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Arm Sees Strong Growth as It Makes Plans for 2023 IPO

Masayoshi Son is chairman and chief executive officer of SoftBank Group, which owns Arm.

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Kiyoshi Ota/Bloomberg

The chip design firm Arm is preparing for what will be one of the most important initial public offerings of 2023, and unlike many other semiconductor companies, the company is posting strong financial performance.

SoftBank Group
 acquired ARM for $32 billion in 2016; the Tokyo-based technology holding reached an agreement two years ago to sell the company to
(ticker: NVDA), but the deal was eventually scuttled in the face of opposition from both other chip makers and from regulators.

Arm doesn’t actually make or sell components. Instead, the company creates widely used chip designs—Arm-based processors can be found in almost all of the world’s mobile phones. The company continues to see growing demand as well for Arm-based chips both in cloud data center and automotive applications.

Since the Nvidia deal fell apart, there has been widespread expectations that SoftBank would instead opt to take Arm public. Had the IPO market not effectively shutdown in 2022, it might have happened last year. But both SoftBank and Arm are determined to go public in 2023.

Arm CEO Rene Haas said in an interview with Barron’s on Tuesday that the company is “fully committed” to going public this year. “Plans are well under way,” he said. “There a lot of internal energy working on it.”

Meanwhile, the company continues to put up solid results. In the December quarter, Arm had revenue of $746 million, up 28% from a year earlier, with adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization, of $450 million. (To put that in perspective,
Advanced Micro Devices
) had Q4 adjusted Ebitda of $1.4 billion, on revenue of $5.6 billion.)

Arm generates revenue two ways: from licenses to the technology for new applications, and from ongoing royalty payments once devices reach the market. In the December quarter, licensing revenue was $300 million, up 65%. The company said the strong growth was driven by new long-term agreements with four key customers, including an auto maker, a cloud service provider, a microcontroller company and a consumer electronics semiconductor vendor.

Royalty revenue was $446 million, up 12%, which was a little slower than the 18% recorded in the first 9 months of the company’s March 2023 fiscal year. Haas said that while the company wasn’t immune from the slowdown in PC and handset unit weakness, he notes that Arm’s results were buffered by the fact that cutting-edge phones generally have more complex processors—with higher royalty rates—than older models.

And Haas adds that the company continues to see strong growth from the cloud and automotive markets. In the auto market, he says, the company has 85% share of the market for processors used in in-vehicle entertainment systems, and 55% share in the market for assisted-driving applications.

Asked about the red-hot artificial intelligence software trend, Haas noted that the kind of large language models used by Open AI, Google and others in generative AI applications require a “huge among of compute cycles,” which should benefit demand for Arm-based processors.

Write to Eric J. Savitz at


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