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Look, they two beat the street on earnings, on earnings for share basis. You look at revenue dialing up almost twenty percent. But again it's a world a conservative forecast. And what this means not only for smartphones, but what it means for AI demand as well. We've got to get to it with arms CEO Rene Haas, who joins us now, and I put it to you, you've been out everywhere at the moment. There's deals being done, of course, a soft bank and open AI that will dig into.
But what about this forecast and what it signals for your business? Is it just you being conservative as a newly public company.
Thanks Kerlen, and appreciate you having me on this morning. Yeah, I don't know if I agree with the dialogue muted forecast. We beat our projections for Q three and we actually raise guidance four Q four and for the year, and we're looking at about four billion dollars of annual revenue, which is about twenty five percent.
Increase over the last year.
So we're super happy with the trajectory of the business and super happy with the performance.
Maybe just investors are too exuberant they're too exuberant around the fact that you've already said your compute platform is going to help open ai and SoftBank make good on their Advanced Enterprise AI, the optimism around your AI future as well as how integral you are smartphones. So is it that are people too excited about the AI opportunity here?
Yeah, I'm going to try to decouple what the market is saying about our results and just talk about the results in general, of which we are again incredibly pleased by. We are seeing extremely strong demand for our products across the board. We had record royalties. We were up twenty three percent year on year. Our version nine compute subsystems,
which drive higher world TIID rates. We're just growing faster than the market, which is what we told investors when we went public back in Analyst Day a year and a.
Half ago plus.
So yeah, we're not seeing any slowdown in demand quite frankly, Carol. In fact, we're seeing an acceleration in it, particularly driven by all things around artificial intelligence.
Rene. Speaking of future growth, one of the things that ARM is also banking on is its high profile partnership in Stargate, and you're a big player in that could you kind of tell us what investors can expect this year to gain from that venture.
I can say, broadly speaking, the way you think about Stargate is it's an infrastructure project unlike any other five hundred billion dollars. One hundred billion dollars will spend initially, and these are to build out the world's largest AI data centers for training and inference. We are the key technology partner around CPU. We're the only CPU technology partner that was named, which is terrific obviously for US. One can imagine going forward a lot of opportunity for technology
innovation there. But in a near term we'll be linked with the Grace Blackwell ship using the Gray CPU which is armed bay and the.
Black Lill GPU which is video based.
But these large frontier models are going to require Jackie a huge amount of power for training and inference, and we're just so excited about being involved in this. It's going to be fantastic. Well.
At the same time, this project also kind of puts you in the middle of this US China tech rivalry. You're at the front lines of it, being the top supplier to American AI companies, And I'm curious if you think that perhaps tying your fortunes so closely to open Ai is a risk.
I'm not sure I think about it quite that way. Open Ai is a fantastic partner. Arguably they're the leader at the moment in terms of adoption of chat, GPT and their APIs and their enterprise suite. We work with everyone, though we work very closely with Google, we work closely with Meta Aws, you know all the partners. But we're very thrilled to be involved with open Ai. They have phenomenal technology.
Rene. We're going to lean into that China Us story. Deep Seek extraordinary the push and pull has in the narratives. Can you explain as to whether you think we are going to need as much compute as we all foresaw before.
Oh, I think unquestionably, Caroline, And in fact, I think even more than we probably have been thought about.
So why is that?
Well, if you look at what deep Seek has done, which is an amazing, by the way piece of work they've done what's called distillation, and distillation is building on top of an existing frontier model which takes lots of power and lots of compute to generate. If you think about GPT four, which were was hundreds of megawatts GPT five sixty seven.
These are in the gigawatts.
So even though you may have models that can distill or build a con the frontier models, the frontier models still need a lot of power. And then with that that drives a huge demand for inference, which is really where the larger use loads are. And more efficient inference means you can drive AI to much smaller devices, to smartphones, earbuds, devices that don't have a lot of capability for power.
It's great for ARMED because that's where we are today, it's where we exist, and now you can run those AI workloads on the CPU. So I think actually what deep seat proves is that we're just going to see an even more accelerant towards towards compute.
Well on that front, you know you have a significant business in China. Are you concerned at all about perhaps how the slowing smartphone business might affect Arm's future growth.
Yeah, it's a great question.
And you know, again what we've seen in smartphones with your single digits type of growth, we're in the double digits growth in terms of royalties, in some cases twenty percent growth. And why is that we're putting more technology into these phones, our version nine, our compute subsystems drive higher royalty rates. So we're just growing faster than the market, and particularly in the premium segment which requires more and
more compute. So while the units have been slowed in some areas, it actually has an impacted as very much.
Just look at our record royalties.
To have this kind of number in a market where people think things are slowing down, just.
Phenomenal record royalties. Upside in licensing. I would just want to get to the litigation if I'm met here RENAA, and briefly, perhaps it hasn't gone in the way that you thought with Qualcom. What does it mean for the future earnings?
Really, there's no impact on future earnings, Caroline. The trial was a mistrial on one of the verdicts, so the dispute is still open. But to your question, in terms of the future forecast, we had no impact whatsoever.
Renee Ha, CEO of ARM, thank you for joining us.