We're of course going to be talking about the chip design firm ARM, which has really bounced off of its lows in terms of its share price throughout the trading of today. We're currently over the last two days down by one point three percent. Coming out after the bell with its earnings tepid forecast ed was what the market seemed to be focusing in on, even though they absolutely smashed it in terms of their fiscal fourth quarter numbers and their fourth first quarter look ahead. Let's stick in
to some of that caution with Renee. Has is the ARM CEO, Renee wonderful to have time with you. And look, there does seem to be a worry about your full year forecasts?
Are you being cautious?
Well, thanks both for having me Ed and Carroll. And we just came off a record year in terms of revenue. We were up twenty percent a little bit over twenty percent our fiscal twenty three from twenty twenty two, and we're actually forecasting even higher growth this year, north of twenty percent.
And we also signaled to.
The markets yesterday that in twenty five, twenty six, twenty seven, we see that growth continuing. So we have incredible visibility into our business and we're very very confident of this growth rate going forward.
We're just seeing your shares actually ticking to positive territory rene up now six tenths of one percent. The underlying story is the build out in AI infrastructure. Right, we're talking about data center powered GP by GPUs. Your numbers were good. Tell me about the underlying demand, then about the long term and the addressable market you think is either intact or is not.
Well. I think this AI buildout, as you describe, or maybe said another way, just expanding capacity to run these foundation models, to do more and more training, to do more and more inference. We really are only at the very beginning because when you start to think about the capabilities that this could unleash, whether it's around healthcare, pharmer research, productivity, gains, call centers, we're still in the very very early days.
That all starts with having to do this level of training and inference in the cloud, but it ultimately will find itself in every single edge device, whether that's a PC, your smartphone, your car, and whether it's all those devices I've mentioned from the data center to the edge devices, they all run on ARM. So we have incredible visibility to where this is all going, which is why we're very confident.
In the growth rates. They're also one of the big problems.
You've got with all of these AI data centers is around energy and power, so power efficiency being so key, it's what ARM is really good at. Increasingly we're seeing the most complex applications moving to ARM and most sophisticated training ship on the planet that was just announced Grace Blackwell, well that's based on ARM.
Okay, So you're managing to really think that you're going to be the server play as well as the PC play, the cell phone play, and I want to focus in on the cell phone play, Renee, because that's been where your bread and muster has been history. How are we looking from a smartphone perspective? Is the market looking strong to you? We've had many a mixed message coming from China to mod for example.
Overall, what we've seen the smartphone market briefly for ARM has been quite a good growth rate in terms of royalties. Our version nine which is now being used in many of the premium mobile phones, that drives a higher royalty rate for ARM. There's also more complex CPUs that go into that that's also better.
For ARM and going forward carrolling.
One of the things that we're seeing, and it's not just in smartphones, is that as these AI models are moving so fast, the hardware can't keep up with the software. The software innovation is happening so quickly that by the time the hardware is ready to run those models, everyone wishes they had more performance, they had more efficiency. So what does that mean for ARM. It's driving growth in
our licensing activity. People are looking to do more and more design ships faster and faster, and that's all good for us going forward. So I think going forward you're going to see more and more innovation happening, not only in the smartphones, but across all these edge devices.
What's interesting in AY is it's hard to keep up with the pace of geopolitical change as well. The latest news coming that Huawei of course is not going to have access to qualcom to Intel chips. You were, of course a UK based company, but are affected by US policies. Has this impacted your business the limitations of Huawei's access to chip designed to chip technology to licenses.
Yeah, So that issue that you referred to specifically was when Huawei was placed on the entity list I think twenty nineteen, twenty twenty, companies had to apply for a license to exempt them to ship to Huawei. So a number of companies asked for those licenses, they got those licenses. Now those licenses are being revoked. We don't follow in that category in any way, shape or form. We didn't apply for any licenses at the time to ship, complied
with the export control as they were laid out. So there's really anne event for us in terms of what you're seeing with Qualcom and or Intel.
We are speaking live to the Arms CEO, Renee has We're on the ground here at Bloomberg Tech in San Francisco. Last week, Renee Christiano and Mom was on the show telling Caroline and I, this is the year of the AIPC. You were asked about that on your earning school last night and you gave a slightly different answer. And maybe it's not the year of the AIPC more the twelve to thirty six month window. And you don't want to see just one PC supplier, you said you'd like to
see two or three. What's your beef with Qualcom?
Now?
When I look at the PC ecosystem, one large ecosystem has already moved to ARM in a very big way. Apple is now one percent based on ARM. All the Apple silicon is based on ARM and you see amazingly good products relative to what they've delivered, fantastic battery life, performance, thin and light, no fans. When you think about the Windows market, it's a very different market. It's highly fragmented.
You have lots of different players. The ecosystem matters, the channel matters, price points matter, high end gaming machines versus low end devices that are like cloud enabled. So what does all of that mean. It generally has meant that breadth, vendor choice, multiple options to provide a full scope is what matters. And what I'm hearing is over the next couple of years, the Windows ecosystem is going to be able to afford that.
And I think over.
The next two three years, I do believe Windows Unarmed will be real. I think you'll see multiple players, multiple price points, multiple units, and I think you'll see meaningful market share that we start to gain the kind of performance you see in the other ecosystem. I think we'll find its way into the Windows ecosystem.
All Rennie, I wanted to talk about geography really quick we're here in San Francisco, right, there's a lot about Americas are in d focus on AI related chips. Are you seeing this sort of equivalent activity in Europe, for example, any of your customers outside of those markets.
Yeah, well I'm in San Francisco today too, so I will see you a little bit later.
But in general, I think the.
Geopolitics are something that all tech CEOs are now having to figure out and work with AI models, foundation models, sovereign clouds, thinking about what level of training takes place in a country versus outside the country, where the weights sit, et cetera. That these are all the kind of things that politicians have never really had to think about in the past.
So we're involved in a lot.
Of those conversations, whether that's in the United States, whether that's in Europe, and really just trying to understand it because any lawmakers in all these jurisdictions are just trying to figure it all out. And as I mentioned before, as the software and models are moving so fast asked, it's difficult for everyone to keep up, But we are central to all those discussions.
Renee, what's been keeping up is your valuation?
Boy?
I mean, do you think there's too much exuberance around AI valuations out there. Are you going to make the most of it by well, we talked to one point of listing in the UK too.
Yeah, you know, I don't think about the valuations as much as I just think about the AI opportunity, which I frankly believe is undercalled in terms of just what it's going to mean relative to society and what it can do for our planet. I think again we are in very very early days in terms of the capabilities of what this can unleash for our society. Incredibly excited to be part of it. But I don't think we're
part of a hype cycle at all. I think there's a lot of innovation taking place, and you know, frankly, the innovation that's taking place, any inventions that we're seeing, it's just breathtaking. So no, I don't pally viewed as a hype cycle at all.
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