Arm stock falls even though chip designer tops Q4 estimates

Arm Holdings' (ARM) fiscal fourth-quarter earnings are out, but the stock is down in Wednesday's after-hours trading. The chip company posted $928 million in revenue and adjusted earnings of $0.36 per share, beating top and bottom line estimates.

Interactive Brokers Chief Strategist Steve Sosnick joins Market Domination Overtime's Julie Hyman and Josh Lipton in breaking Arm's latest earnings results and how semiconductor companies are now pricing in manufacturing trends and industry forecasts.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Luke Carberry Mogan.

Video transcript

All right, let's get to arm holdings.Now, let's just a bonanza.So arm coming out with its fourth quarter, its fiscal fourth quarter a total total revenue here $928 million comfortably above the $880 million that analysts were forecasting.Um, and if you look at the first quarter forecast 875 to $925 million analysts, they were looking for 868.So got to be honest, Not sure exactly why we are seeing the shares take a hit here.I'm just scanning through some of the other numbers.I don't know if anything stands out to you, Josh.I'm looking through it, too.I mean, listen, we we talk about arm because it's one of the most important semiconductor semiconductor companies on the planet.Just full stop.You know, I, I wonder, Julie.I'm looking through the metrics, too, that the stock had, of course enjoyed this strong run.It more than doubled since the IBO back last fall last September.Uh, you know, it is hard to impress when you've so like that.Bloomberg has actually point out today in a piece is more expensive than any stock in the NASDAQ 100 heading into the print, and that includes NVIDIA.Of course, you wonder if that's playing some role here.You know, it could be that the company's forecast for 2025 revenue for 3.8 to $4.1 billion at the mid point of that is a little bit lower than the $4.01 billion that analysts had been estimating and to bring back in Steve Sosnick here.This sort of speaks to little margin for error that we were kind of talking about.I mean, especially given that the stock has done so well but that that's where it comes from.This is, But this has been a pheno, a phenomenal performer, particularly if you owned it before the before last quarter's earnings.I hate to bring up a term from the old days that that Dave whisper whisper numbers, and I do think that those are at play again because I think that when you when you have these mysterious misses, when you have a stock down, you know, 9% because of you know, because when when they're they beat on EPS when they beat on revenues and and maybe guide a little bit lower next year.You know, uh, that's where you have to wonder what is really being priced into some of these names.Um And so, uh, I hate that term.I really But But it was very useful back in the day.And I, I have this fear that it's useful again.Um, what about the semiconductor trade overall?I mean, you talked to We've talked a little bit.We've talked a lot about NVIDIA as being the sort of next catalyst coming later this month.Um, but you see something that's so pivotal, like arm disappointing, you know, and and again, it speaks to kind of where we are.We're not in the A I cycle.Also, that raises the stakes.I have a feeling that arm right now, if I had to just, you know, eyeball it, it's it's it's become victim to what I warned.What I warned could be the problem of NVIDIA is people expect people expect to beat and raise, And so if you just sort of beat but don't raise but you know, or don't raise enough, is that disappointing.Remember, NVIDIA actually went down after its last couple of earnings of events.It it it then regrouped and zoomed higher.But But this is what happens is you get you get such, um, enthusiasm priced into some of these stocks, that it's really hard for them to beat in the short term again and also realising that the first move is sell first.Ask questions.Let me ask you one and and you're the guy.I asked this, Steve.I was always taught that even if you're not in the chips, you watch the chips because they they tend to lead the market on the way up and the way down.Is that accurate?I believe so, Yeah, you know it it it changes over time and, you know, various points.In my career, it was oil stocks.It was bank stocks.Now it's chip stocks that they're they're what's driving.They're what's driving the bus.I mean, you ultimately, you know, we we've become beholden sort of to the mega cap.The mega cap tech names, all of them use semiconductor Semiconductors are in some ways the new oil because they're in everything, and so they are a good.They're a good paradigm for where demand is in the economy.You wanna talk about autos?You gotta talk about semiconductor.Pick something.We we can We can do this.Refrigerators, right.I mean, you couldn't get a refrigerator for a while because they couldn't get chips for your refrigerator.Who even knew they had chips.All right, we gotta leave it there.Thanks so much for hanging out with us.I appreciate it.