1 00:00:02,520 --> 00:00:07,040 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:08,080 --> 00:00:10,799 Speaker 2: Look, they two beat the street on earnings, on earnings 3 00:00:10,800 --> 00:00:13,360 Speaker 2: for share basis. You look at revenue dialing up almost 4 00:00:13,400 --> 00:00:16,720 Speaker 2: twenty percent. But again it's a world a conservative forecast. 5 00:00:16,760 --> 00:00:19,360 Speaker 2: And what this means not only for smartphones, but what 6 00:00:19,360 --> 00:00:21,560 Speaker 2: it means for AI demand as well. We've got to 7 00:00:21,600 --> 00:00:24,880 Speaker 2: get to it with arms CEO Rene Haas, who joins 8 00:00:24,960 --> 00:00:27,160 Speaker 2: us now, and I put it to you, you've been 9 00:00:27,560 --> 00:00:30,360 Speaker 2: out everywhere at the moment. There's deals being done, of course, 10 00:00:30,360 --> 00:00:32,360 Speaker 2: a soft bank and open AI that will dig into. 11 00:00:32,800 --> 00:00:35,440 Speaker 2: But what about this forecast and what it signals for 12 00:00:35,479 --> 00:00:37,640 Speaker 2: your business? Is it just you being conservative as a 13 00:00:37,680 --> 00:00:39,640 Speaker 2: newly public company. 14 00:00:40,080 --> 00:00:43,760 Speaker 1: Thanks Kerlen, and appreciate you having me on this morning. Yeah, 15 00:00:43,760 --> 00:00:46,960 Speaker 1: I don't know if I agree with the dialogue muted forecast. 16 00:00:47,560 --> 00:00:52,600 Speaker 1: We beat our projections for Q three and we actually 17 00:00:52,720 --> 00:00:56,800 Speaker 1: raise guidance four Q four and for the year, and 18 00:00:56,840 --> 00:00:59,959 Speaker 1: we're looking at about four billion dollars of annual revenue, 19 00:01:00,320 --> 00:01:02,560 Speaker 1: which is about twenty five percent. 20 00:01:02,280 --> 00:01:03,480 Speaker 3: Increase over the last year. 21 00:01:03,880 --> 00:01:06,720 Speaker 1: So we're super happy with the trajectory of the business 22 00:01:06,760 --> 00:01:08,040 Speaker 1: and super happy with the performance. 23 00:01:08,800 --> 00:01:13,600 Speaker 2: Maybe just investors are too exuberant they're too exuberant around 24 00:01:13,640 --> 00:01:15,880 Speaker 2: the fact that you've already said your compute platform is 25 00:01:15,920 --> 00:01:18,360 Speaker 2: going to help open ai and SoftBank make good on 26 00:01:18,400 --> 00:01:22,280 Speaker 2: their Advanced Enterprise AI, the optimism around your AI future 27 00:01:22,319 --> 00:01:25,080 Speaker 2: as well as how integral you are smartphones. So is 28 00:01:25,120 --> 00:01:28,679 Speaker 2: it that are people too excited about the AI opportunity here? 29 00:01:30,040 --> 00:01:32,679 Speaker 1: Yeah, I'm going to try to decouple what the market 30 00:01:32,760 --> 00:01:34,640 Speaker 1: is saying about our results and just talk about the 31 00:01:34,680 --> 00:01:38,480 Speaker 1: results in general, of which we are again incredibly pleased by. 32 00:01:38,520 --> 00:01:41,520 Speaker 1: We are seeing extremely strong demand for our products across 33 00:01:41,560 --> 00:01:44,800 Speaker 1: the board. We had record royalties. We were up twenty 34 00:01:44,840 --> 00:01:49,040 Speaker 1: three percent year on year. Our version nine compute subsystems, 35 00:01:49,080 --> 00:01:52,240 Speaker 1: which drive higher world TIID rates. We're just growing faster 36 00:01:52,320 --> 00:01:55,560 Speaker 1: than the market, which is what we told investors when 37 00:01:55,600 --> 00:01:57,400 Speaker 1: we went public back in Analyst Day a year and a. 38 00:01:57,400 --> 00:01:58,600 Speaker 3: Half ago plus. 39 00:01:59,120 --> 00:02:02,720 Speaker 1: So yeah, we're not seeing any slowdown in demand quite frankly, Carol. 40 00:02:02,800 --> 00:02:05,840 Speaker 1: In fact, we're seeing an acceleration in it, particularly driven 41 00:02:05,840 --> 00:02:07,560 Speaker 1: by all things around artificial intelligence. 