February 27, 2024

Members of Arm’s leadership; Chief Commercial Officer Will Abbey, CEO Rene Haas, CFO Jason Child and General Manager for Automotive Dipti Vachani ring the opening bell, as Softbank’s Arm, chip design firm, holds an initial public offering (IPO) at Nasdaq Market site in New York, September 14, 2023.

Brendan McDermid | Reuters

Shares of chip designer Arm soared more than 60% on Thursday after the chip design company reported better-than-expected earnings and issued a strong profit forecast for the current quarter.

The stock surge added about $46.8 billion to Arm’s market cap, with more than $42 billion of that accruing to SoftBank, which owns 90% of the company.

Arm’s chip design technology is in most smartphones and many PCs. The company reported adjusted earnings per share of 29 cents, topping the average analyst estimate of 25 cents, according to LSEG, formerly known as Refinitiv. Revenue rose 14% to $824 million, beating the $761 million average estimate.

For the current quarter, Arm projected earnings per share of between 28 cents and 32 cents on sales of $850 million to $900 million. Analysts were expecting earnings of 21 cents per share on sales of $780 million. At the midpoint of its revenue range, Arm is looking for revenue growth this quarter of 38%.

Founded in 1990 and acquired by Masayoshi Son’s SoftBank in 2016 for $32 billion, Arm went public on the Nasdaq in September. The company sold shares at $51 apiece in its IPO and was trading above $122 on Thursday. Son remains chairman of the company and he’s joined on the board by SoftBank’s Ron Fisher.

Arm makes money through royalties, when companies pay for access to build Arm-compatible chips. That usually amounts to a small percentage of the final chip price.

Arm said its customers shipped 7.7 billion Arm chips during the September quarter, the most recent period for which figures are available. Arm counts AppleGoogleMicrosoft and Nvidia as customers, and the company is riding the artificial intelligence wave, as more companies need hefty processors to run their workloads.

“We are seeing the demand for Arm technology to enable AI everywhere, from the cloud to edge devices in your hand,” Arm wrote in its shareholder letter for the quarter. “The most demanding AI applications are already running on Arm today.”

Because of SoftBank’s overwhelming control of the stock, Arm shares remain thinly traded compared to other large-cap companies. That could change in the coming months after the post-IPO lockup period ends in March and insiders, including SoftBank, are finally able to sell shares.

SoftBank on Thursday showed a solid recovery in its Vision Fund investment group due to a recovery in the value of tech companies. The Vision Fund, known in part for its notoriously bad bet on WeWork, logged a gain on investment of 600.7 billion Japanese yen ($4.02 billion), its biggest increase since March 2021.

SoftBank’s flagship tech investment arm had a rough time in the fiscal year that ended in March last year, posting a record loss of around $32 billion amid a slump in tech stock prices and the souring of some of the business’ bets in China. The company’s cumulative loss on WeWork topped $14 billion.

— CNBC’s Arjun Kharpal contributed reporting.

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