Arm Holdings (ARM, Financial) announced financial results for its fiscal Q2 ending September 30, 2024, with a revenue of $844 million, marking a 5% increase year-over-year. The company posted a GAAP gross profit of $812 million and a non-GAAP gross profit of $820 million, maintaining a non-GAAP gross margin of 97.2%, comparable to the previous fiscal year.
Arm continues to project growth in the Windows ARM segment in the PC market and remains optimistic about cloud computing, with customers beginning to utilize ARM-based products in this field. Notably, there has been significant progress in the smartphone market, particularly in pricing and the Chinese Android sector.
Regarding recent legal matters, ARM indicated that although a notice of licensing cancellation was sent to Qualcomm, their agreement remains intact, with ongoing litigation that is not expected to impact short-term revenue.
For licensing this fiscal year, ARM does not anticipate a significant increase in backlog orders due to upcoming milestone confirmations. Currently, ARM has 39 clients and aims to reach 50, with a focus on developing more chips through its ATA. This strategic direction underscores ARM's commitment to long-term growth.
The decrease in LTE growth expectations and v9 adoption stagnation over the past two quarters were addressed. ARM is content with V9’s adoption and foresees value-based pricing leading to increased patent fees. The transition in the CSS may also double the cost compared to v9.
ARM's confidence in capturing 50% of both the CFS computing subsystem and smartphone markets remains unchanged. High and low-end smartphone market growth is expected to drive increased v9 penetration, particularly with all Android versions transitioning to v9 in China by next year.
ARM's commitment to achieving a 50% market share in PCs and ongoing developments in the cloud market reflect its positive long-term outlook. The company identifies market share and cloud service fees as key variables influencing its valuation strategy, as customer adoption in cloud computing continues to grow.
