U.S.-listed shares of Arm Holdings PLC enjoyed a significant boost of more than 25% in extended trading on Wednesday. This comes after the chip designer raised its guidance for the year, citing promising developments in the semiconductor market.

Arm reported higher royalty rates for its latest chip, which the company stated were “typically at least double” the rates for its predecessor. Additionally, Arm saw an increase in market share in the cloud-server and automotive sectors, leading to new royalty streams.

In a letter to investors accompanying the results, Arm executives expressed optimism about the broader semiconductor market. They noted that smartphones, in particular, experienced a strong return to growth in the third quarter. This positive trend, along with the rising demand for AI-driven technology, contributed to Arm’s favorable outlook.

For the December quarter, Arm earned $87 million, or 8 cents per share, compared to $182 million, or 18 cents per share, in the same period last year. Revenue also experienced a notable surge, jumping 14% to reach $824 million. Analysts surveyed by FactSet had projected earnings of 25 cents per share on sales of $762.5 million.

Looking ahead to fiscal year 2024, Arm anticipates revenue to fall within the range of $3.155 billion and $3.205 billion. This represents an upward revision from the previous guidance of $2.960 billion to $3.080 billion. The company also raised its estimated earnings per share for the year to a range of $1.20 to $1.24, compared to the previous projection of $1.00 to $1.10.

On the expense side, Arm forecasts slightly lower operating expenses of approximately $1.7 billion for the year, down from the earlier forecast of $1.765 billion.

Year-to-date, Arm’s U.S.-listed shares have gained 2.5%, while the S&P 500 index has seen a roughly 5% increase. Arm went public in September and continues to make strides in the semiconductor market. With its solid financial results and optimistic outlook, Arm is poised for continued success and growth in the coming years.

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