ARM Holdings has reported a remarkable 28 percent year-over-year increase in revenue, reaching a historic $806 million during the September quarter of 2023.
The revenue surge exceeded initial expectations, with the primary driver being the signing of several high-value, long-term license agreements with industry-leading technology companies. These companies are actively engaged in developing cutting-edge chips across various sectors, encompassing ARM’s target markets. This has resulted in a remarkable 106 percent year-over-year growth in licensing and other revenue. A substantial portion of this revenue boost was enabled by ARM’s innovative Total Access business model, which provides clients with access to a diverse array of ARM central processing units (CPUs) and related technologies.
The demand for high-performance CPUs has surged, reflecting the growing need for artificial intelligence (AI) across a broad spectrum of applications, from cloud servers to smartphones to automotive systems. However, royalty revenue experienced a modest 5 percent year-over-year decline, primarily due to lower sales of smartphone chips. Nevertheless, this was offset by robust growth in other target markets, notably cloud computing and automotive applications. ARM’s overall royalty revenue also benefits from higher royalty rates as the penetration of ARMv9 architecture expands.
In a notable statistic, ARM’s customers have reported the shipment of 7.1 billion ARM-based chips in the prior period, marking a 6 percent year-over-year reduction. This decrease is attributed to the softening of high-volume markets such as IoT and embedded applications, which was counterbalanced by growth in higher-value but lower-volume markets like cloud servers and automotive chips. Consequently, the cumulative number of ARM-based chips shipped has now surpassed 272.5 billion units.
ARM’s commitment to innovation is exemplified by its substantial increase in headcount, with a remarkable 17 percent year-over-year growth. More than 85 percent of the net new hires have been directed toward engineering roles. The associated costs of this headcount expansion were mitigated by several one-off items, resulting in a 2 percent year-over-year reduction in operating expenses. This has culminated in a significant 92 percent increase in operating profits, achieving a remarkable 47.3 percent operating margin.
ARM recently introduced the Arm Neoverse Compute Subsystems (CSS), providing a faster and more efficient pathway for the development of custom-built chips tailored for AI, cloud servers, 5G base station equipment, and other critical infrastructure applications. Furthermore, ARM announced Arm Total Design for Neoverse CSS, engaging essential ecosystem partners to expedite the development of ARM Neoverse-based chips.
In the run-up to the end of Q3 and early Q3, ARM’s partners made several exciting announcements concerning AI-capable devices:
Nvidia unveiled the GH200 Grace Hopper Superchip, a groundbreaking creation that combines ARM-based Grace CPUs with the Hopper GPU, serving as a remarkable case study for energy-efficient AI training and inference.
Renesas introduced New Ultra-High Performance MCUs, incorporating ARM Helium Technology to enhance AI performance on edge and endpoint devices.
Meta and ARM announced a collaborative effort, demonstrating PyTorch models running natively on ARM CPUs and NPUs, simplifying the deployment of PyTorch models at the edge.
Google revealed its upgraded Tensor G3 chip, supporting on-device generative AI and featuring the potent Arm Cortex-X4 mobile CPU.
Xiaomi’s latest 14 and 14 Pro smartphones will utilize Qualcomm’s Snapdragon 8 Gen 3, which is also based on ARM’s Cortex-X4 CPU, enabling on-device generative AI capabilities.
Google and Qualcomm joined forces to bring generative AI experiences to Android phones, harnessing the combined power of the ARM CPU and accelerator to enhance AI performance.
These developments underscore ARM’s continued commitment to shaping the future of technology and its dedication to advancing AI capabilities across a broad range of applications. With record revenue growth and a thriving ecosystem of partners, ARM is poised for a dynamic and innovative future.