Arm plc(US:ARM) The Motley Foolยท2025-01-09 13:17Core Viewpoint - Arm Holdings is experiencing significant stock performance driven by strong demand for AI capabilities and strategic partnerships, particularly with Nvidia, positioning the company for continued growth in 2025 [1][12]. Financial Performance - In 2024, Arm's stock gained 64.2%, outperforming the S&P 500 and Nasdaq Composite indices, which returned 25% and 29.6% respectively [1]. - For fiscal Q3 2024, Arm's revenue grew 14% year over year, with adjusted EPS increasing by 32%, surpassing Wall Street's expectations of 5% revenue growth and 14% EPS growth [2]. - In fiscal Q4 2024, revenue surged 47% year over year, and adjusted EPS increased by a factor of 18, again exceeding analyst consensus estimates [4]. - In fiscal Q1 2025, revenue soared 39% year over year to $939 million, and adjusted EPS rocketed 67% to $0.40, comfortably exceeding Wall Street's expectations [6]. - For fiscal Q2 2025, revenue rose 5% year over year to $844 million, while adjusted EPS fell 17% to $0.30, with license revenue declining 15% but royalty revenue growing 23% [9]. Stock Performance - Arm stock experienced volatility, including a 33% pullback in mid-April 2024 due to a broader tech stock sell-off [3]. - Following the release of Q1 2025 results, Arm stock dropped 15.1% and 23.1% in the subsequent three market days, despite strong quarterly results [6][7]. - As of January 8, 2025, Arm stock is trading at approximately 73 times forward projected earnings, indicating high investor expectations [11]. Future Outlook - Arm is expected to benefit from its partnership with Nvidia, particularly through the sales of Nvidia's Grace Blackwell superchips, which integrate GPUs with Arm-based CPUs, set to roll out in late January 2025 [12]. - Wall Street projects revenue for the upcoming Q3 2025 to increase by 15% to $947.2 million, with adjusted EPS expected to grow 17% year over year to $0.34 [10].