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Investing.com -- Chip designer Arm Holdings ADR (NASDAQ:ARM) posted a stronger-than-expected quarterly profit but said it no longer expects to hit the upper end of its guidance, resulting in a narrower outlook. Shares fell roughly 5% in premarket trading Thursday.
The company posted third-quarter earnings per share (EPS) of $0.39, surpassing analysts’ estimates of $0.25. Revenue for the quarter came in at $983 million, also above expectations of $946.8 million.
Arm forecast earnings per share between $0.48 and $0.56 for the fourth quarter, compared with analysts’ average estimate of $0.53. The company expects revenue of $1.175 billion to $1.275 billion, roughly aligning with the consensus of $1.23 billion.
For the full year, the chipmaker said it no longer expects to reach the upper end of its previous full-year forecast. Arm revised its full-year revenue outlook to a range of $3.94 billion to $4.04 billion, tightening from its earlier estimate of $3.8 billion to $4.1 billion. The midpoint of that range is now at $3.99 billion, above the consensus estimate of $3.96 billion.
Arm also narrowed its guidance for adjusted EPS, with the midpoint now at $1.60, up from the previous guide of $1.55.
"In the near-term, even with the slight tick up to full-year guidance that is now slightly ahead of expectations, we think that guide may still see muted response from investors given the strong valuation levels," Bernstein analysts said in a post-earnings note.
"We remain cautious on cyclical headwinds for now, although admit the long-term story continues to develop nicely," they added.
Separately, Barclays (LON:BARC) analysts said the December quarter beat and in-line March guidance "keeps numbers moving in the right direction." However, they highlighted "real concern
around the stall out of v9 mix (25% for 3rd straight quarter)."
Overall, Barclays continues to view this as a strong IP franchise for the long term but noted that they "see some more issues coming out of this print than on the way in."
Arm licenses its chip designs to major semiconductor firms and has benefited from the growing adoption of AI, as customers look to integrate more power-efficient computing architectures.
Pratyush Thakur contributed to this report.