SoftBank-backed UK chip designer Arm said demand for its new AI chip would drive $2 billion in sales during 2027 and 2028.
It was the first sniff of a payoff from Arm’s shift into flogging its own chips, rather than just licensing designs.
Arm reported revenue of $1.5 billion for the quarter ending March, roughly in line with the cocaine nose jobs of Wall Street expectations. It expects $1.26 billion in the current quarter, a shade above the $1.2 billion analysts had pencilled in.
Arm chief executive Rene Haas said demand for its first data centre chip had “exceeded expectations, reinforcing Arm as the compute platform for the AI era”.
The $2 billion forecast doubles what Arm guided about a month ago when it launched the chip.
The stock first perked up in after-hours trading before sliding about eight per cent, which suggests the suits had sobered up.
Arm reported $671 million in royalty revenue from products using its intellectual property. That was slightly less than the $700 million analysts expected.
The global smartphone market, where Arm’s chip designs rule the roost, has shrunk this year. A nasty memory chip shortage, driven by data centre demand, has not helped.
Licensing revenue came in at $819 million, beating the $775 million analysts expected. Arm put that down to demand for its AI chip designs.
Arm and other chip firms, including Intel and AMD, have benefited from surging demand for central processing units. Chipzilla and AMD are finding fresh interest because CPUs were not the first toys grabbed during the early AI gold rush.
Customers piled into Nvidia graphics processing units to train AI models, leaving CPUs looking a bit yesterday. Now CPUs are wanted to run AI applications, and Arm said CPU demand was set to quadruple.
Arm’s results followed AMD’s strong numbers on Tuesday. AMD shares rose about 18 per cent on Wednesday after AMD chief executive Lisa Su doubled her prediction for AI CPU market growth into 2030.
Arm shares have more than doubled since the start of the year. The rise was helped by Arm’s long-awaited announcement of its own AI processor chip in March.
Arm’s move from selling intellectual property to offering a full AI chip marks a serious change of trousers. It could enable the company to grab a much larger slice of the global data centre infrastructure market.
In March, Haas predicted the new chip would drive a fivefold increase in revenue over the next five years.
The launch of the “AGI CPU” will put Arm up against its own customers, including Nvidia, Google and Amazon.
That lands as SoftBank chief executive Masayoshi Son pushes “Project Izanagi”, his effort to build a challenger to Nvidia. Last month, Haas became chief executive of SoftBank’s international group.
