged alongside the rise of artificial intelligence (AI), positioning companies like Arm Holdings (NASDAQ: ARM) to benefit from increased demand. Known for its energy-efficient chip designs, Arm dominates the mobile device market and is now seeing heightened interest in its architectures as power-intensive AI applications continue to rise. ARM stock year-to-date price. Source: Google FinanceARM, currently trading at $148 with a year-to-date gain of 115%, reflects the appeal o ...