SoftBank, Oracle and OpenAI are setting up a joint venture called Stargate and investing $500 billion in AI infrastructure projects in the US over the next four years. I have been very positive about the developments around the SoftBank Group for some time now, as you can see from previous posts. Microsoft, NVIDIA and ARM will also be technology partners in the project.

https://www.handelsblatt.com/technik/ki/usa-openai-softbank-und-oracle-schmieden-kolossales-ki-buendnis/100102415.html

$9984 (+11,88%)

$ORCL (+7,67%)

$MSFT (+1,7%)

$NVDA (+4,95%)

$ARM (+5,22%)

$QCOM (+0,66%) . $ARM (+5,22%)

The lawsuit between chip manufacturer Qualcomm and architecture design company Arm has come to an end: A court in Delaware has acquitted Qualcomm of allegations of violating Arm's licensing agreements, as reported by Bloomberg and others. The background to this are accusations by Arm that Qualcomm should have negotiated a new license agreement with the takeover of Nuvia.

At the time, Nuvia had negotiated a technology license (TLA) with Arm for the use of finished IP blocks (intellectual property) and an architecture license (ALA). This enabled Nuvia to develop its Arm CPU cores (Oryon), which Qualcomm uses in its Snapdragon X and, more recently, Snapdragon 8 chips following the takeover.

Qualcomm itself received technology and architecture licenses from Arm, albeit on different terms. As a start-up, Nuvia had received cheaper licenses, but the royalties per chip sold were higher. According to Arm's argumentation, Qualcomm would have had to negotiate new licenses after the takeover of Nuvia. Qualcomm had also applied for such a license transfer, but wanted to keep Nuvia's license terms - which Arm rejected.

Jury reached a partial agreement

At the end of the negotiations, Arm made Qualcomm two offers: Either the Oryon developers would no longer work on Arm designs for two years or Qualcomm would pay $135 million for new licenses. Qualcomm subsequently broke off negotiations.

After two days of discussions, in which there was apparently a stalemate in the meantime, the jury was able to agree that Arm's claims against Qualcomm were unjustified. The jurors could not agree on the question of whether Nuvia had breached the license agreement with Arm. According to the presiding judge Maryelle Noreika, this can be renegotiated at a later date.

https://www.golem.de/news/chips-qualcomm-verstoesst-nicht-gegen-arm-lizenzabkommen-2412-191941.html

From sand to chip: how is a modern semiconductor made?

Reading time: approx. 10min

1) INTRODUCTION

Since 2023 at the latest and the rapid rise of Nvidia $NVDA (+4,95%) semiconductors and "AI chips" in particular have been the talk of the town. Since then, investors have been chasing after almost every company that has something to do with the manufacture of chips, driving share prices to unimagined heights. However, hardly any investors really know how complex the value chain is within the production of modern chips.

In this article, I will give you an overview of the entire manufacturing process and the companies involved. Even if many of you have a vague idea that the production of modern chips is complex, you will certainly be surprised by how complex it really is in reality.

2) BASIC

The starting point for every chip are so-called wafers [1] - i.e. thin wafers, which usually consist of so-called high-purity monocrystalline silicon. In the field of power semiconductors, which primarily comprises chips for applications with higher currents and voltages, silicon carbide (SiC) or galium nitride (GaN) has recently also been used as the base material for the wafers.

In the so-called front end the actual core components of the chips - the so-called dies - are created and applied to the wafers. The dies are rectangular structures that contain the actual functionality of the later chip. The finished dies are then tested for their functionality and electrical properties. Each die that is found to be good is then integrated into the so-called backend where the individual dies are separated on the wafer. This is followed by the so-called packaging. The individual dies from the front end are then electrically contacted and integrated into a protective housing. In the end, this housing with the contacted die is what is usually called a chip chip.

Now that we have a rough overview of the overall process, let's take a closer look at the individual processes involved in producing the dies on the wafer. This is the area in which most highly complex machines are used and which is usually the most sensitive.

3) FROM SAND TO WAFER

Before wafers made of high-purity silicon can even be produced and the actual process for manufacturing dies can begin, the actual wafer must first be manufactured in almost perfect quality. To do this, quartz sand, which consists largely of silicon dioxide, is reduced with carbon at high temperatures. This produces so-called raw siliconwhich, with a purity of around 96%, is not yet anywhere near the quality required for the production of wafers.

