The replica of the ARM is an electronic chip board during a collaborative ceremony launching a partnership between Malaysia and ARM Holdings in Kuala Lumpur, Malaysia, on March 5, 2025.
Hari Anggara | Nurphoto | Getty Images
Shares of UK-based semiconductor designer Arm Holdings plunged 7.48% in after-hours trading Wednesday after the company’s licensing revenue missed Wall Street estimates.
Arm’s fiscal third-quarter licensing revenue rose 25% from a year earlier to $505 million, but came in 2.9% below the $519.9 million expected by analysts surveyed by FactSet.
“ARM is down -8% in late trading after its guidance only slightly beat – not helped by the negative read through from Qualcomm numbers after-hours given ARM chip designs are heavily used in smartphones,” said Andrew Jackson of Ortus Advisors.
Shares of Qualcomm also nosedived 9.68% after hours Wednesday. While the company’s fiscal first-quarter results beat expectations, its forecast disappointed due to a global memory shortage.
Despite missing Wall Street estimates for licensing revenue, Arm posted record quarterly revenue of $1.242 billion for the last three months of 2025, driven by artificial intelligence demand. That figure beat LSEG SmartEstimates by 1.54%, which are weighted toward forecasts from analysts who are more consistently accurate.
Arm’s chip designs power most of the world’s smartphones and are increasingly used in AI data centers and edge computing devices.
“ARM is trying to diversify into AI chips used for DC/servers, but the success of this remains uncertain, and its business model is still heavily reliant on royalties from chips used in consumer products such as handsets,” Jackson said.
If Chinese smartphone production declines next year because of memory shortages, as Qualcomm suggested, Arm’s outlook could worsen before improving, he added.
Shares of Arm, which went public in 2023, have also faced broader tech market pressures in the lead-up to earnings and are down 4% year-to-date.