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May 6 (Reuters) - Arm Holdings forecast first-quarter revenue above Wall Street expectations on Wednesday, benefiting from higher adoption of its chip technology as tech companies spend heavily onartificial intelligencecompute.
Arm’s stock jumped 12% in the wake of the report, but reversed course after Arm executives told analysts on a conference call that they have not yet secured supplies to meet the demand for a new chip.
Analysts also probed the costs of the chip designer getting into the business of making its own chips.
Shares in Arm were down over 6% in premarket trading on Thursday as investors assessed the comments and results.
The company expects quarterly revenue of $1.26 billion, compared with analysts' estimates of $1.25 billion, according to data compiled by LSEG.
Arm generates revenue by licensing its technology to companies such asNvidiaandApple, collecting royalty payments for every product built using its designs.
These chip architectures are highly valued for consuming relatively little power — a key advantage for data center operators who are under increasing pressure to control the rising energy demand and heat output that come with running large-scale AI models.
Arm's designs power virtually every smartphone in the world, giving it an important role in the vast handheld market.
However, a shortage of memory chips has strained the industry, driving up the prices of consumer electronics and stalling sales, leaving Arm with potentially lower royalties.
Smartphone chip designer Qualcomm last week provided a dour quarterly revenue forecast due to the memory issues, but its stock jumped on upbeat comments of a demand rebound.
Arm shares have soared this year, climbing more than 91%, and outperforming other major chip makers including Nvidia, Advanced Micro Devices and Broadcom, as of Tuesday's close.
“It was a very tough setup for them - the expectations were just so high," said Seaport Research Partners analyst Jay Goldberg.
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