British chip designer Arm Holdings plc (ARM) has been one of the major beneficiaries of the artificial intelligence (AI) wave. In its public trading debut last September, its shares surged an impressive 25% on day one. The company has made rapid strides in the AI landscape, with industry giants such as Advanced Micro Devices (AMD), Apple (AAPL), Broadcom (AVGO), Nvidia (NVDA), Qualcomm (QCOM), and many others relying on its innovative chip designs.
Last month, at the Computex 2024 event, Arm made headlines with its bold forecast of reaching 100 billion AI-ready devices by the end of next year. Adding to its positive buzz, the company was swiftly included in the Nasdaq-100 Index ($IUXX) just 10 months after its IPO, highlighting its rapidly growing impact on the global tech scene.
Arm Holdings: A Tech Powerhouse
With over 30 years of pioneering power-efficient CPU design, Cambridge, UK-based Arm Holdings plc (ARM) has evolved from its origins as a battery-focused computer designer to become a leader in ultra-efficient compute platforms. Today, Arm’s technology drives the next generation of smart, AI-powered, and immersive experiences across everything from sensors and smartphones to automobiles and data centers. The company is at the forefront of computing innovation, providing high-performance, cost-effective, and energy-efficient IP solutions for CPUs, GPUs, NPUs, and interconnect technologies.
Impressive Financial Performance
ARM shares are up more than 96%, dwarfing the broader S&P 500 Index ($SPX) gain of 13.2% and the Nasdaq-100’s 12.7% return on a YTD basis. Over the past six months alone, the stock is up 106%. The stock hit an all-time high of $188.75 earlier this month, fueled by the sizzling buzz surrounding its AI innovations.
Analyst Optimism
On July 19, Morgan Stanley (MS) upgraded its rating on Arm from “Equal-Weight” to “Overweight,” and raised its price target to $190 – marking a new Street-high price target for the stock. The investment bank expects that even after Arm’s strong YTD rally, this growth trend will persist as AI technology increasingly transitions to edge computing, becoming embedded in consumer devices and various applications.
Forecast and Outlook
Arm’s total revenue soared to $928 million, marking a remarkable 46.6% year-over-year increase, and exceeding estimates. Adding to the performance, the company’s adjusted EPS of $0.36 also marked a significant improvement. Despite concerns over valuation, the growth trajectory for ARM stock remains highly enticing.
For fiscal 2025, the company anticipates revenue to range between $3.8 billion and $4.1 billion, while adjusted EPS is expected to be between $1.45 and $1.65.