Daily Mail

Arm tumbles as first US results come up short

- By Emily Hawkins

ShAreS in Arm tumbled as the British chipmaker’s first set of results since becoming the biggest float of the year underwhelm­ed Wall Street.

The firm’s guidance released late on Wednesday night missed investors’ expectatio­ns in a blow for the company and its biggest backer Softbank, who snubbed London in favour of New York this September.

Arm forecast third-quarter revenue of £620m, below analysts’ estimates of £625m. This pushed shares down by 7pc, plunging below its $51 per share IPO price.

But shares later recovered to finish down 5pc at $51.58.

Arm’s maiden update since the float was closely watched after the

High hopes: Arm listed on New York’s Nasdaq stock exchange in September

UK lost out on a hard-fought battle to persuade the Cambridge-based firm to list on the London market.

In one of the most eagerly-anticipate­d stock market floats of recent years, Arm was valued at more than £50bn on its debut.

Ben Barringer, technology analyst at Quilter Cheviot, said: ‘Straight out of the gates you would expect a company to beat expectatio­ns and raise guidance – that would be prudent stock management.’

‘Arm will likely bounce around the level of its IPO price but ultimately disappoint a few hoping for better results in the shortterm,’ Barringer added.

There have also been fears that Arm’s exposure to China will weigh on its share price.

In documents published in August, Arm revealed it was ‘particular­ly susceptibl­e to economic and political risks’ in China, where it rakes in nearly a quarter of its revenues.

Arm has previously pointed to how growing tensions between the Biden administra­tion in the US and Beijing have already started to hamper its performanc­e.

But it was not all gloomy news for shareholde­rs as Arm struck an upbeat note with its second quarter revenues. Sales rose 28pc to £656m, beating analyst expectatio­ns.

revenues were driven by a slew of firms designing new chips with its technology amid a boom for Artificial Intelligen­ce (AI).

Arm said big names including Google, Meta and Nvidia were working on AI-capable chips.

These tech giants signed up as investors in its IPO, alongside other major clients such as Apple, Alphabet, Intel and Samsung electronic­s.

But Japanese private equity giant Softbank who bought Arm in 2016 still owns 90pc of the shares.

Arm also expects its annual sales for the 2024 financial year to be £2.46bn, above analysts’ expectatio­ns of £2.4bn.

‘We are delighted with Arm’s performanc­e as a listed company, which has demonstrat­ed the strength of our business model,’ management wrote in a letter to investors.

russ Mould, investment director at AJ Bell, said: ‘The outlook for Arm is still promising. Investors and analysts just need to have more realistic expectatio­ns about the pace of growth.’

Before Arm was bought by Softbank for £24bn in 2016, it was a member of the FTSe 100 index and had a secondary listing in New York.

Once Softbank’s proposed sale of Arm to Nvidia was defeated by regulators, Britain pushed hard for it to return to the stock market in London.

But Softbank chief Masayoshi Son selected New York in a savage blow for the London stock market.

It raised £4bn for owner Softbank in the biggest New York float since electric car manufactur­er rivian listed in 2021.

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