Arm Q1 Revenue Up 39%, Q2 Forecast to Dip

Arm, the UK-based chip design company, announced on Wednesday its fourth consecutive quarter of growth, with Q1 revenue increasing by 39% year-over-year to $939 million, and profits reaching $233 million. For Q2, Arm forecasts net revenue between $780 million and $830 million, a decrease of $109 million to $159 million compared to the previous quarter.

During the earnings call on Wednesday, CFO Jason Child attributed the subdued outlook to the "timing of license revenue recognition." Child anticipates that Q2 will be the low point for Arm's fiscal year 2025. Despite the projected decline in revenue, he predicts a significant increase in bookings for the second quarter.

The anticipated Q2 dip is not expected to impact Arm's full-year revenue forecast, which remains between $3.8 billion and $4.1 billion. The company projects the most substantial growth in Q4, driven largely by increasing demand for AI chips. However, this did not prevent Arm's stock from falling over 12% in after-hours trading.

CEO Rene Haas emphasized AI as the growth driver for Q1 of fiscal 2025 during the analyst call. He explained, "We see AI everywhere, driving demand for Arm’s high-performance, energy-efficient computing platforms. While most large AI models are trained and inferred on large GPU clusters and specialized accelerators, these segments still require CPUs for management."

"Every chip designed today requires CPUs, and they are designed with Arm in mind," Haas continued. "The ultimate benefit of using Arm in AI data centers is customization," he said, highlighting Nvidia’s Grace-Hopper GH200 superchip as a prime example. Released in 2022, the GH200 combines 72 Arm Neoverse V2 core CPUs with H100 GPUs via a 900GB/s NVLink-C2C interconnect. Its successor, the Grace-Blackwell chip, explored in depth by Arm last March, will use the same Grace CPU paired with dual Blackwell GPUs.