Arm reports record royalties but total revenues slide

Licensing down 53% due to major one-off deals signed a year ago

Chip designer Arm reported record revenues for its latest quarterly trading update as it continues to diversify the business beyond licensing.

For its second quarter ending 30 September - Arm’s 2022 financial year ends in March 2023 somewhat counterintuitively - royalty revenues jumped to $463.2 million from $378.2 million in the prior year period. For the arithmetically challenged, that is a 22.47 percent rise.

Yet total revenues were down 16 per cent to $655.85 million due to a 53 percent plunge in licensing to $192.7 million, a company spokesperson told The Register.

This reflects the more spikes nature of licensing and highlights why Arm is keen to build royalties. “This spike was due to the timing of revenue recognition of two major licenses that were signed in prior periods,” Arm said.

All market segments for royalties grew, Arm said, with new highs reached for both the automotive line of business as ADAS adoption “continues to drive more advanced computing in cars”, and in IoT.

There was ongoing adoption of Arm Neoverse, it added. Nvidia’s Grace processor is set to be among the first chips to integrate the upcoming Neoverse V2 CPU cores due in 2023. There was also an uplift in royalties for devices despite the fall in smartphone shipments.

During the three months, Arm’s customers shipped 7.5 billion Arm-based chips, this was up 9 percent year-on-year. The total Arm ecosystem has now swelled to more than 240 billion Arm-based chips.

Arm CEO Rene Haas, who took on the role from Simon Segars earlier this year in the wake of the collapsed purchase by Nvidia, said in a canned statement:

“Arm is defining the future of computing as adoption of our technology continues across all of the markets we serve, demonstrated by our strong licensing results and record royalty revenues this quarter.

“As we continue to diversify, our investment across all lines of business continues to pay off, with impressive growth in automotive and IoT in particular.”

Adjusted earning before income tax, depreciation and amortization (EBITDA) margin was 50 percent compared to 59 percent a year earlier.

The British-headquartered chip designer was widely expected to IPO this year but given the turmoil in the financial markets, parent Softbank may decide to hold off on the flotation.

In related news today, Softbank’s Vision Fund reported a $7.2 billion loss for the quarter due to writing down investments in tech stocks. ®