Arm Holdings ADRs sank nearly 9% in premarket trading, on track for the largest intraday decline in almost a year, after the chip-architecture company reported softer-than-expected fiscal fourth-quarter royalty revenue tied to a slowdown in the smartphone industry, while assuring investors that data center demand can offset the slump.
During an earnings call, Wells Fargo analyst Joe Quatrochi asked Arm CEO Rene Haas:
"Clearly, data centers are very strong and accelerating, but thenhow do you think about consumer electronics, smartphones, et cetera?"
So in terms of Q4, as we said before the quarter, we had a bit of a tough comp in that. We had a particularly strong ramp of maybe 400 [ph], a year ago, more so than what we expected this year.
As a result, you saw a bit of a slowdown in royalty revenue. As indicated by our guidance, we're expecting that to get back to the kind of 20% range by Q1.
So I would say within -- you know, the assumptions within our expectations are, we will probably continue to see unit growth, I think actually flip to negative for the mobile market in this last quarter. We're going to continue to see very flattish, maybe slightly negative numbers for the overall market.
Haas' comments about the smartphone slowdown are key because Arm's smartphone exposure remains large, and mobile application processors accounted for about 46% of its total royalty revenue in 2025.
Haas has made clear to analysts that the push into data centers and other markets will help offset Arm's high exposure to a softening smartphone market.
Royalties, a closely watched metric for Arm, generated $671 million in fourth-quarter revenue, missing the Bloomberg Consensus estimate of $693.3 million.
"We're seeing the acceleration of Arm being a significant player in the data center," Haas said in an interview, quoted by Bloomberg.
Source: ZeroHedge News
