Arm rockets to record heights with blistering Q2 results

Cambridge superchip architect Arm increased Q2 revenue by 28 per cent year-on-year to top more than $800 million for the first time in its 33-year history. Revenue hit $806m.

CEO Rene Haas said the returns reinforced the reality that Arm’s diversified business strategy was “showing real results.”

The better than expected revenue was driven by multiple high-value long-term licence agreements signed with industry leading technology companies and royalty revenue benefiting from market share gains and higher royalty rates.

The immediate need for companies to increase investment in Artificial Intelligence across all end markets helped drive licence revenue up 106 per cent.

The ongoing requirement for power efficient solutions in infrastructure and automotive continued to drive double digit royalty growth in those markets. Non-GAAP operating profit increased 92 per cent to $381m.

Addressing the demand for reduced development time and decreased time to market, Arm announced the Arm® Neoverse™ Compute Subsystems, for companies developing differentiated chips for cloud compute.

A total of 7.1 billion Arm-based chips were reported as shipped, taking the cumulative total to 272.5 billion.

New Arm-based energy-efficient AI capable products were announced by Google, Meta, Nvidia, Renesas, Xiaomi, and many more as Arm takes AI everywhere.

Haas said: “Following our successful IPO, Arm is off to an outstanding start as a public company with record revenue fuelled by the success of our diversified business. 

“Licensing revenue was up over 100 per cent year-over-year as the demand for AI has kicked off increased investment across all end markets. Our royalty revenue benefited from market share gains in automotive and cloud compute as our latest technologies, such as Armv9, increased penetration across all markets where AI is driving the need for our unique combination of performance and power efficiency.”

Operationally, Arm continued to increase investments in R & D to meet the demand for more compute capability from across the industry and to execute on its broadening product roadmap. 

Overall headcount increased by 17 per cent with more than 85 per cent of the net new hires going into engineering roles. 

Looking forward, Arm reports good visibility into its licensing pipeline for the second half of the fiscal year, although there is uncertainty regarding the exact timing of some deals and the revenue recognition profiles for future agreements are subject to change. 

Industry analysts forecast that the semiconductor industry is starting to recover, which can benefit Arm’s royalty revenue; however the trajectory of the recovery is not clear and the industry remains vulnerable to changes in the external macroeconomic environment. 

Arm is central to the acceleration of AI and Machine-Learning (ML) workloads to computers everywhere. Whether its large language models being trained in the cloud or inference models being deployed at the edge, the need for efficient computing resources has never been more important. 

All AI algorithms need CPUs to run their models and Arm’s strategy is to develop the CPUs and related technologies needed to run these algorithms in the most energy efficient manner. 

Arm is making rapid progress in the adoption of its technology with AI acceleration in its CPUs and GPUs, and AI-specific products such as the Arm Ethos™ neural processing unit (NPU).

Arm reports continuing demand from companies needing access to higher-performance CPUs, GPUs and other technologies, and to develop AI capable chips for a wide range of end markets.

During the quarter, Arm signed multiple licenses for its latest products with companies that are designing chips requiring advanced AI capability for applications such as autonomous driving, cloud servers, consumer electronics, Internet of Things (IoT) and smartphones. 

Arm says it is making significant progress across its target end markets, with new product and ecosystem announcements, market leaders licensing Arm technology for their next chips, design wins at major OEMs, and with its latest technology being deployed into high-volume applications.

The company continues to gain market share within the cloud compute market as customers increasingly adopt and deploy Arm CPUs into their cloud server chips driven by the need for power efficient computing.