Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Look, they two beat the street on earnings, on earnings
Speaker 2: for share basis. You look at revenue dialing up almost
Speaker 2: twenty percent. But again it's a world a conservative forecast.
Speaker 2: And what this means not only for smartphones, but what
Speaker 2: it means for AI demand as well. We've got to
Speaker 2: get to it with arms CEO Rene Haas, who joins
Speaker 2: us now, and I put it to you, you've been
Speaker 2: out everywhere at the moment. There's deals being done, of course,
Speaker 2: a soft bank and open AI that will dig into.
Speaker 2: But what about this forecast and what it signals for
Speaker 2: your business? Is it just you being conservative as a
Speaker 2: newly public company.
Speaker 1: Thanks Kerlen, and appreciate you having me on this morning. Yeah,
Speaker 1: I don't know if I agree with the dialogue muted forecast.
Speaker 1: We beat our projections for Q three and we actually
Speaker 1: raise guidance four Q four and for the year, and
Speaker 1: we're looking at about four billion dollars of annual revenue,
Speaker 1: which is about twenty five percent.
Speaker 3: Increase over the last year.
Speaker 1: So we're super happy with the trajectory of the business
Speaker 1: and super happy with the performance.
Speaker 2: Maybe just investors are too exuberant they're too exuberant around
Speaker 2: the fact that you've already said your compute platform is
Speaker 2: going to help open ai and SoftBank make good on
Speaker 2: their Advanced Enterprise AI, the optimism around your AI future
Speaker 2: as well as how integral you are smartphones. So is
Speaker 2: it that are people too excited about the AI opportunity here?
Speaker 1: Yeah, I'm going to try to decouple what the market
Speaker 1: is saying about our results and just talk about the
Speaker 1: results in general, of which we are again incredibly pleased by.
Speaker 1: We are seeing extremely strong demand for our products across
Speaker 1: the board. We had record royalties. We were up twenty
Speaker 1: three percent year on year. Our version nine compute subsystems,
Speaker 1: which drive higher world TIID rates. We're just growing faster
Speaker 1: than the market, which is what we told investors when
Speaker 1: we went public back in Analyst Day a year and a.
Speaker 3: Half ago plus.
Speaker 1: So yeah, we're not seeing any slowdown in demand quite frankly, Carol.
Speaker 1: In fact, we're seeing an acceleration in it, particularly driven
Speaker 1: by all things around artificial intelligence.
Speaker 4: Rene. Speaking of future growth, one of the things that
Speaker 4: ARM is also banking on is its high profile partnership
Speaker 4: in Stargate, and you're a big player in that could
Speaker 4: you kind of tell us what investors can expect this
Speaker 4: year to gain from that venture.
Speaker 1: I can say, broadly speaking, the way you think about
Speaker 1: Stargate is it's an infrastructure project unlike any other five
Speaker 1: hundred billion dollars. One hundred billion dollars will spend initially,
Speaker 1: and these are to build out the world's largest AI
Speaker 1: data centers for training and inference. We are the key
Speaker 1: technology partner around CPU. We're the only CPU technology partner
Speaker 1: that was named, which is terrific obviously for US. One
Speaker 1: can imagine going forward a lot of opportunity for technology
Speaker 1: innovation there. But in a near term we'll be linked
Speaker 1: with the Grace Blackwell ship using the Gray CPU which
Speaker 1: is armed bay and the.
Speaker 3: Black Lill GPU which is video based.
Speaker 1: But these large frontier models are going to require Jackie
Speaker 1: a huge amount of power for training and inference, and
Speaker 1: we're just so excited about being involved in this. It's
Speaker 1: going to be fantastic. Well.
Speaker 4: At the same time, this project also kind of puts
Speaker 4: you in the middle of this US China tech rivalry.
Speaker 4: You're at the front lines of it, being the top
Speaker 4: supplier to American AI companies, And I'm curious if you
Speaker 4: think that perhaps tying your fortunes so closely to open
Speaker 4: Ai is a risk.
Speaker 1: I'm not sure I think about it quite that way.
Speaker 1: Open Ai is a fantastic partner. Arguably they're the leader
Speaker 1: at the moment in terms of adoption of chat, GPT
Speaker 1: and their APIs and their enterprise suite. We work with everyone,
Speaker 1: though we work very closely with Google, we work closely
Speaker 1: with Meta Aws, you know all the partners. But we're
Speaker 1: very thrilled to be involved with open Ai. They have
Speaker 1: phenomenal technology.
Speaker 2: Rene. We're going to lean into that China Us story.
Speaker 2: Deep Seek extraordinary the push and pull has in the narratives.
Speaker 2: Can you explain as to whether you think we are
Speaker 2: going to need as much compute as we all foresaw before.
Speaker 1: Oh, I think unquestionably, Caroline, And in fact, I think
Speaker 1: even more than we probably have been thought about.
Speaker 3: So why is that?
Speaker 1: Well, if you look at what deep Seek has done,
Speaker 1: which is an amazing, by the way piece of work
Speaker 1: they've done what's called distillation, and distillation is building on
Speaker 1: top of an existing frontier model which takes lots of
Speaker 1: power and lots of compute to generate. If you think
Speaker 1: about GPT four, which were was hundreds of megawatts GPT
Speaker 1: five sixty seven.
Speaker 3: These are in the gigawatts.
Speaker 1: So even though you may have models that can distill
Speaker 1: or build a con the frontier models, the frontier models
Speaker 1: still need a lot of power. And then with that
Speaker 1: that drives a huge demand for inference, which is really
Speaker 1: where the larger use loads are. And more efficient inference
Speaker 1: means you can drive AI to much smaller devices, to smartphones, earbuds,
Speaker 1: devices that don't have a lot of capability for power.
Speaker 1: It's great for ARMED because that's where we are today,
Speaker 1: it's where we exist, and now you can run those
Speaker 1: AI workloads on the CPU. So I think actually what
Speaker 1: deep seat proves is that we're just going to see
Speaker 1: an even more accelerant towards towards compute.
Speaker 4: Well on that front, you know you have a significant
Speaker 4: business in China. Are you concerned at all about perhaps
Speaker 4: how the slowing smartphone business might affect Arm's future growth.
Speaker 3: Yeah, it's a great question.
Speaker 1: And you know, again what we've seen in smartphones with
Speaker 1: your single digits type of growth, we're in the double
Speaker 1: digits growth in terms of royalties, in some cases twenty
Speaker 1: percent growth. And why is that we're putting more technology
Speaker 1: into these phones, our version nine, our compute subsystems drive
Speaker 1: higher royalty rates. So we're just growing faster than the market,
Speaker 1: and particularly in the premium segment which requires more and
Speaker 1: more compute. So while the units have been slowed in
Speaker 1: some areas, it actually has an impacted as very much.
Speaker 3: Just look at our record royalties.
Speaker 1: To have this kind of number in a market where
Speaker 1: people think things are slowing down, just.
Speaker 2: Phenomenal record royalties. Upside in licensing. I would just want
Speaker 2: to get to the litigation if I'm met here RENAA,
Speaker 2: and briefly, perhaps it hasn't gone in the way that
Speaker 2: you thought with Qualcom. What does it mean for the
Speaker 2: future earnings?
Speaker 1: Really, there's no impact on future earnings, Caroline. The trial
Speaker 1: was a mistrial on one of the verdicts, so the
Speaker 1: dispute is still open. But to your question, in terms
Speaker 1: of the future forecast, we had no impact whatsoever.
Speaker 4: Renee Ha, CEO of ARM, thank you for joining us.