ARM Holdings share price surges as it shakes off smartphone struggles with profit rise

Lynsey Barber
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ARM makes smartphone components (Source: Getty)

UK chip maker ARM has shaken off that smartphone slowdown with expectation-busting first quarter results.

The figures

Pre-tax profit surged 14 per cent to £137.5m in the three months to the end of March on revenues of £276.4m, a rise of 22 per cent and slightly ahead of expectation.

It shipped 4.1bn chips, up 10 per cent year-on-year. Licensing, royalty, software and tools revenue also grew, however royalty revenue missed forecasts.

Shares in the Cambridge-based firm jumped more than four per cent as markets opened.

20 April 2016 @ 8:30amARM Holdings (ARM)

Why it's interesting

Smartphones are reaching saturation point and global sales are slowing, with a knock on effect on firms making components for them.

Apple has reportedly cut production for the second consecutive quarter.

What ARM said

"At the start of 2016, ARM has seen its current technology gaining share in target end-markets, and strong demand for our next generation of products from a wide range of companies. The licensing pipeline for the rest of the year is robust, with leading companies looking to license ARM technology for their next generation products. We expect that ARMv8-A technology will continue to penetrate in mobile and enterprise markets, and the higher royalty rate earned on these products will underpin future royalty revenues.

"Macroeconomic uncertainty remains, and could influence consumer and enterprise spending in 2016, potentially impacting semiconductor sales and industry confidence. Based on current conditions in the semiconductor industry, we expect group dollar revenues for the full year to be in line with market expectations," said chief executive Simon Segars.

What the analysts said

"Buoyed by booming smartphone sales in recent years, it looks like it’s reducing its dependency on this sector and broadening out its interests.

"Arm is now shipping more than half of its chips to non-mobile markets, meaning the company’s fortunes cannot simply be linked directly to the likes of Apple anymore," said ETX Capital's Joe Rundle.