ARM Q1 Earnings: Investors Focus on AI Demand After Semiconductor Selloff

Arm Holdings helps customers push chips to the market faster and could benefit from the growth of data centers

• Arm Holdings is scheduled to report first quarter earnings on Wednesday, July 31, after the market close.
• Analysts expect the company to report earnings of $0.34 on $903.6 million in revenue.
• Options market expects a move of +/- 14.7%—exceeding the expected move for most stocks.

Arm Holdings (ARM) is scheduled to report first quarter earnings for fiscal year 2025 on Wednesday, July 31, after the market close. A webcast with management will follow at 5:00 p.m. EDT.

This report will be Arm’s fourth quarterly earnings since it listed on U.S. markets last September in the largest initial public offering (IPO) of the year. ARM is up more than 160% since its debut.

Arm wasn’t immune to the market rout over the past two weeks of trading, with the stock price falling more than 21% from its early July all-time high at 188.75. The pullback offers an opportunity for investors who believe in Arm’s long-term potential.

Next week will see several other chipmakers report earnings, including Qualcomm (QCOM), Advanced Micro Devices (AMD) and Intel (INTC). Altogether, it could be a make-or-break week for the semiconductor industry because investors will get a better read on the industry’s outlook.

Arm Earnings: What do investors expect?

Traders are giddy ahead of a busy week of chip earnings after another volatile week of trading. An impressive report from Arm could put the stock back on the path to new all-time highs.

Arm has beaten estimates in all three quarters since its listing. While that is encouraging, markets may not treat the stock price well if it disappoints.

According to Yahoo Finance, analysts expect earnings per share (EPS) of $0.34 on $903.6 million in revenue. That would be down 2 cents from last quarter’s $0.36 per share and down $24 million from $928 million. Arm provided guidance in its Q4 earnings for $0.32 to $0.36 per share and revenue of $875 million to $925 million.

Arm’s technology is used by a vast array of high-profile companies. iPhones and Mac computers use the company’s instruction set for their processors, and Amazon (AMZN) uses Arm-based processors for its Graviton cloud workload chips. Investors might learn when Amazon plans to bring its Graviton 4 chip to the market when it reports earnings on Thursday, Aug. 1.

China is also in focus for investors. Just under a quarter of Arm’s revenue comes from China, although it doesn’t directly own its subsidiary business. The Biden administration is considering implementing the foreign direct product rule, which could affect Arm’s China business. Investors may ask management about the impact, if any, such a move would have on the business.

Arm’s exposure to the automotive industry may bring on another headwind because its royalty revenue—which represents over half of its revenue—depends up on industry trends.

A lofty valuation is also front and center amid the recent pullback in the semiconductor industry. ARM trades with a forward price-to-earnings ratio of 98. That is high relative to other chip names, with Nvidia (NVDA) at 43 and Intel (INTC) at 29.

However, ARM’s benefit from the growth in data centers may outweigh broader concerns. Data center operators are in a race to capture market share in the artificial intelligence (AI) race. ARM provides solutions that help customers push their chips to the market faster, which puts it in an exceptional position if investment in AI continues to accelerate.

Trading Arm ahead of earnings

Arm is trading near critical technical levels, with prices challenging an area of resistance turned support between 140 and 150. The selloff pushed prices below the nine-, 12- and 21-day exponential moving averages (EMAs), and the moving average convergence/divergence (MACD) appears to be on track to cross below its midpoint. Overall, the technical structure remains weak, but if prices can rise above the 140-150 range, it could motivate some buying.

ARM’s expected move per options pricing is +/- 21.88 points, or 14.7% of Friday’s 148.80 stock price. That is a relatively large expected move compared to the market average for earnings, which is in the 5% to 10% range.

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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