ARM stock plummeted after softer guidance spooked investors

Arm Holdings (NASDAQ:ARM) shares hit the brakes and went into reverse in Wednesday’s afterhours trade, as softer than anticipated guidance evidently spooked the market.

The UK-headquartered, Japanese-owned and US-listed chipmaker told investors that it was forecasting second-quarter revenue between $780 million and $830 million – with the range falling beneath a prior analyst consensus estimate of $804 million.

Its first quarter was otherwise more than buoyant, driven by rising demand and investment in AI-capable processing technologies.

Revenue for its first quarter was up 39% year-over-year at $939 million, and was comfortably higher than the Wall Street analyst forecast of $902 million.

Earnings (adjusted) per share came in at 40 cents, also ahead of market expectations of 34 cents.

Another more bearish signal was a quarter royalty revenue figure, marked at $467 million, below the expected $492 million, albeit licensing revenue was ahead of forecast at $472 million versus $418 million.

“We delivered record revenues and exceeded the high-end of our guidance range,” chief executive Rene Haas said in a statement.

“License revenue hit a record level as the proliferation of AI everywhere is driving more companies to make broad and long-term commitments to use Arm’s power-efficient technology in their future products.”

Haas added: “AI's substantial energy requirements are driving growth in Arm's compute platform, which is the most power efficient solution available.”

In afterhours trade, Arm shares fell $18.37 or 12.75% to $125.80.

It followed an 8.4% gain during Wednesday’s regular trading hours, in which Arm had closed at $144.17.