Rene Haas, Arm CEO discusses the company's cautious forecast and the overall positive outlook for royalty growth in Q1. He is joined by Bloomberg's Caroline Hyde and Vonnie Quinn.
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Questions asked in this interview
6
0:00How uncertain are things from a demand perspective, that also perhaps you're not giving that annual target that some had hoped for?
2:24Are you thinking that we'll see a downward trajectory for some of the electronics parts that you've diversified the business into?
3:28And also, how much pricing power do you have in an inflationary environment?
4:24Has there been any signal of uncertainty on spending on AI infrastructure?
5:41Do 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?
7:02Rene, your top five customers are responsible for 60% of revenue, and aren't China 20% of that?
Bloomberg Audio Studios, podcasts, radio, news. Now to a major company story. Arm is 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 ARM CEO Rene Haas along with Bloomberg Tech co-host Caroline Hyde. Caroline, thank you. And Rene, it's always wonderful to welcome you to Bloomberg Television. Let's just dwell on your numbers because revenue is strong, up 34% for your fiscal fourth quarter. We saw more than a billion dollars being brought in and indeed a profit beat, but investors are 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 some had hoped for?
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 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, and in fact, we're not seeing that guidance coming from our partners. So as a result, 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.
And look, just for the people who always need to be reminded of the business model, you are designing ultimately, people 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'll see a downward trajectory for some of the electronics parts that you've diversified the business into?
Yeah, you know, 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 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, thank you 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.
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Haas, R. (2025, May 8). Arm CEO Rene Haas Talks Earnings | Bloomberg Talks [Interview transcript]. Bloomberg Podcasts. CEOInterviews.AI. https://ceointerviews.ai/interview/2417427/
