Arm Holdings (NASDAQ:ARM) saw its American depositary receipts decline by more than 7% in U.S. premarket trading on Thursday, even after the semiconductor design company reported fiscal third-quarter results that exceeded analyst expectations.
The company posted earnings per share of $0.43, surpassing market forecasts of $0.32. Revenue came in at $1.24 billion, slightly above the consensus estimate of $1.22 billion.
Looking ahead, Arm projected fourth-quarter fiscal 2026 earnings of $0.58 per share, narrowly exceeding analyst expectations of $0.57. The company also forecast revenue of approximately $1.47 billion, compared with the average market projection of $1.44 billion.
“[T]he stock was down […] likely on [an] anticipated potential dip in smartphone industry units next year. In addition, there’s been obvious investor concern in the technology space regarding [artificial intelligence], especially how it will affect the software space,” analysts at Guggenheim Securities said in a note.
Investor attention also turned to licensing revenue, which includes upfront payments for access to Arm’s chip architecture designs. That segment generated $505 million during the quarter, below estimates of roughly $520 million, although the company noted that licensing revenue increased 25% year-on-year.
In a letter to shareholders, Arm said overall third-quarter revenue rose 26% compared with the previous year, marking a record quarter and the fourth consecutive period in which revenue exceeded $1 billion.
Royalty revenue also increased 27% to a record $737 million, supported by strong demand across data centre infrastructure, smartphone production and artificial intelligence-related applications.
“Demand for the Arm platform is strong as more leading companies signed high-value licenses for next-generation technologies,” the company said.