Arm Holdings and Qualcomm Stocks Fall on Earnings Outlook

NASDAQ: ARM, QCOM

Arm Holdings (ARM) and Qualcomm (QCOM) stocks experienced a decline on Thursday following the release of their earnings outlooks. The outlooks indicate that AI is not yet generating a significant surge in demand for consumer electronics that use the companies' chips.

Arm Holdings

Arm, which fell 3.8% in early trading on Thursday, issued earnings guidance for the March quarter that was slightly below expectations. The company anticipates adjusted earnings per share of $0.48-$0.56 in its fiscal fourth quarter, compared to the $0.53 consensus estimate. Revenue for the quarter is projected to range from $1.18 billion to $1.28 billion, with Wall Street analysts expecting $1.23 billion. Arm also lowered the upper range of its revenue outlook for fiscal year 2025 to $4.04 billion from $4.1 billion, while raising the lower range to $3.9 billion from $3.8 billion.

Qualcomm

Qualcomm, which slid 5% on Thursday, reported growth in revenue from its smartphone chips but indicated a slowdown in that segment for the March period. The company attributed the decline to seasonality and reduced shipments to Apple, which has been developing its own chips for smartphones. CFO Akash Palkhiwala forecasted a 10% growth in revenue for the handset segment in the current quarter.

Impact of AI on Demand

Analysts speculate that an AI-driven demand cycle for smartphones could mitigate the companies' softer outlooks. Lower-cost AI models, such as DeepSeek, are expected to enhance the spread of inferencing at the edge, potentially boosting demand for PCs, smartphones, and IoT devices.

Industry Outlook

Despite the recent dip, Arm shares remain significantly higher than last year, rising nearly 130%. Qualcomm's shares have seen a more modest 17% increase over the same period. Arm stands to benefit from the recently announced Stargate project, which will invest heavily in AI infrastructure. While concerns about an AI spending slowdown persist, major tech companies continue to make substantial investments in the field.