Arm’s shares fell on concerns about smartphone chips

Shares of the UK-based semiconductor designer Arm Holdings The company’s licensing revenue fell 7.48% in after-hours trading Wednesday after it missed Wall Street estimates.

Arm’s fiscal third-quarter licensing revenue rose 25% from a year earlier to $505 million, but fell 2.9% below the $519.9 million expected by analysts polled by FactSet.

Andrew Jackson, equity analyst at Ortus Advisors, said investors were also reacting to Arm’s guidance only slightly beating estimates, as well as poor perspective Delivered by its chip design customer Qualcomm.

shares of Qualcomm It nosedived 9.68% after hours on Wednesday. While the company’s fiscal first-quarter results beat expectations, its forecast was disappointed by a global memory shortage.

Despite missing Wall Street estimates for licensing revenue, Arm Posted record quarterly revenue $1.242 billion for the last three months of 2025, driven by artificial intelligence demand. That number beat LSEG SmartEstimates, which are based on analyst estimates that are more consistently accurate.

Arm’s chip design powers most of the world’s smartphones and is increasingly used in AI data centers and edge computing devices.

“ARM is trying to diversify into AI chips used for DC/servers, but success is uncertain and its business model still relies heavily on royalties from chips used in consumer products like handsets,” Jackson said.

A slowdown in Chinese smartphone production due to memory shortages could hurt Arm’s outlook before it improves, he added.

Executives from both Qualcomm and Arm divisions have hinted that the smartphone maker may reduce production volumes as supply constraints persist.

Futurum Group analyst Rolf Bulk told CNBC that such a scenario would put pressure on Arm customers. apple And Samsung.

Smartphones remain Arm’s largest end market, accounting for roughly half of its revenue, despite increasing exposure to data centers.

Shares of Arm, which went public in 2023, have faced broader tech market pressure on the earnings front and are down 4% year-to-date.