The replica of the ARM is an electronic chip board during a collaborative ceremony launching a partnership between Malaysia and ARM Holdings in Kuala Lumpur, Malaysia, on March 5, 2025.
Hari Anggara | Nurphoto | Getty Images
Shares of UK-based semiconductor designer Arm Holdings plunged 7.48% in after-hours trading Wednesday after the company’s licensing revenue missed Wall Street estimates.
Arm’s fiscal third-quarter licensing revenue rose 25% from a year earlier to $505 million, but came in 2.9% below the $519.9 million expected by analysts surveyed by FactSet.
Andrew Jackson, an equity analyst at Ortus Advisors, said that investors were also reacting to Arm’s guidance only slightly beating estimates, as well as a poor outlook delivered by its chip design customer Qualcomm.
Shares of Qualcomm also nosedived 9.68% after hours Wednesday. While the company’s fiscal first-quarter results beat expectations, its forecast disappointed due to a global memory shortage.
Despite missing Wall Street estimates for licensing revenue, Arm posted record quarterly revenue of $1.242 billion for the last three months of 2025, driven by artificial intelligence demand. That figure beat LSEG SmartEstimates, which are weighted toward forecasts from analysts who are more consistently accurate.
Arm’s chip designs power most of the world’s smartphones and are increasingly used in AI data centers and edge computing devices.
“ARM is trying to diversify into AI chips used for DC/servers, but the success of this remains uncertain, and its business model is still heavily reliant on royalties from chips used in consumer products such as handsets,” Jackson said.
He added that if Chinese smartphone production declines due to the memory shortages, Arm’s outlook could worsen before improving.
Executives at both Qualcomm and Arm have signaled that smartphone makers may scale back production volumes as supply constraints persist.
Rolf Bulk, an analyst at Futurum Group, told CNBC that such a scenario would also pressure Arm customers like Apple and Samsung.
Smartphones remain Arm’s largest end market, accounting for roughly half of its revenues, even as exposure to data centers increases, Bulk said.
Shares of Arm, which went public in 2023, have also faced broader tech market pressures in the lead-up to earnings and are down 4% year-to-date.