Arm plc(ARM)2025-05-07 22:00Financial Data and Key Metrics Changes - In Q4, the company achieved record revenue exceeding $1,000,000,000 for the first time, with full-year revenue surpassing $4,000,000,000 and royalty revenue exceeding $2,000,000,000 [6][13] - Non-GAAP operating profit reached a record $655,000,000, with non-GAAP EPS of $0.55, at the high end of guidance [16][19] - Royalty revenue grew 18% year on year to a record $607,000,000, driven by flagship smartphone launches [13][14] Business Line Data and Key Metrics Changes - Licensing revenue hit an all-time high of $634,000,000, increasing over 50% year on year, primarily due to demand for ARMv9 technology [7][14] - Smartphone royalties increased by 30% year on year, significantly outpacing the modest 2% growth in shipments [10][14] - The company launched its first ARMv9 Edge AI platform, which has been adopted by major industry players [10][11] Market Data and Key Metrics Changes - The company expects up to 50% of new server chips at hyperscalers to be ARM-based this year, indicating strong momentum in the data center market [7][8] - The automotive sector has shown strong double-digit growth, with ARM gaining share in advanced driver-assistance systems (ADAS) [55] - IoT and embedded markets have experienced some slowness, but signs of recovery are anticipated [56] Company Strategy and Development Direction - The company is focusing on customization of silicon to differentiate performance and unlock unique features, particularly in automotive and hyperscaler markets [41][42] - There is a strategic shift towards signing deals directly with OEMs, which may increase the total addressable market (TAM) [41][42] - The company plans to continue aggressive investment in R&D to support customer needs and capitalize on AI demand [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in healthy growth despite macroeconomic uncertainties, citing visibility into customer design pipelines and rising demand for custom silicon [19][20] - The company does not expect a significant direct impact from tariffs on royalty and licensing revenues, but acknowledges potential indirect effects [16][25] - Future guidance for Q1 indicates revenue growth of 12% year on year, with strong expectations for royalty growth between 25% to 30% [17][19] Other Important Information - The company has expanded its developer community to over 22,000,000, the largest in the world [11] - A significant licensing agreement was signed with the Malaysian government to accelerate the development of an ARM-based AI ecosystem [64] Q&A Session Summary Question: Impact of tariffs on revenue - Management clarified that tariffs do not directly impact costs, and any revenue impact would be indirect, primarily affecting demand elasticity [22][24] Question: ARMv9 adoption rate - The adoption rate for ARMv9 has increased to over 30%, driven by custom silicon solutions [30][32] Question: Strategic direction towards OEMs - Management confirmed a trend towards direct relationships with OEMs for customized silicon, which is expected to continue [41][42] Question: Licensing performance in Q4 - Licensing revenue growth was strong, with a year-on-year increase of 53%, and management remains optimistic about future growth [72][75] Question: Royalty growth by end market - Management indicated strong growth in smartphones and infrastructure, with expectations for continued growth in automotive and recovery in IoT [55][56] Question: Licensing deal with the Malaysian government - The deal is seen as a milestone, with potential for similar agreements with other governments in the future [64] Question: Sequential trends in royalty growth - Management expects Q1 to show strong growth, with a seasonal dip in Q2, followed by growth in the latter half of the year [70][71]