Sales And Profits Surge Ahead At ARM Holdings Plc

ARM Holdings plc (LON:ARM) issues an upbeat third-quarter update, but royalties miss analyst expectations.

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The shares of ARM Holdings (LSE: ARM) (NASDAQ: ARMH.US) dropped 3% to 1,000p this morning after the high-tech chip-maker missed expectations in its third-quarter results, despite revealing impressive profit and revenue growth.

ARM, which develops microchips included in modern smartphones, revealed a 27% surge in sales to £184m and a remarkable 36% lift in pre-tax profits to £93m. This was mostly driven by the signing of a record 48 new licenses, from 24 different companies.

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However, investors were disappointed by news that royalties had grown by just 14% to $122m, compared with analyst expectations of $128m.

Commenting on the results, ARM chief executive Simon Segars added:

“As the products we use every day become more connected, and as new categories of smart devices are introduced, there are increasing opportunities for ARM’s high-performance, low-power technology, which drive both license and long-term royalty revenues.

With more customers choosing to deploy ARM technology in their products and ARM’s royalty revenues outperforming the overall semiconductor industry, this has been another quarter that underpins ARM’s long-term growth opportunity.”

With a market cap of £14bn, ARM shares trade at 50 times their expected earnings, and offer a prospective dividend yield of 1.4%.

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> Mark owns no securities mentioned in this article.

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