Arm CEO Rene Haas Talks Earnings

Bloomberg Audio Studios, podcasts, radio news now to a major company story, Armstock. In the headlines, it's posting record quarterly revenue but issuing cautious guidance for the current quarter, citing the timing of new licensing deals in particular. Meanwhile, the Trump administration pans to roll back Biden Nearer ai Chip curbs with a new export control framework in the works,

Carolyn, thank you.

Bonnie and Renee. It's always wonderful to welcome you to Bloomberg Television. And let's just dwell on your numbers, because revenue strong, up thirty four percent for your fiscal fourth quarter. We saw more than a billion dollars being brought in and indeed a profit beat.

But investors taken with what seems to be.

This cautious outlook, how uncertain are things from a demand perspective that also perhaps you're not giving that annual target that someone had hoped for.

Yeah a hi, Carolin, and thank you for the the kind words. Yes, we just came off an amazing end of our fiscal year, the first billion dollar quarter, which was a record record royalties over six hundred million dollars, record licensing over six hundred million dollars, and then we finished the year at four billion dollars, which was also a record for the company.

For Q one, we're looking at very good royalty growth.

Actually, Caroline, we're projecting anywhere between twenty five to thirty percent. On the licensing side, I think, as you know, the deals can be a little bit lumpy, So as a result of looking forward in terms of whether deals closed in the June or July timeframe, we decided to be cautious and give the outlook that we did just based upon licensing. But the overall health of the business is

On royalties.

The reason we chose not to give the yearly guidance thing, as you know, now vast majority of our businesses increasinglyyalties, and that really comes from people who make either the end ship or the end equipment, and that in the next two to three quarters is a little hard to predict, and in fact, we're not seeing that guidance coming from our partners.

So as a.

Result, given that their visibility isn't as strong as it usually is around that we decided not to go forward and give a guidance beyond justice first quarter, and.

Just for the people who always need to be reminded of the business model you are designing. Ultimately, people that are licensing using these designs, you are not directly impacted by tariffs, but of course the people that make the smartphones eventually might be. Are you hearing anything about a worry on demand in the future. Are you thinking that we'll will see a downward trajectory for some of the electronics parts that you've diversified the business into.

Yeah, thank you for pointing that out.

Yet exactly, we are a provider of the designs that go into chips that go into end products like your iPhone, your Ford f one fifty, your earbudd it's the AI data centers. So we're not directly impacted, but we are certainly indirectly impacted, and that would come on the royalty side to your question, are we.

Seeing anything relative to folks?

Not clear in terms of where the terrorifts are coming from. What we're seeing is kind of a lack of clarity as opposed to any one indicator or the other. So that's just really driving and it's just the lack of visibility that our end partners have.

Ren I have.

Any plans on changing how you actually charge your royalties, maybe you'll move into a per device basis. And also how much pricing power do you have in an inflationary environment?

Yeah, thanks for asking that question. What we have done is transition to more comprehensive products what we call our compute subsystems, and think of that as a design that not only are we licensing the individual blocks of IP, but all of the other blocks of IP required to make a subsystem that would go on a chip.

Those command higher royalties.

Generally double from what we see on traditional individual blocks. The benefit to the customers is it really accelerates time to market. Chip development time goes down, huge value that they see in terms of predictability of the design.

So that's what.

We've been shifting to much more in terms of our royalty model, which is why the royalty growth has been as good as it has been.

I'm really interested in the AI data center part because this has been a real era of focus of growth, and I'm interested in the momentum that you're seeing and how resilient it is. You're talking about uncertainty when it comes to smartphones and electronics in the future. Has there been any signal of uncertainty on spending on AI infrastructure.

Yeah, not that we've seen, Caroline.

You've got Stargate obviously, a huge program that's being done between soft Bank and open Ai, which is all around capital and power for data centers. You're seeing large capex spending by the major hyperscalers. But probably more important, certainly, I think we're nowhere close to really good enough in

Of data to create the model.

JP Morgan has one hundred and fifty petabytes of data sitting inside their enterprise. In one way, shape or form, harnessing that data, turning that data into real valuable information, and then helping productivity. There's a lot of white space there, and I think still there's a long way to see growth here.

There's been some uncertainty, of course, around ultimately how those that use your designs can ultimately sell their chips. And we've now got a pullback from the AI diffusion rule as it's called here in the United States. It would seem that's going to be announced anytime soon by the Trump administration. Is that going to be a boost for your business? Do you think that leads to most You're actually lack of it, because now we have countries having to negotiate on a case by case basis.

Yeah, I don't know that I could predict it. I mean, actually seen what the what the outcome looks like. The wonderful thing about our jobs these days, CEOs, that we're reading the news and hearing that from you at real time. I think we'll just have to see, is the short answer. I don't think AI demand is a bubble in any way, shape or form. And as I said, I don't think we've gone anywhere close to reaching its true potential.

When you think about.

End devices that will run AI models, everything will run them. They'll run in earbuds, they'll run in cars, they'll run on mobile phones. They're certainly going to run in the cloud, but they won't run exclusively in the cloud. And I think we still have a long way to go in this area. The progress has been remarkable, shockings in some ways just how good the models have become, but there's still a long ways to go in terms of I think true AGI and then ultimately ASI.

Ronnie, your top five customers are responsible for sixty percent of revenue and are in China twenty percent of that. I'm curious as to how you're making an effort to diversify. That's a phenomenally concentrated client base, particularly when you consider the China. You know, you might have some concerns around China.

Yeah, the industry that we're in has been seeing, you know, quite a bit of consolidation. You know, for quite some time. The amount of capital required to make chips is quite a bit. So you look at the number of companies who are their end products are chips. Its shrink over the last number of years. And at the same time, you've got large hyperscalers in the Microsoft's, the Metas, the Googles, to Amazons that you know, there's not many people have

The insatiable demand for more and more.

Compute driven by AI, I think again, is we're in very early stages of it.

You also have to.

Remember that running these AI workloads, you still need to run them on top of running a Windows operating system, on top of running an iOS operating system, on top of running an IBI instrumentation inside a car or autonomous So it's not that AI compute replaces traditional compute. It's on top of which is a strong demand signal for personmic conductors, and I has the m CEO.

It's going to enjoy having you. Thank you very much.

Indeed,