Robust royalties push chip designer ARM’s profit higher

Chip designer ARM Holdings posted a 32 per cent rise in second-quarter profit, reflecting a jump in royalties from devices like Apple’s iPhone 6, and said it would meet market expectations for the year as long as consumer spending holds up.

The British company, whose technology is in the vast majority of smartphones and tablets, reported pretax profit of £123.9 million (€176.7 million), broadly in line with expectations of £124.1 million according to a Thomson Reuters poll, on revenue of £228.5 million.

“Assuming macroeconomic uncertainty does not further impact consumer spending, we expect overall group dollar revenues for full-year 2015 to be in line with current market expectations,” it said on Wednesday.

Apple, which uses ARM's processor designs in its iPads, iPhones and Watch, missed expectations with its forecast for revenue late on Tuesday, adding to concerns that the smartphone market is weakening.

Earlier this month, Taiwan Semiconductor Manufacturing Co (TSMC), the world's biggest contract chipmaker, said the outlook had continued to deteriorate, particularly for cheaper smartphones in emerging markets like China.

Doubts about the strength of consumer demand for smartphones has hit ARM’s shares, which closed on Tuesday 16 per cent off the high of 1,233 pence they touched after first-quarter results in April.

Reuters