By Juby Babu and Max A. Cherney
July 29 (Reuters) - Arm Holdings forecast second-quarter revenue above Wall Street estimates on Wednesday, signaling strong demand for its energy-efficient chip designs for AI data centers.
Demand for Arm's chip architecture has surged as companies like Alphabet and Amazon.com build custom AI chips, boosting the company's licensing revenue and royalties as more complex chips are shipped to data centers.
Revenue from royalties, which Arm collects on each chip shipped using
its technology, rose 22% to $715 million in the first quarter, while licensing revenue grew 23% to $574 million.
Arm's chip designs are prized for their power efficiency, a critical advantage for data center operators looking to manage the soaring energy costs and heat generated by running massive AI models.
Its AGI CPU, a new AI data center chip unveiled in March, is exceeding initial expectations, with demand now surpassing $2 billion across fiscal years 2027 and 2028, the company said. It has already delivered the product to multiple customers.
Cloud firm Oracle has agreed to buy the new chip, Arm CEO Rene Haas said in an interview with Reuters. Haas did not disclose the contract value.
"We have new customers in North America and China," Haas said, adding that the company can now secure supply for more than $1 billion worth of chips.
"I feel better about (supply) than I did 90 days ago," he said.
Jefferies analysts see sales of the new chip reaching $18 billion in fiscal 2031, surpassing the chip designer's own projection of $15 billion. Haas said the company is not changing any forecasts on Wednesday.
Arm projected second-quarter revenue of $1.38 billion, above analysts' average estimate of $1.34 billion, according to data compiled by LSEG.
The UK chip designer expects second-quarter profit of 47 cents per share, adjusted for stock compensation, among other things, compared with analysts' expectations of 43 cents per share.
The company reported revenue of $1.29 billion and adjusted per-share earnings of 45 cents for the first quarter. Analysts expected revenue of $1.26 billion and adjusted profit of 40 cents a share.
(Reporting by Juby Babu in Mexico City; Editing by Sahal Muhammed)
