Arm tumbles as British chipmaker’s first set of results since US float come up short

Shares in Arm tumbled as the British chipmaker’s first set of results since Wall Street became the year’s biggest IPO.

The company’s guidance released late Wednesday missed investors’ expectations and dealt a blow to the company and its biggest lender Softbank, which rejected London in favor of New York in September.

Arm expects third-quarter revenues of £620 million, lower than analyst expectations of £625 million. This pushed the shares down 7 percent, falling below the IPO price of $51 per share.

But shares later recovered to end down 5 percent at $51.58.

Arm’s first update since going public was closely watched after Britain lost the hard-fought battle to convince the Cambridge-based company to list on the London market.

In one of the most hotly anticipated stock prices in recent years, Arm was valued at more than £50 billion on its debut.

Ben Barringer, technology analyst at Quilter Cheviot, said: ‘Right out of the gate you would expect a company to exceed expectations and provide guidance – that would be sensible inventory management.’

“Arm will likely bounce around the IPO price level but end up disappointing some people hoping for better results in the short term,” Barringer added.

There are also fears that Arm’s exposure to China will weigh on its share price.

In documents published in August, Arm revealed it is “particularly sensitive to economic and political risks” in China, where it earns almost a quarter of its revenue.

Arm has previously pointed out that growing tensions between the Biden administration in the US and Beijing have already begun to hamper its performance.

But it wasn’t all gloomy news for shareholders, as Arm set a positive tone with second-quarter sales. Sales rose 28 percent to £656 million, exceeding analyst expectations.

Revenues were driven by a slew of companies designing new chips with their technology amid an artificial intelligence (AI) boom.

Arm said big names including Google, Meta and Nvidia were working on AI-enabled chips.

These tech giants signed on as investors in the IPO, alongside other major clients such as Apple, Alphabet, Intel and Samsung Electronics.

But Japanese private equity giant Softbank, which bought Arm in 2016, still owns 90 percent of the shares.

Arm also expects annual sales to reach £2.46 billion for the 2024 financial year, above analyst expectations of £2.4 billion.

“We are pleased with Arm’s performance as a publicly traded company, which has demonstrated the strength of our business model,” management wrote in a letter to investors.

Russ Mould, investment director at AJ Bell, said: ‘The outlook for Arm continues to be promising. Investors and analysts simply need to have more realistic expectations about the growth rate.’

Before Arm was bought by Softbank for £24 billion in 2016, it was a member of the FTSE 100 index and had a secondary listing in New York.

When Softbank’s proposed sale of Arm to Nvidia was rejected by regulators, Britain pushed hard for a return to the London stock market.

But Softbank chief Masayoshi Son chose New York over the London stock market in a major blow.

It raised £4 billion for owner Softbank in the biggest float in New York since electric car maker Rivian listed in 2021.

£5bn SoftBank hit

Losing: Softbank founder Masayoshi Son

Armchair Softbank suffered another blow when it shocked investors with a £5 billion quarterly loss as its WeWork investment collapsed.

The unexpected loss in the second quarter marked the fourth straight quarter in the red for the Japanese conglomerate.

Dismal results came during an already disappointing week for Softbank founder Masayoshi Son, after the investment giant was hit by the collapse of WeWork.

The company owns an almost 80 percent stake in the office provider.

Softbank said it posted £1.3 billion in losses in the first half of the year due to financial support for WeWork.