Yahoo Finance Results: Arm Holdings plc Beat Earnings Expectations And Analysts Now Have New Forecasts
A week ago, Arm Holdings plc (NASDAQ:ARM) came out with a strong set of first-quarter numbers that could potentially lead to a re-rate of the stock. Arm Holdings beat earnings, with revenues hitting US$939m, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 19%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Check out our latest analysis for Arm Holdings
After the latest results, the 31 analysts covering Arm Holdings are now predicting revenues of US$3.98b in 2025. If met, this would reflect a decent 14% improvement in revenue compared to the last 12 months. Per-share earnings are expected to leap 111% to US$0.86. Before this earnings report, the analysts had been forecasting revenues of US$4.00b and earnings per share (EPS) of US$0.86 in 2025. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
The consensus price target rose 7.5% to US$134despite there being no meaningful change to earnings estimates. It could be that the analystsare reflecting the predictability of Arm Holdings' earnings by assigning a price premium. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Arm Holdings analyst has a price target of US$200 per share, while the most pessimistic values it at US$66.00. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Arm Holdings' revenue growth will slow down substantially, with revenues to the end of 2025 expected to display 19% growth on an annualised basis. This is compared to a historical growth rate of 31% over the past year. Compare this to the 113 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 18% per year. So it's pretty clear that, while Arm Holdings' revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Arm Holdings. Long-term earnings power is much more important than next year's profits. We have forecasts for Arm Holdings going out to 2027, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Arm Holdings that you should be aware of.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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