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Bloomberg Audio Studios. Podcasts, radio, news. Now to a major company story, Armstock in the headlines. It's posting record quarterly revenue, but issuing cautious guidance for the current quarter, citing the timing of new licensing deals in particular. Meanwhile, the Trump administration plans to roll back Biden-era AI chip curbs.
with a new export control framework in the works and that may impact things too. So joining us now to discuss it all is RMCEO Renée Haas along with Bloomberg Tech co-host Carolyn Hyde. Carolyn. Thank you, Vonnie. And Renée, it's always wonderful to welcome you to Bloomberg Television. And let's just dwell on your numbers because revenue's strong, up 34% for your fiscal fourth quarter. We saw more than a billion dollars being brought in and indeed a profit beat.
investors taken with what seems to be this cautious outlook how uncertain are things from a demand perspective that also perhaps you're not giving that annual target that someone hoped for
Yeah. Hi, Caroline, and thank you for the kind words. Yes, we just came off an amazing end of our fiscal year. The first billion-dollar quarter, which was a record. Record royalties over $600 million. Record licensing over $600 million. And then we finished the year at $4 billion, which was also a record for the company. For Q1, we're looking at very good royalty growth, actually, Caroline. We're projecting anywhere between 25% to 30%.
On the licensing side, I think, as you know, the deals can be a little bit lumpy. So as a result of looking forward in terms of whether deals close in the June or July timeframe, we decided to be cautious and give the outlook that we did just based upon licensing. But the overall health of the business is really, really good. You know, we have...
Obviously, it's coming off a great quarter, and we have really good visibility into the current quarter on royalties. The reason we chose not to give the yearly guidance, I think as you know now, the vast majority of our business is increasingly royalties, and that really comes from people who make either the end chip or the end equipment. And that in the next two to three quarters is a little hard to predict. In fact, we're not seeing that guidance coming from our partners. So as a result, guidance...
Given that their visibility isn't as strong as it usually is around that, we decided not to go forward and give guidance beyond just this first quarter.
Just for the people who always need to be reminded of the business model, you are designing ultimately people that are licensing using these designs. You are not directly impacted by tariffs, but of course the people that make the smartphones eventually might be. Are you hearing anything about a worry on demand in the future? Are you thinking that we will see a downward trajectory for some of the electronics parts that you've diversified the business into?
Yeah, thank you for pointing that out. Yeah, exactly. We are a provider of the designs that go into chips, that go into end products like your iPhone, your Ford F-150, your earbuds, the AI data centers. So we're not directly impacted, but we are certainly indirectly impacted, and that would come on the royalty side. To your question, are we seeing anything relative to...
folks not clear in terms of where the tariffs are coming from. What we're seeing is kind of a lack of clarity as opposed to any one indicator or the other. So that's what's really driving it. It's just the lack of visibility that our end partners have. Rene, have you any plans on changing how you actually charge your royalties? Maybe you'll move it to a per device basis. And also, how much pricing power do you have in an inflationary environment?
Yeah, thanks for asking that question. What we have done is transition to more comprehensive products, what we call our compute subsystems. And think of that as a design that not only are we licensing the individual blocks of IP, but all of the other blocks of IP required to make a subsystem that would go on a chip. Those command higher royalties, generally double from what we see on traditional individual blocks.
The benefit to the customers is it really accelerates time to market. Chip development time goes down. Huge value that they see in terms of predictability of the design. So that's what we've been shifting to much more in terms of our royalty model, which is why the royalty growth has been as good as it has been.
I'm really interested in the AI data center part because this has been a real area of focus, of growth, and I'm interested in the momentum that you're seeing and how resilient it is. You're talking about uncertainty when it comes to smartphones and electronics in the future. Has there been any signal of uncertainty on spending on AI infrastructure?
Yeah, not that we've seen, Caroline. You've got Stargate, obviously a huge program that's being done between SoftBank and OpenAI, which is all around capital and power for data centers. You're seeing large CapEx spending by the major hyperscalers.
But probably more importantly, I think we're nowhere close to really good enough in terms of capability, what AI can do. Obviously, the advances have been amazing. And if you look at just what OpenAI has done with ChatGPT, it's been remarkable. But enterprise usage from a mass deployment standpoint is still quite modest. A factoid I like to refer to is AI.
ChatGPT used a petabyte of data to create the model. JPMorgan has 150 petabytes of data sitting inside their enterprise in one way, shape or form. Harnessing that data, turning that data into real valuable information and then helping productivity, there's a lot of white space there and I think still there's a long way to see growth here. There's been some uncertainty of course around ultimately how those that use your designs can ultimately sell their chips.
and we've now got a pullback from the AI diffusion rule, as it's called here in the United States. It would seem that's going to be announced anytime soon by the Trump administration. Is that going to be a boost for your business? Do you think that leads to more certainty or actually lack of it? Because now we have countries having to negotiate on a case-by-case basis.
Yeah, I don't know that I could predict it. I haven't even actually seen what the outcome looks like. The wonderful thing about our jobs these days, CEOs, is that we're reading the news and hearing it from you in real time. I think we'll just have to see is the short answer. I don't think...
AI demand is a bubble in any way, shape or form. And as I said, I don't think we've gotten anywhere close to reaching its true potential. When you think about end devices that will run AI models, everything will run them. They'll run in earbuds, they'll run in cars, they'll run in mobile phones. They're certainly going to run in the cloud, but they won't run exclusively in the cloud. And I think we still have a long way to go in this area.
The progress has been remarkable, shocking in some ways, just how good the models have become. But there's still a long ways to go in terms of, I think, true AGI and then ultimately ASI. Rene, your top five customers are responsible for 60% of revenue and are in China, 20% of that. I'm curious as to how you're making an effort to diversify. That's a phenomenally concentrated client base, particularly when you consider that China, you know, you might have some IP concerns around China.
Yeah, the industry that we're in has been seeing quite a bit of consolidation for quite some time. The amount of capital required to make chips is quite a bit. So you look at the number of companies who are, their end products are chips. It's shrank over the last number of years. And at the same time, you've got large hyperscalers, the Microsofts, the Metas, the Googles, the Amazons, that there's not many people who have that capital.
that being said the number of chips the demand for chips the compute has actually gone way up so uh i probably don't think so much about the number of people who buy i would get more worried if the number of if the quantity was going down and and we're not seeing that uh and why are we not seeing that the insatiable demand for more and more compute driven by ai i think again is is uh we're in very early stages of it you also have to remember that
running these AI workloads, you still need to run them on top of running a Windows operating system, on top of running an iOS operating system, on top of running an IVI instrumentation inside a car or autonomous. So it's not that AI compute replaces traditional compute. It's on top of, which is a strong demand signal for semiconductors.
Renee Haas, the Arm CEO, it's been a joy having you. Thank you very much indeed. Hiscox Small Business Insurance knows there is no business like your business. Across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to Hiscox Insurance for protection. Find flexible coverage that adapts to the needs of your small business with a fast, easy online quote at Hiscox.com. That's H-I-S-C-O-X.
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