Shares in ARM (LSE: ARM) are around 2% higher today after it reported an encouraging set of first quarter results. Revenue increased by 14% versus the prior year, while processor royalty revenue rose by 15% year-on-year, which is an outperformance of the wider industry of 18 basis points. And with normalised earnings rising by 15% versus the first quarter of the previous year, ARM seems to be moving in the right direction.

Encouragingly, ARM saw strong demand for its most advanced technology. For example, 8 licenses were signed for ARM Cortex-A technology for high-performance and highly efficient application processors. And ARM extended long-term agreements with two foundries to cover a range of physical intellectual property tech from 55nm to 14nm.

ARM also recorded an increase in the adoption of its processor technology, with 39 processor licenses signed by a broad range of companies including leading semiconductor vendors and OEMs. Furthermore, ARM experienced growth in shipments of chips based on its own technology, with 4.1bn ARM-based chips shipped in the first quarter of the year. This represents a 10% increase versus the same period last year.

Future focus

Looking ahead, ARM is on track to meet its full-year expectations. Looking beyond this year, it has the scope to benefit from the current trend in devices becoming smarter. That’s because more companies require access to smart processors to build intelligence into more products. They should drive future royalty revenue as more consumers and enterprises choose to buy smarter and better connected products.

In terms of investment, ARM is currently accelerating its plans to build market share in areas such as networking infrastructure and servers, as well as to create new products and take advantage of opportunities in the Internet of Things. So it seems to be well positioned to maintain a strong rate of growth despite being an increasingly mature business.

Growth stock

Of course, ARM is still priced as a high growth stock. It has a price-to-earnings (P/E) ratio of 41 and while this is much higher than most of its FTSE 100 index peers, ARM’s rate of growth is also exceptionally high. For example, it’s forecast to increase its bottom line by 44% this year, which puts it on a price-to-earnings-growth (PEG) ratio of less than 1. This indicates that ARM offers growth at a very reasonable price and could continue the share price performance that has seen its value rise by 645% in the last 10 years.

Clearly, the slowdown in China and slower growth in demand for smartphones has caused investor sentiment in ARM to come under pressure of late. However, as today’s results show, ARM remains a top notch growth stock and on track to deliver upbeat gains for its investors over the long run.

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Peter Stephens owns shares of ARM Holdings. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.