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Arm shares jumped nearly 50% on Thursday after the British chip designer reported higher revenue buoyed by strong demand for artificial intelligence.
SoftBank-backed Arm, which listed on Nasdaq in September, raised its earnings outlook as it posted revenue of $824 million in the three months ended at the end of December, up 14% year over year and beating analysts’ expectations .
The results are Arm’s second since its successful IPO, which valued the company at $65 billion on its first day of trading and marked its largest U.S. listing in nearly two years.
By Thursday, Arm’s market capitalization had nearly doubled since then to about $117 billion.
Chief Executive Rene Haas said the company has benefited from the “profound opportunity” of growing demand for new AI applications, which he said is “driving out the need for many different products.”
Nvidia’s Grace Hopper, Microsoft’s Cobalt, and Amazon’s Graviton, used to run large language models, are all based on Arm’s newest V9 chip design.
The V9 now accounts for 15% of the company’s overall royalty revenue, up from 10% last quarter, and is earning royalties at double the rate of the previous version, Haas said.
In recent years Arm, which sells chip design licenses to manufacturers who in turn pay royalties on each unit shipped, has sought to diversify its business to reduce its dependence on the shrinking smartphone market.
On Wednesday, however, the company said royalty revenue from smartphones improved as device sales recovered. Haas said Arm’s V9 designs were “in all premium smartphones” from companies including Apple, Samsung and Google.
Chief Financial Officer Jason Child said Arm has seen strong growth in China, with its division in the country now accounting for 25% of total revenue, up from 20% in the third quarter.
Haas added that licensing revenue growth also increased, thanks in part to increased demand for the Arm Total Access computing platform.
The latest earnings represent a sharp improvement from Arm’s first report in November, which left Wall Street disappointing after the company paid more than $500 million in staff compensation costs related to its listing.
The chip designer on Wednesday raised its full-year revenue forecast from a range of $2.96-3.1 billion to $3.15-3.2 billion.
Japan’s SoftBank sold less than 10% of Arm in the IPO, holding onto most of its shares so it could borrow money against them. Analysts said this strategy could limit long-term supply and help boost the stock’s value.
Shares of the stock rose 64% to a record high of $126.59 on Thursday morning in New York, more than double the $51 price the company offered when it first listed. They closed the session up 47.9% to a record $113.89.
Adjusted earnings per share were $0.29, and the company raised its full-year forecast from a range of $1.00 to $1.10 to $1.20 to $1.24.
Arm’s upbeat results contrast those of many other chip companies this year. Intel, AMD and Texas Instruments all offered lukewarm outlooks amid concerns about a general sluggishness in the semiconductor industry.
Qualcomm, however, also beat revenue expectations last week, attributing its strong results to demand for AI-focused chips.