42 00:02:08,880 --> 00:02:12,160 Speaker 4: Rene. Speaking of future growth, one of the things that 43 00:02:12,320 --> 00:02:15,600 Speaker 4: ARM is also banking on is its high profile partnership 44 00:02:16,040 --> 00:02:19,239 Speaker 4: in Stargate, and you're a big player in that could 45 00:02:19,240 --> 00:02:22,239 Speaker 4: you kind of tell us what investors can expect this 46 00:02:22,480 --> 00:02:24,440 Speaker 4: year to gain from that venture. 47 00:02:25,800 --> 00:02:28,119 Speaker 1: I can say, broadly speaking, the way you think about 48 00:02:28,160 --> 00:02:31,839 Speaker 1: Stargate is it's an infrastructure project unlike any other five 49 00:02:31,919 --> 00:02:35,680 Speaker 1: hundred billion dollars. One hundred billion dollars will spend initially, 50 00:02:36,160 --> 00:02:38,600 Speaker 1: and these are to build out the world's largest AI 51 00:02:38,720 --> 00:02:41,959 Speaker 1: data centers for training and inference. We are the key 52 00:02:42,000 --> 00:02:46,120 Speaker 1: technology partner around CPU. We're the only CPU technology partner 53 00:02:46,160 --> 00:02:49,760 Speaker 1: that was named, which is terrific obviously for US. One 54 00:02:49,800 --> 00:02:53,320 Speaker 1: can imagine going forward a lot of opportunity for technology 55 00:02:53,360 --> 00:02:56,600 Speaker 1: innovation there. But in a near term we'll be linked 56 00:02:56,639 --> 00:02:59,480 Speaker 1: with the Grace Blackwell ship using the Gray CPU which 57 00:02:59,480 --> 00:03:01,000 Speaker 1: is armed bay and the. 58 00:03:00,960 --> 00:03:02,919 Speaker 3: Black Lill GPU which is video based. 59 00:03:03,400 --> 00:03:06,240 Speaker 1: But these large frontier models are going to require Jackie 60 00:03:06,280 --> 00:03:09,880 Speaker 1: a huge amount of power for training and inference, and 61 00:03:10,200 --> 00:03:12,120 Speaker 1: we're just so excited about being involved in this. It's 62 00:03:12,160 --> 00:03:14,160 Speaker 1: going to be fantastic. Well. 63 00:03:14,200 --> 00:03:16,800 Speaker 4: At the same time, this project also kind of puts 64 00:03:16,880 --> 00:03:20,440 Speaker 4: you in the middle of this US China tech rivalry. 65 00:03:20,680 --> 00:03:23,280 Speaker 4: You're at the front lines of it, being the top 66 00:03:23,320 --> 00:03:26,520 Speaker 4: supplier to American AI companies, And I'm curious if you 67 00:03:26,560 --> 00:03:30,200 Speaker 4: think that perhaps tying your fortunes so closely to open 68 00:03:30,240 --> 00:03:31,160 Speaker 4: Ai is a risk. 69 00:03:32,680 --> 00:03:34,360 Speaker 1: I'm not sure I think about it quite that way. 70 00:03:34,600 --> 00:03:38,480 Speaker 1: Open Ai is a fantastic partner. Arguably they're the leader 71 00:03:38,720 --> 00:03:41,520 Speaker 1: at the moment in terms of adoption of chat, GPT 72 00:03:41,720 --> 00:03:45,400 Speaker 1: and their APIs and their enterprise suite. We work with everyone, 73 00:03:45,480 --> 00:03:47,560 Speaker 1: though we work very closely with Google, we work closely 74 00:03:47,600 --> 00:03:51,160 Speaker 1: with Meta Aws, you know all the partners. But we're 75 00:03:51,240 --> 00:03:53,000 Speaker 1: very thrilled to be involved with open Ai. They have 76 00:03:53,080 --> 00:03:54,200 Speaker 1: phenomenal technology. 77 00:03:54,960 --> 00:03:58,240 Speaker 2: Rene. We're going to lean into that China Us story. 78 00:03:58,440 --> 00:04:02,600 Speaker 2: Deep Seek extraordinary the push and pull has in the narratives. 79 00:04:02,880 --> 00:04:05,760 Speaker 2: Can you explain as to whether you think we are 80 00:04:05,800 --> 00:04:08,560 Speaker 2: going to need as much compute as we all foresaw before. 81 00:04:09,840 --> 00:04:12,760 Speaker 1: Oh, I think unquestionably, Caroline, And in fact, I think 82 00:04:13,120 --> 00:04:15,160 Speaker 1: even more than we probably have been thought about. 83 00:04:15,520 --> 00:04:16,680 Speaker 3: So why is that? 84 00:04:17,240 --> 00:04:19,280 Speaker 1: Well, if you look at what deep Seek has done, 85 00:04:19,279 --> 00:04:21,400 Speaker 1: which is an amazing, by the way piece of work 86 00:04:22,080 --> 00:04:25,600 Speaker 1: they've done what's called distillation, and distillation is building on 87 00:04:25,680 --> 00:04:29,040 Speaker 1: top of an existing frontier model which takes lots of 88 00:04:29,080 --> 00:04:32,240 Speaker 1: power and lots of compute to generate. If you think 89 00:04:32,279 --> 00:04:36,719 Speaker 1: about GPT four, which were was hundreds of megawatts GPT 90 00:04:36,839 --> 00:04:37,680 Speaker 1: five sixty seven. 