Arm outperforms other tech giants with a 28% revenue growth

Thanks to long-term agreements with key customers and premium phones that are powered by advanced chips, Arm posted strong revenue growth when the other tech giants saw declining sales and profits in the weak economy.

Arm's parent SoftBank released the fiscal third quarter financial results that ended on December 2022. Arm's sales grew by 28% year-on-year to US$746 million, and its earnings before interest, taxes, depreciation, and amortization for the quarter reached US$450 million. Arm said a record 8 billion Arm-based chips were shipped in the latest quarter, adding that Arm-based chips shipped to date have reached 250 billion.

The Times quoted Arm's statement saying it was still fully committed to launching its IPO in 2023. Arm said the preparations were well advanced, and it was watching the market conditions before announcing a firm date. Meanwhile, the UK government talked with SoftBank about a London-based IPO for Arm, Seeking Alpha reports.

Arm's non-royalty revenue, which includes sales generated by licensing, software, and services, is the major contributor to Arm's revenue growth and rose by 64.84% annually to US$300 million, while royalty sales for the latest quarter still grew by 11.78% to US$446 million despite declining smartphone shipments.

The Register quoted Arm saying that its licensing benefited from new strategic long-term agreements with four key customers, including an automotive OEM, a cloud service provider which The Register speculates to be AWS, a leading microcontroller manufacturer, and a vendor of semiconductors for consumer electronics.

As for the royalty segment, Arm CEO Rene Haas said while the company wasn't immune from the slowdown in the PC and handsets market, Arm's results were buffered by the fact that cutting-edge phones generally have more complex processors than older models. Arm charges higher royalty rates on advanced processors, Dow Jones reports.

As the market of smartphones is plateauing, Arm is betting on new areas, such as data centers and automotive applications, for diversified growth. According to Dow Jones, Haas said Arm has an 85% share of the market for chips in in-vehicle entertainment systems and a 55% share for chips used in assisted-driving applications.

Source: SoftBank, February 2023