Why Is Arm Stock Falling 8% After Hours?

Higher adjusted operating expenses in its third quarter spooked investors.

• Arm’s third quarter revenue grew 26% year-on-year to $1.24 billion, representing record quarterly revenue.
• The company said it expects Q4 revenue in the range of $1.42 billion to $1.52 billion, analysts on average are expecting the revenue of $1.44 billion. 
• Arm in its earnings call said that SoftBank is "not interested" in selling any shares of Arm stock.

Shares of Arm Holdings fell more than 8% in extended hours of trading on Wednesday as investors were spooked by higher operating expenses.

The company posted $716 million in adjusted operating expenses during the quarter, a 37% rise from a year-ago quarter.

Arm in its earnings call said that SoftBank (SFTBY) is "not interested" in selling any shares of Arm stock.

Strong Quarter

Arm’s third quarter revenue grew 26% year-on-year to $1.24 billion, representing record quarterly revenue and its fourth consecutive billion dollar revenue quarter. Analysts on average were expecting revenue of $1.23 billion. 

It said its royalty revenue grew a robust 27% year-over-year to a record of $737 million driven by growth across our target end markets, including AI and general purpose data center, smartphones, physical AI and edge AI. 

“Arm delivered a record revenue quarter as demand for AI computing on our platform continues to accelerate” said Rene Haas, CEO. “Record royalty results in the third quarter reflect the growing scale of our ecosystem, as customers design the Arm compute platform into next-generation systems across cloud, edge, and physical environments to deliver high-performance, power-efficient AI. The fundamentals of the Arm business have never been stronger.”

It reported adjusted profit of $0.43 per share compared with $0.39 in the same period a year ago, analysts on average had expected profit of $0.41 per share.

Outlook

The company said it expects Q4 revenue in the range of $1.42 billion to $1.52 billion, analysts on average are expecting the revenue of $1.44 billion. 

Arm sees Q4 profit in between $0.54 to $0.52 per share, analysts’ consensus for the fourth quarter is $0.56 per share.  

How Did Stocktwits Users React?

Retail sentiment around ARM trended in ‘extremely bullish’ territory amid ‘extremely high’ message volume. 

One bullish user said that “ARM will see Nvidia 2022-2024 like growth in coming years, staying the course here”.

Another user predicted that the stock will be at least $125 by the end of the month.

Another user called the stock “oversold”.