Core Viewpoint - Arm Holdings experienced a volatile year in 2025, with strong results driven by AI trends, but faced valuation concerns and fears of an AI bubble, leading to an 11% decline in stock price by year-end [1]. Group 1: Company Performance - Arm started the year positively, benefiting from the $500 billion Stargate Project involving major companies like Nvidia and Oracle [2]. - The stock saw a sharp decline in March due to a broader market retreat and the "Liberation Day" tariff announcement [2]. - Despite the fluctuations, Arm reported a 24% revenue growth for the first half of the current fiscal year, although growth can be erratic due to its licensing model [5]. Group 2: Business Model and Product Development - Arm's business model relies on licensing and royalty revenue, which results in slower growth compared to other chip manufacturers that sell chips directly [4]. - The company is expanding its product portfolio with compute subsystems (CSS), enhancing production efficiency for customers [6]. - Arm is gaining traction in cloud computing through partnerships with Microsoft, Alphabet, and Amazon [6]. Group 3: Future Outlook - For the upcoming third quarter, Arm is guiding for $1.225 billion in revenue, reflecting a 24% increase year-over-year, and adjusted earnings per share are expected to rise to $0.41 from $0.39 [9]. - While investors may seek stronger bottom-line growth, Arm's competitive advantages and investments in AI are anticipated to yield positive results in the future [9].

Investment Rating - The report upgrades Cambricon to a Buy rating with a target price of Rmb1,223, indicating a potential upside of 76% from the current price of Rmb695 [1][2]. Core Insights - Cambricon is experiencing a recovery in revenue growth, driven by a shift from intelligent computing cluster systems to cloud chips, which are expected to dominate its revenue stream. The company anticipates a revenue growth of 111% CAGR from 2025 to 2027, primarily due to the rising demand for cloud chips in the generative AI sector in China [1][2]. - The company is projected to turn profitable in 2025, with an EBIT margin expected to improve to 26% by 2030 [2]. Summary by Sections Revenue and Growth - In 1Q25, Cambricon's revenues increased by 12% QoQ, marking a significant recovery from a -90% QoQ decline in the same quarter over the past five years. Cloud chips contributed 99% of 2024 revenues, a substantial increase from 13% in 2023 [1][2]. - The forecast for total revenue is Rmb1,174.5 million in 2024, Rmb5,531.1 million in 2025, Rmb12,047.9 million in 2026, and Rmb24,703.5 million in 2027 [4][13]. Inventory and Demand - Inventory levels rose to Rmb2.8 billion in 1Q25, up from Rmb99 million in 2023, indicating strong demand for cloud chips. Raw material costs surged by 1,400% YoY in 2024, while finished goods inventory declined by 23% YoY [1][2][27]. - Contract liabilities, reflecting pre-orders, increased to Rmb1.4 million in 1Q25, up from Rmb0.3 million in 2023, signaling positive future growth prospects [1][2]. Research and Development - The number of R&D engineers increased from 727 in 1H24 to 741 in 2024, with revenue per R&D engineer rising to Rmb619, compared to Rmb381k in 2022 [1][2][17]. Financial Projections - The report anticipates a significant increase in net income, with projections of Rmb946.8 million in 2025, Rmb2,369 million in 2026, and Rmb5,014 million in 2027, reflecting a growth of 546% from previous estimates [30]. - EBITDA is expected to grow at an 80% CAGR from 2025 to 2030, with margins improving to 26% by 2030 [34]. Valuation - The target price of Rmb1,223 is based on a revised EV/EBITDA multiple of 49x for 2030E, reflecting a more conservative approach compared to previous estimates [35][37].