On Monday evening, the entire tech world turned its attention to Apple's Californian headquarters. At this time, the company started its annual September keynote, this time under the motto "It's Glowtime". And Apple let it shine brightly. Unlike in previous years, the focus was not on hardware upgrades, but rather on software features, above all artificial intelligence. However, special hardware is required to enable the new iPhone 16 to create texts, images and other content on demand. The smartphone therefore contains a particularly powerful chip in the form of the new "A18". This processor is in turn based on the latest V9 chip design technology from ARM Holdings. However, the British company's advanced computer architectures are not only used by Apple; almost all cell phones are based on ARM technology.
The ARMv9 architecture, which has been available since 2021 and is both energy-saving and significantly more powerful, is designed to work with artificial intelligence and is therefore enjoying increasing demand. For example, the technology is already used in the M4 chip of the current iPad Pro and in some Android devices. ARM earns money from customers such as Apple or Qualcomm paying license fees for the use of the semiconductor designs. The company can rely on a long-term collaboration. In September last year, a contract was negotiated with Apple until after 2040.
In the first quarter of the current financial year 2024/25 (March 31), ARMv9 already accounted for a quarter of revenue. In the previous quarter, it only accounted for 20%. The management assumes that in two to three years, around 60% to 70% of revenue could be attributable to the v9 design, which in turn should drive license fees. Around 100 billion AI-enabled ARM-based chips are expected to be delivered by the end of the 2026 financial year. However, the company is not only anticipating major growth opportunities in the smartphone sector; shipments of ARM-based computers are also on the rise. Microsoft's first generation of Copilot+ PCs, for example, runs all important applications on the innovative technology of the company founded in 1990.
The fact that the ARM design is a big seller is reflected in the business figures. At the start of the year, ARM continued its double-digit percentage growth and achieved sales of USD 939 million, an increase of 39% compared to the same period last year. In the "License and other" segment, which accounts for around half of the Group's revenues, sales even rose by 72%. On the profit side, the semiconductor company was also able to shine again with high growth rates after a rather turbulent year 2023/24. The operating result increased by 64%, with the margin improving by 3 percentage points to 19.4%.
While the figures exceeded the expectations of the financial community, the outlook was more of a cold shower. ARM is expecting adjusted earnings of USD 0.23 to USD 0.27 per share for the current quarter, while analysts were expecting USD 0.28. The British company also failed with its revenue forecast. The Group expects sales of between USD 780 million and USD 830 million, which corresponds to a midpoint of USD 805 million. However, the estimates were USD 812.8 million. Even if the deviations are not really sensational, the share price plummeted by more than a tenth. The share price reaction shows that investors in growth companies currently have no sympathy even for such slight differences.
Although ARM has not yet been able to make up for the recent price dip, the share is still up around 90% in 2024. However, the strong upward momentum from the beginning of the year has already faded, and the share price has been a zero-sum game over the past six months. This is exactly the right time to go on the hunt for yield with a barrier reverse convertible (BRC). The recent high volatility of the ARM share makes for a particularly attractive investment. Leonteq has launched two new single BRCs with attractive coupons and low barriers. The CHF variant offers the prospect of a maximum yield of 14.60% p.a., while in USD 18.20% p.a. is even possible within the term. The barrier for both product variations is a reassuring 45% away from the starting price. These top conditions are even possible without the issuer granting itself a callable function. Investors can count on a fixed term of 15 months from the outset.
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