Arm Stock Goes on Roller-Coaster Ride After Earnings

Arm stock displayed on a screen at the Nasdaq MarketSite in New York City — (Image credit: Michael M. Santiago/Getty Images)

Arm Holdings (ARM) stock initially fell nearly 8% in early trading Thursday as the chip designer's soft fiscal full-year outlook offset top- and bottom-line beats for its fiscal fourth quarter. The chip stock briefly erased these earlier losses but was last seen back in the red.

In the three months ended March 31, Arm's revenue increased 47% year-over-year to $928 million. Its earnings per share (EPS) improved to 36 cents from 2 cents in the year-ago period.

"We finished our financial year achieving over $3 billion in revenue for the first time, and with strong tailwinds heading into fiscal 2025 as artificial intelligence (AI) is driving increased demand for Arm-based technology across all end markets," Arm CEO Rene Haas said in a statement.

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The results handily beat analysts' expectations, which had called for revenue of $878.2 million and EPS of 30 cents, as noted in Kiplinger's earnings calendar.

Despite the impressive quarterly results, sentiment toward ARM stock turned negative when the company provided its revenue outlook for the 2025 fiscal year. Arm anticipates revenue in the range of $3.8 billion to $4.1 billion. The midpoint of this range is $3.95 billion, which is below the $3.99 billion in revenue analysts are expecting for the fiscal year.

"I wanted to make sure we set a target that ties to what we have high confidence in to what we can deliver," Jason Child, chief financial officer at Arm, told Reuters.

Arm also provided its EPS outlook for fiscal 2025, calling for a range of $1.45 to $1.65, which satisfied Wall Street's expectations of $1.54.

"From cloud to edge, all AI software models, from GPT to Llama, rely and run on the Arm compute platform,” Haas said. “As these models become larger and smarter, their requirements for more compute with greater power efficiency can only be realized through Arm."

Is Arm stock a buy, sell or hold?

Arm's share price has surged since the company's mid-September initial public offering (IPO), up nearly 67% through the May 8 close. Analysts see more upside for the shares moving forward too.

According to S&P Global Market Intelligence, the consensus analyst target price for ARM stock is $111.85, representing implied upside of about 8% to current levels. Meanwhile, the consensus recommendation on the tech stock is Buy.

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.