ARM beats market expectations with 23% profit surge

July 25, 2012
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    It seems that ARM has beaten again the forecasters’ predictions for Q2 2012, and even better, the British chip designer outperformed the industry as well.

    While Intel and Qualcomm had to reduce expectations for their results, ARM surprised everyone with a 23% profit surge in the last quarter, or a $103.2 million pre-tax profit for $135 million worth of sales. Analyst Julian Yates at Investec said it was a good set of numbers – “It’s 5 percent ahead of our profit number, and they have beats on top-line royalties and licenses”.

    Admittedly, ARM is not playing with billions every quarter like Intel does. But they don’t need to, since they are only licensing intellectual property and not manufacturing chips, so their profit margin seems to be very healthy.

    Nevertheless, it’s possible for ARM to take a hit in demand by the end of the year, due to the current macroeconomic situation that discourages consumers from buying devices. Analysts predict that ARM’s revenues for the whole year will be $875, which is slightly less than their initial prediction of $877.

    While Intel and ARM’s revenues are not comparable by any means, the two companies are still competitors, and they are increasingly starting to step on each other’s toes. Actually, I would say that ARM has been much more successful at stepping on Intel’s toes so far. ARM-powered tablets deliver long battery life, which pushes many people to use them instead of Intel-powered laptops. ARM has also entered the server business, and won big customers like HP, which is another direct threat to Intel. At the same time, ARM has allied with AMD to help the troubled chip-maker take a stab at Intel.

    Just because ARM is not making as much money as Intel because it’s not selling physical products, it doesn’t mean it won’t cause Intel billions in loses in the coming years. Regardless of how well or bad Intel is doing, I expect ARM to do very well in the close future .

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