ARM profit up on higher chip shipments, sales

Q2 revenue was up 22 percent at £228.5 million, with royalties- an important measure for ARM’s financial performance – soaring 41 percent to £113.5 million. Like many mobile device makers, Apple uses ARM’s processor designs in its range of iThings.

Shares in ARM fell 63p to 976p following the announcement, although technology shares were broadly down after results from Apple and Microsoft failed to impress.

Simon Segars, ARM chief exec, said a diverse range of companies chose to license ARM’s latest processors in the second quarter and physical IP for future product developments. It earns licensing fees from chip manufacturers such as Qualcomm Inc. and Nvidia Corp. and royalties on every chip shipped.

“Assuming macroeconomic uncertainty does not further impact consumer spending, we expect overall group dollar revenues for full-year 2015 to be in line with current market expectations”, it said on Wednesday. The company’s revenue often lags behind the market, because almost half of its business comes from royalties. Apple is one of ARM’s biggest customers, accounting for 20-25 percent of processor royalties past year, according to analyst estimates.

However, Apple announced iPhone sales of 47 million for the fiscal third quarter, falling slightly short of analyst expectations of 48.8 million, despite being up 35 percent on the previous quarter.

ARM shares closed Tuesday at 1,039 pence, valuing the company at GBP14.6 billion.

Broker Charles Stanley upgraded ARM to “buy” from “accumulate” following the results.

Some analysts have suggested ARM could be hurt by a slowdown in the global smartphone market. Earlier this month, Samsung warned of sliding quarterly operating profit and revenue as it grapples with the fast-changing mobile industry.

But even that sweetener that was not enough to save ARM from the fallout from Apple’s disappointing results.