ARM Beats Profit, Revenue Expectations, but Misses on Margin Growth

From DailyTech: ARM Holdings plc (LON:ARM) continues to perform bullishly, pumping its pre-tax profit for the second calendar quarter (ending in June) to £86.6M ($132.4M USD), up 30 percent from Q2 2012.

As the producer of the most-used architecture and instruction set for tablets and smartphones, ARM is a classic story of a company positioning itself in the right place at the right time. As most of its revenue (£171.2M ($262.8M USD) in Q2 2013) comes from licensing, the company is free of much in the way of supply chain/manufacturing expenses and enjoys gaudy margins (48.6 percent in Q2 2013).

The only real disappointment/miss amidst another strong quarter for ARM was its margin growth. A survey of 12 analysts by UK-based Financial Times, a Pearson PLC unit (LON:PSON), had predicted a pre-tax profit of £83.4M ($128.1M USD) on a revenue of £165.2M ($253.6M USD) (a margin of 50.5).

The lower-than-hoped margin, coupled with concerns about the general slowdown in smartphone sales caused ARM stock to drop 1 percent in Wed. trading, despite the increase in profit.

On a year-to-year basis, ARM-architecture chip shipments increased 20 percent, reaching 2.4 billion, roughly 800 million a month. The company signed 25 new licensees, including 7 licensees of its Mali graphics cores and 5 Cortex-A CPU core licensees.

ARM's new chief executive officer Simon Segars in an earnings call states that his firm is just getting started, remarking, "[The] smartphone market itself, as I said is developing in quite interesting ways, and it's easy to think that everybody on the planet has a smartphone, but actually when you look at global penetration of smartphones it's actually quite low."

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