ARM Holdings Shares Slip on Slowing Smartphone Sales

ARM Holdings PLC (NASDAQ: ARMH) reported fourth-quarter and fiscal year 2015 results before U.S. markets opened Wednesday. For the quarter, the semiconductor design and licensing firm posted adjusted diluted earnings per American depositary share (ADS) of $0.36 on revenues of $407.9 million. In the same period a year ago, the company reported earnings per ADS of $0.30 on revenues of $357.6 million. Fourth-quarter results also compare to the Thomson Reuters consensus estimates for earnings per ADS of $0.36 and $264.53 million in revenues. One ADS is equal to three ordinary shares.

For the full year, the company posted adjusted earnings per ADS of about $1.32 on revenues of $1.49 billion, compared with earnings per ADS of about $1.05 on revenues of $1.29 billion in 2014. The consensus estimate called for earnings per ADS of $1.38 on revenues of $1.46 billion.

CEO Simon Segars said:

During the year ARMv8-A surpassed 50% share of smartphone shipments, Mali became the industry’s highest-shipping GPU architecture, and our Partners increased their shipments into enterprise infrastructure and embedded markets. … Demand for our technology is increasing, and during the quarter we signed multiple licences for the next generation of high-performance and secure ARM processors. Our increased investments in both 2015 and 2016 will help us meet demand by extending the capabilities of our technology and the ecosystem, and will support long-term growth and returns for shareholders.

Here’s what the company had to say about the outlook for 2013:

ARM enters 2016 with a robust opportunity pipeline for licensing helped by the introduction of new ARM technologies and our expanding market opportunities. Chips based on ARMv8-A technology are expected to continue to gain share in mobile and enterprise markets, and the higher royalty rate earned on these products helps to underpin growth in royalty revenues.

Increased economic uncertainty may influence consumer and enterprise spending, potentially impacting semiconductor revenues and industry confidence. Based on current conditions in the semiconductor market, we expect Group dollar revenues for the full year to be broadly in line with market expectations.

Analysts have consensus first-quarter estimates for EPS of $0.38 and revenues of $403.27 million and full-year estimates for EPS of $1.57 and revenues of $1.67 billion.

A global slowdown in smartphone sales growth spells caution for investors in ARM, one of the world’s premier suppliers of chip designs for the ubiquitous mobile devices.

The stock traded down about 6.8% in the noon hour Wednesday to $38.55, after posting a new 52-week low of $38.19. The 52-week high is $54.82. Thomson Reuters had a consensus analyst price target of $55.68 before the earnings report.

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