In several chemical processes, which are carried out by Wacker Chemie
$WCH (-2,42%) or Siltronic
$WAF (-0,79%) are used to turn the "impure" silicon into so-called polycrystalline silicon with a purity of 99.9999999%. For every billion silicon atoms, there is then only one foreign atom in the silicon. However, this pure polycrystalline silicon is still not suitable for the production of wafers, as the crystal structure in the silicon is not uniform enough. In order to create the right crystal structure, the polycrystalline silicon is then melted again and a so-called ingotwhich is made from monocrystalline silicon is produced. A comparison between raw silicon and the ingot can be found in the following image [3]:

This ingot is then sawn into thin slices, which are then the final wafers for semiconductor production. The best-known wafer producers are Shin Etsu
$4063, (+0,08%)
Siltronic or GlobalWafers
$6488.

4) FROM THE WAFER TO THE DIE

The wafers described in the previous section can now be used to produce dies. The overall process for producing dies basically consists of applying a large number of layers using various chemical, mechanical and physical processes. The overall process (depending on the product) takes approx. 80 different layers on the wafer, requiring almost 1000 different process steps and 3 months
non-stop production are required [4].

A macroscopic analogy is useful here, which I have also taken from [4]. You can compare the overall process for producing dies with baking a large multi-layer cake. This cake has 80 layers and the recipe for baking consists of 1000 steps. It takes 3 months to make the cake and if even one layer of the cake deviates from the recipe by more than 1%, the whole cake collapses and has to be thrown away.

In the first process steps, the wafer is covered with billions tiny little transistors are created on the wafer, which are then all individually electrically contacted in the following steps. The final steps consist of electrically connecting the transistors to each other, resulting in a complete electrical circuit [4]:

Each individual layer of the approximately 80 layers in the die requires highly specialized processes, which can be roughly summarized as:

• Applying masks: Photolithography, photoresist coating (applying photoresist)
• Apply material: Chemical Vapor Deposition (CVD), Physical Vapor Deposition (PVD), Atomic Layer Deposition
• Remove material: Plasma annealing, Wet annealing, Chemical Mechanical Planarization (CMP)
• Modify material: Ion Implanting, Annealing
• Material cleaning
• Inspecting the layers: Optical, Microscopical, Focused Ion Beam, Defect Inspection

Apply masks

Ultimately, a mask can be thought of as an enlarged copy of the structure of a special layer in the die. These so-called photomasks are then scanned using so-called scanners or steppers "copied" in reduced size onto the wafer. The best-known manufacturer of such lithography systems is ASML
$ASML (+1,54%). It is currently the only producer of lithography systems that make it possible to produce structures smaller than 10 nanometers on the wafer. In today's powerful and modern chips, such as those found in smartphones, AI chips and processors, the smallest structures are around 3 nanometers in size. Other manufacturers of lithography systems for larger structures (10nm and larger) are Canon Electronics
$7739 or Nikon $7731 (-0,54%) .

The photomasks - i.e. the enlarged "copies" of the structures - are produced by companies such as Toppan $7911 (+2,23%) , Dai Nippon Printing
$7912 (+0%) or Hoya $7741 (+0,68%) manufactured. Systems for cleaning the photomasks or for applying the photoresist are produced, for example, by Suss Microtec
$SMHN (+3,49%) for example.

Apply/remove/modify/clean material

As can be seen in the overview above, there are a variety of methods and processes for modifying the material of a particular layer. As a result, there is a lot of different equipment that can handle a process very well with incredible specialization. The best-known and most successful equipment manufacturers include Applied Materials $AMAT (+1,26%), LAM Research
$LRCX (+1,37%), Tokyo Electron (TEL)
$8035, (+0,68%)
Suss Mictrotec, Entegris
$ENTG (+1%) and Axcelis $ACLS (+1,14%).

The material - for example, highly specialized chemicals - is of course also required for production. Companies such as Linde
$LIN (+0,12%), Air Liquide
$AI (+0,51%), Air Products
$APD (+0,26%) and Nippon Sanso
$4091 (+0,9%) are major manufacturers of process gases such as nitrogen, hydrogen and argon.

Inspect

As mentioned, every single layer in the manufacturing process of a die must be perfect in order to obtain a functional die at the end. Any small deviation or foreign particles can impair the functionality of the die. As the function of the die can only be checked precisely on the finished die, it is advantageous to inspect the individual layers for defects and deviations during production. Special machines are required for this, which must be able to do different things depending on the layer. Manufacturers of such machines include KLA
$KLAC (+0,36%) or Onto Innovation
$ONTO (+0,95%).

The following applies to almost all of the companies mentioned in this section: the companies are highly specialized and have quasi-monopolies on the machines for certain process steps. quasi-monopolies. Suitable equipment therefore usually costs several million dollars. In addition, some of the systems are so complex that they can only be serviced by the manufacturer's own service staff, which results in recurring service revenues for every machine sold. As a rule, each machine requires several highly specialized engineers to ensure long-term stable operation.

