ARM Holdings (ARM)_ First Take_ Strong quarter and guidance driven by a recovery in royalty revenue

Summary of ARM Holdings Conference Call Company Overview - Company: ARM Holdings (ARM) - Industry: Semiconductors Key Financial Results - Revenue: ARM reported revenue of $1.14 billion, exceeding Goldman Sachs (GS) and Street estimates of $1.06 billion [2] - Operating Margin: Recorded at 41.1%, significantly higher than GS and Street estimates of 36.0% [2] - Operating EPS: Reported at $0.39, above GS and Street estimates of $0.33 [2] - Licensing Revenue: Achieved $515 million, surpassing GS's estimate of $473 million and Street's estimate of $474 million [2] - Royalty Revenue: Reached $620 million, ahead of GS's estimate of $586 million and Street's estimate of $585 million [2] Guidance for FY3Q - Revenue Guidance: Midpoint guidance set at $1.225 billion, well above GS's estimate of $1.09 billion and Street's estimate of $1.11 billion [3] - Operating Expense Guidance: Projected at $720 million, exceeding GS's estimate of $675 million and Street's estimate of $676 million [3] - Operating EPS Guidance: Expected to be $0.41, above GS's estimate of $0.34 and Street's estimate of $0.35 [3] Market Expectations and Stock Performance - Investor Sentiment: The stock is expected to rise due to better-than-expected revenue and EPS guidance, driven by a recovery in royalty revenue [1] - Focus Areas for Investors: Key topics of interest include operational expenses, smartphone market recovery, Datacenter business updates, and contributions from v9 and CSS to royalty revenues [1] Price Target and Risks - Price Target: Set at $150, based on a multiple of 75x normalized EPS estimate of $2.00 [4] - Risks: - Slower transition from v8 to v9 and CSS [4] - Less traction in Datacenter business [4] - Faster traction for Compute Sub-Systems [4] - Emergence of new customer cohorts licensing ARM technology [4] Additional Insights - Quarterly Growth: Year-over-year revenue growth of 34.5% and quarter-over-quarter growth of 7.8% [7] - Gross Margin: Excluding stock-based compensation, gross margin was 98.2%, slightly above estimates [7] - Market Capitalization: ARM's market cap stands at $171.2 billion [8] This summary encapsulates the key financial metrics, guidance, market expectations, and risks associated with ARM Holdings as discussed in the conference call.