21st Oct 2015 10:23
LONDON (Alliance News) - ARM Holdings PLC was leading the FTSE 100 Wednesday after it said it expects to meet market expectations for 2015 dollar revenue, and reported an increase in pretax profit for its third quarter.
In the quarter to end-September the computer chip designer reported a pretax profit of GBP102.9 million, up from GBP79.2 million a year before, as revenue rose to GBP243.1 million, up from GBP195.5 million.
This brings ARM's pretax profit for the first nine months of the year to GBP301.0 million, up from GBP225.1 million a year before, on revenue of GBP699.1 million, up from GBP569.3 million. On a dollar basis, revenue for the nine months was USD1.08 billion, up from USD935.0 million.
Dollar royalty revenue rose 35% in the quarter, and made up 54% of group revenue, as the company was boosted by its recently launched ARMv8-A based chips. Its guidance remains unchanged for royalty growth, and it continues to expect royalty revenue growth to outperform semiconductor industry growth by 15 percentage points.
This strong performance offset a weaker performance from licence revenue, where dollar licence revenue fell 2% in the quarter, primarily as a result of the company complete agreements related to 28 and 20 nanometre nodes, and beginning to transition towards delivering technology related to more advanced nodes. It continues to expect licence revenue growth of 5-10% per year in the medium term.
Operating expenses during the quarter were GBP108.4 million, compared to GBP99.3 million in the second quarter and GBP86.8 million a year before. It expects operating expenses in the fourth quarter to increase to between GBP117 million and GBP119 million, as it bolsters investment in an effort to speed up share gains in key markets like enterprise infrastructure, as well as opening up new revenue streams in the 'Internet of Things' space.
The company said it enters the final quarter of 2015 with "strong royalty momentum" and a "healthy licensing pipeline".
The third quarter "has been another strong quarter for royalty revenue growth, driven by premium chip pricing and elevated royalty percentages from recently introduced ARMv8-A based chips. These new chips are now shipping in a wide range of devices including smartphones, enterprise equipment such as base stations and servers, and consumer electronics such as digital TVs," said ARM Chief Executive Officer Simon Segars in a statement.
Shares in ARM were up 7.8% at 1,038.00 pence Wednesday morning, the biggest gainer in the FTSE 100.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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