Shares of Arm plunge 8% after licensing revenue misses estimates, Qualcomm outlook adds pressure

Shares of Arm Holdings, a prominent UK semiconductor designer, experienced a significant decline of 7.48% in after-hours trading on Wednesday. This drop followed the company's announcement that its licensing revenue fell short of Wall Street expectations. In the fiscal third quarter, Arm reported a 25% increase in licensing revenue compared to the previous year, totaling $505 million. However, this figure was 2.9% below the anticipated $519.9 million, as projected by analysts from FactSet. Andrew Jackson from Ortus Advisors noted, "ARM is down -8% in late trading after its guidance only slightly beat – not helped by the negative read through from Qualcomm numbers after-hours given ARM chip designs are heavily used in smartphones." Qualcomm's stock also took a hit, dropping 9.68% during after-hours trading. Although Qualcomm's fiscal first-quarter results surpassed expectations, its outlook disappointed investors due to ongoing global memory shortages. Despite its licensing revenue miss, Arm achieved a record quarterly revenue of $1.242 billion for the last three months of 2025, driven largely by the rising demand for artificial intelligence. This figure exceeded LSEG SmartEstimates by 1.54%, which take into account forecasts from more consistently accurate analysts. Arm's chip designs are crucial for the majority of the world's smartphones and are increasingly being integrated into AI data centers and edge computing devices. "ARM is attempting to diversify into AI chips for data centers and servers, but the success of this initiative remains uncertain, and its business model heavily relies on royalties from chips used in consumer products such as handsets," Jackson added. He cautioned that if production of Chinese smartphones declines next year due to memory shortages, as suggested by Qualcomm, Arm's outlook could deteriorate further before showing signs of improvement. Since going public in 2023, Arm's shares have also been impacted by broader pressures in the tech market, resulting in a year-to-date decline of 4%.