AI and cars not smartphones will be Arms main growth

AI and cars, not smartphones, will be Arm’s main growth points

With only a few days left until Arm’s IPO on the US stock exchange, an event was held the day before in New York for about a hundred representatives of the investment community, where Arm’s management shared some information about the dynamics of earnings and … shared other financial indicators. In the near future, the company is pinning its highest hopes on the artificial intelligence systems segment.

    Image source: Apple

Image source: Apple

At least as mentioned ReutersLast fiscal year, stagnation in the smartphone market caused Arm’s total revenue to decline slightly compared to the previous reporting period, from $2.7 billion to $2.68 billion. In this market segment, Arm already controls around 99%. A change in the company’s turnover is only possible in line with the development of the entire smartphone market and there is practically no scope for a further increase in the share. However, through 2025, Arm’s mobile revenue will grow at an average annual rate of 6%, as management expects.

In the cloud computing and server systems segment, Arm is still content with a 10% market share, according to sources familiar with the company’s presentation to investors. Accordingly, average annual sales growth in this area of ​​17% is expected until 2025. In many ways, this will be possible due to the rapid development of artificial intelligence systems.

In the automotive segment, Arm controls about 41% of the market and expects a compound annual growth rate of 16%. Arm would also like to expect an increase in market share in the PC segment, but Apple has now actually completed the active phase of this migration due to its refusal to use Intel processors and further dynamics are difficult to predict.

Arm officials raised concerns about its high reliance on the independent company Arm China, through which it generates revenue in the Chinese market, which accounts for 24.5% of total sales. This counterparty often delays its payments, and at the end of March the debt amounted to $386.9 million. However, the management of the British holding is not particularly concerned about the existence of such debt. Apparently, this is an ordinary situation that does not pose a serious threat to Arm’s financial well-being.

For the current fiscal year, which ends in March, Arm expects total sales to increase by 11%. After next fiscal year’s results, sales could grow 25%, according to Arm management, and even a year later, sales growth will slow to just 18-19%. In addition to the growth in end-market demand itself, Arm’s revenue growth is also being driven by higher customer royalties.

If Arm’s operating profit margin hit 29% last fiscal year, it jumped to 40% in the most recent quarter. The company’s long-term goal is to increase that figure to 60%, according to the presentation to investors.

About the author

Dylan Harris

Dylan Harris is fascinated by tests and reviews of computer hardware.

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