5) FROM THE DIE TO THE FINISHED CHIP

Once the wafer has been processed, the dies on the wafer are checked for functionality. There is highly specialized equipment for this, so-called probers. These probers test each individual chip several times, if necessary, to check the functionality implemented in the design. Manufacturers of such probers include Teradyne $TER (+0,73%), Keysight Technologies
$KEYS (+0,43%), Onto Innovation or Tokyo Electron. These probers have to control each individual die, some of which are only a few square millimetres in size, and contact the corresponding much smaller test structures with tiny needles. The testing process is sometimes outsourced to entire companies that offer die testing as a complete package. One example of such providers is Amkor Technology
$AMKR (+0,74%).

The processed and tested wafer is now sawn to obtain individual dies. The dies that are found to be good are then integrated into a protective housing in the backend. The dies that have not passed the functionality test are either sorted out or (depending on the error pattern) processed as a variant with reduced functionality similar to those with full functionality. After a final functional test in the package, the chip is ready for use.

6) FOUNDRIES, FABLESS & SOFTWARE

Now that we have an overview of the complex process of manufacturing a chip, let's zoom out a little further to understand which companies perform which tasks in the semiconductor industry.

It's funny that not once in the manufacturing process has the name Nvidia $NVDA (+4,95%) or Apple $AAPL (-0,79%) has been mentioned? Yet they have the most advanced chips, don't they?

The pure production of the chips is done by other companies - so-called foundries. Companies like Nvidia and even AMD $AMD (+1,21%) are in fact fablessThis means that they do not have their own production facilities but only supply the chip design and let the foundries manufacture the actual chip according to their design.

The design of a chip is like the blueprint for production - the foundries then take over the recipe creation and the actual production. There is special software for designing chips. Companies known for this software include Cadance Design
$CDNS (+1,65%) and Synopsys $SNPS (+1,1%). But also the industrial giant Siemens
$SIE (+1,31%) now also supplies software for designing integrated circuits. Synopsys also offers other software for data analysis within foundry production.

Speaking of foundries; the best known foundry is probably TSMC
$TSM, (+1,43%) which is the global market leader in foundries. TSMC designs itself no chips itself and specializes exclusively in the production of the most advanced generations of chips. Another major player that also masters the most advanced structure sizes is Samsung $005930. In contrast to TSMC manufactures Samsung also produces its own designs. Other large foundries are Global Foundries
$GFS, (+0,68%) which was originally a spin-off from AMD and the Taiwanese company United Micro Electronics
$UMC. (+0,43%)

The best-known fabless companies - i.e. companies without their own chip production - are Nvidia, Apple, AMD, ARM Holdings
$ARM, (+5,22%)
Broadcom $AVGO (+2,77%), MediaTek $2454 and Qualcomm $QCOM. (+0,66%) In the meantime Alphabet $GOOGL, (-0,67%)
Microsoft $MSFT, (+1,7%)
Amazon $AMZN (+0,86%) and Meta $META (+0,94%) have designed their own chips for certain functionalities and then have them manufactured in foundries.

In addition to foundries and fabless companies, there are of course also hybrid models, i.e. companies that take on both production and design. The best-known examples of this are, of course, companies such as Intel
$INTC (-1,45%) and Samsung. There is also a whole range of so-called Integrated Device Manufacturer (IDM)which for the most part only manufacture their own designed chips and do not accept customer orders for production. Well-known companies such as Texas Instruments
$TXN, (+1,3%)
SK Hynix
$000660,
STMicroelectronics
$STMPA, (-0,44%)
NXP Semiconductors
$NXPI, (-0,48%)
Infineon $IFX (-0,62%) and Renesas $6723 (+3,29%) are among the IDMs.

FINAL WORD

The aim of this article was to provide an overview of the complexity of the semiconductor industry. I do not, of course no claim to be complete, as there are of course many other companies that are part of this value chain. As Getquin thrives on active exchange, I'll give you some food for thought to discuss in the comments below the article:

• feel free to link any other companies in the comments if you think I've forgotten any relevant ones
• what was the most surprising new information for you from the article?
• which companies from the article have you never heard of?
• before reading the article, did you know approximately how a modern chip is produced and what steps are necessary for this?

In general, I can recommend the 20-minute YouTube video at [4] to any interested reader. It provides an excellent animated overview of the manufacturing process of modern chips.

