SAN FRANCISCO – Arm Holdings, delivering the first earnings report since its initial public offering (IPO), gave a disappointing sales forecast as the company contends with a smartphone slump and uncertain timing for new licensing deals.

Revenue in the three months ending in December will be US$720 million (S$977 million) to US$800 million, Arm said in a statement on Wednesday.

The midpoint of that range – US$760 million – would fall short of the US$773 million analysts have estimated.

That sent Arm shares tumbling as much as 9 per cent in late trading on Wednesday.

The rout threatens to wipe out all the stock’s gains since its IPO in September.

It had been up 6.7 per cent through Wednesday’s close.

Arm’s chip designs are widely used by smartphone makers, and the sluggish sales are a symptom of problems in that industry. Shipments of phones have slowed, with consumers hanging on to older models longer than in the past.

Arm also gave a more conservative forecast as it is unsure about the timing of licensing agreements and when the company will be able to report revenue for them.

Earnings per share will be 21 US cents to 28 US cents in the current quarter, excluding some items, Arm said. Analysts predicted 27 cents.

For the whole of fiscal year 2024, which ends next March, revenue will range between US$2.96 billion and US$3.08 billion. That compares with an average estimate of US$2.96 billion.

Chief executive Rene Haas pointed to the annual forecast as evidence that pending deals will likely close in the fourth quarter.

The general trend is an increase in customer agreements, rather than a pullback, he said.

Arm is not a traditional chipmaker. It provides key parts of semiconductor designs and collects royalties from their use.

It also licenses the fundamental technology governing how chips communicate with software.

On the plus side, Arm is benefiting from customers using its technology to create new semiconductors for artificial intelligence software and services.

The company is also seeing more of its designs go into vehicles and infrastructure, which carry higher prices – and better royalties.

“The businesses where we’ve diversified into were very strong,” said Mr Haas.

But investors have been waiting for signs that the smartphone industry is ready to bounce back.

Arm is a bellwether because it designed much of the fundamental technology used by phone makers.

That industry is still just coming out of a trough, Mr Haas said.

“We’re not immune to that.”

Qualcomm, the biggest seller of phone chips, gave a rosy forecast last week, raising hopes that the industry was recovering. Still, many manufacturers continue to face a glut of inventory.

A quarterly report by GlobalFoundries, the largest United States supplier of made-to-order semiconductors, was also cheered by investors this week. But the company indicated that oversupply problems are lingering, even as it gets better at coping with them.

Britain-based Arm is still 90 per cent owned by SoftBank Group, which acquired the business in 2016 for US$32 billion.

The IPO raised US$4.9 billion, marking the biggest debut on a US exchange in 2023.

Following its return to public markets, Arm is now valued at nearly US$56 billion.

Arm’s customer list spans the technology industry.

Apple uses its instruction set for the processors that power the iPhone and Mac computers.

Amazon.com relies on Arm designs for its Graviton server processors for data centres. Qualcomm and MediaTek are major users of Arm’s blueprints for smartphone processors, meaning the British company’s technology is in every major device. BLOOMBERG