91 00:04:37,760 --> 00:04:39,360 Speaker 3: These are in the gigawatts. 92 00:04:39,760 --> 00:04:42,640 Speaker 1: So even though you may have models that can distill 93 00:04:42,800 --> 00:04:46,039 Speaker 1: or build a con the frontier models, the frontier models 94 00:04:46,040 --> 00:04:48,520 Speaker 1: still need a lot of power. And then with that 95 00:04:48,520 --> 00:04:51,240 Speaker 1: that drives a huge demand for inference, which is really 96 00:04:51,279 --> 00:04:54,680 Speaker 1: where the larger use loads are. And more efficient inference 97 00:04:55,000 --> 00:04:59,839 Speaker 1: means you can drive AI to much smaller devices, to smartphones, earbuds, 98 00:05:00,720 --> 00:05:04,279 Speaker 1: devices that don't have a lot of capability for power. 99 00:05:04,640 --> 00:05:07,080 Speaker 1: It's great for ARMED because that's where we are today, 100 00:05:07,080 --> 00:05:09,080 Speaker 1: it's where we exist, and now you can run those 101 00:05:09,080 --> 00:05:12,400 Speaker 1: AI workloads on the CPU. So I think actually what 102 00:05:12,440 --> 00:05:14,880 Speaker 1: deep seat proves is that we're just going to see 103 00:05:14,880 --> 00:05:17,240 Speaker 1: an even more accelerant towards towards compute. 104 00:05:18,400 --> 00:05:21,160 Speaker 4: Well on that front, you know you have a significant 105 00:05:21,160 --> 00:05:24,839 Speaker 4: business in China. Are you concerned at all about perhaps 106 00:05:25,200 --> 00:05:29,800 Speaker 4: how the slowing smartphone business might affect Arm's future growth. 107 00:05:31,320 --> 00:05:32,400 Speaker 3: Yeah, it's a great question. 108 00:05:32,520 --> 00:05:34,880 Speaker 1: And you know, again what we've seen in smartphones with 109 00:05:34,960 --> 00:05:39,000 Speaker 1: your single digits type of growth, we're in the double 110 00:05:39,040 --> 00:05:42,120 Speaker 1: digits growth in terms of royalties, in some cases twenty 111 00:05:42,160 --> 00:05:45,800 Speaker 1: percent growth. And why is that we're putting more technology 112 00:05:45,800 --> 00:05:48,920 Speaker 1: into these phones, our version nine, our compute subsystems drive 113 00:05:49,000 --> 00:05:53,040 Speaker 1: higher royalty rates. So we're just growing faster than the market, 114 00:05:53,160 --> 00:05:55,640 Speaker 1: and particularly in the premium segment which requires more and 115 00:05:55,680 --> 00:05:58,719 Speaker 1: more compute. So while the units have been slowed in 116 00:05:58,760 --> 00:06:01,000 Speaker 1: some areas, it actually has an impacted as very much. 117 00:06:01,080 --> 00:06:02,359 Speaker 3: Just look at our record royalties. 118 00:06:03,200 --> 00:06:05,080 Speaker 1: To have this kind of number in a market where 119 00:06:05,080 --> 00:06:06,960 Speaker 1: people think things are slowing down, just. 120 00:06:06,920 --> 00:06:10,560 Speaker 2: Phenomenal record royalties. Upside in licensing. I would just want 121 00:06:10,600 --> 00:06:12,680 Speaker 2: to get to the litigation if I'm met here RENAA, 122 00:06:12,680 --> 00:06:14,920 Speaker 2: and briefly, perhaps it hasn't gone in the way that 123 00:06:14,960 --> 00:06:16,760 Speaker 2: you thought with Qualcom. What does it mean for the 124 00:06:16,760 --> 00:06:17,520 Speaker 2: future earnings? 125 00:06:18,920 --> 00:06:22,680 Speaker 1: Really, there's no impact on future earnings, Caroline. The trial 126 00:06:22,760 --> 00:06:24,960 Speaker 1: was a mistrial on one of the verdicts, so the 127 00:06:25,000 --> 00:06:27,599 Speaker 1: dispute is still open. But to your question, in terms 128 00:06:27,600 --> 00:06:29,919 Speaker 1: of the future forecast, we had no impact whatsoever. 129 00:06:33,440 --> 00:06:36,680 Speaker 4: Renee Ha, CEO of ARM, thank you for joining us.