Stay tuned,

Yours Nico Uhlig (aka RealMichaelScott)

SOURCES:

[1] Wikipedia: https://de.wikipedia.org/wiki/Wafer

[2] https://www.halbleiter.org/waferherstellung/einkristall/

[3] https://solarmuseum.org/wp-content/uploads/2019/05/solarmuseum_org-07917.jpg

[4] Branch Education on YouTube: "How are Microchips Made?" https://youtu.be/dX9CGRZwD-w?si=xeV0TYgJ2iwNOKyO

Small update on the Softbank Group $9984 (+11,88%) !!

I am still of the opinion that there is a lot to be said for Softbank Group becoming one of the biggest AI winners at the moment.big AI winners in the future!!!

I find the company very exciting and am a fan of Masayoshi Sonthe CEO of Softbank.

In the picture above you can see Jensen Huang (CEO of NVIDIA) and said Masayoshi Son at the NVIDIA AI Summit Japan held a few days ago. Many interesting things were discussed, but of particular note was the announcement that the Softbank Group, the first company in the world company to receive the latest Nvidia DGX B200 systems to work with NVIDIA to develop the world's most powerful AI supercomputer in supercomputer in Japan.

But more importantly, the Softbank Group wants to build a completely new infrastructure for AI in Japan. It should be noted that the Softbank Group is one of the largest telecom companies in Japan, which is important for the next point. Softbank and NVIDIA have succeeded in creating a telecommunications network on which 5G and AI data streams can run simultaneously, which is also made possible by the fact that the 5G networks are usually only a maximum of one third full. one third and the last two thirds are now to be used for AI applications. Softbank would like to use all of its 5G base stations for these so-called AI-RAN servers and hopes that each installation will generate a gain of at least 219%. Overall, the aim is to build an AI infrastructure covering the entire country, which can be used for numerous applications such as supporting autonomous driving. Universities are also to be actively involved in the further development of the system and new AI applications develop new AI applications. The system has been tested and works. This represents a completely new way for telecoms companies to monetize their networks.

Jensen Huang also said that about Softbank and Japan as a whole: "Japan has a long history of pioneering technological innovations with global impact," said Nvidia CEO Jensen Huang. "With SoftBank's significant investment in Nvidia's full-stack AI, Omniverse and 5G AI-RAN platforms, Japan is leaping into the AI industrial revolution to become a global leader, driving a new era of growth across the telecommunications, transportation, robotics and healthcare industries in ways that will greatly benefit humankind in the age of AI."

Other things about the Softbank Group:

-Softbank owns the British chip designer $ARM (+5,22%) (which, by the way, is still more valuable than the parent company), whose chip designs have a monopolistic position in more and more areas

-This year they acquired the AI chip manufacturer Graphcorewhich is also British. Graphcore was touted early on as an NVIDIA competitor and, according to their own statements, can keep up technologically, but they ran out of money along the way, which led to Softbank acquiring the former hopeful at a huge discount. huge discount at a huge discount. Graphcore could become even more interesting in the future, as it is assumed that Softbank will merge ARM and Graphcore to jointly develop AI chips develop AI chips together

-Many of Softbank Vision Fund's investments are also slowly moving in the right direction, which earned them a profit of 7.7 billion dollars in the last quarter. Especially in India there were many successful IPOs of Softbank holdings. The profit was 5 times higher than analysts had expected

-As I have written a lot about $GRAB (+1,19%) I want to note, even if it is not so relevant now, that Softbank also has about 10% in Grab in Grab

Conclusion: Overall, I see Masayoshi Son's vision and think the conglomerate's reorientation towards AI & chips is a very interesting development. Softbank can become the most important AI company in Japan and also get involved internationally through its many holdings, many of which will be added in the coming years. Masayoshi Son is just getting warmed up and has a lot of cash to invest. In addition, he is once again looking to attract substantial capital (around 70 billion) from the Middle East for a new project in the field of AI chips (another topic). Who knows what will become of Graphcore, ARM or the chip venture Rapidus (another topic). In any case, all of this promises huge returns, which currently make the share appear significantly undervalued.

But the important thing now is results. After all the super positive news such as the big quarterly profit or the announcement of the AI-RAN servers and supercomputers, you would think that the share should have benefited from this. But investors will probably remain skeptical for the time being and wait until the first milestones have been reached.

I believe that Masayoshi Son's strategy will work out with the support of his friend Jensen Huang. I could really have written a lot more about this, but I've been writing about it for a long time now and I think I've gotten the message across :)

Goodbye poor.

Outlook meh. Chart meh

Money may go into $AFRM (+0,55%)

07.11.2024

iPhone sales boost revenue for chip designer Arm + Qualcomm beats expectations for fourth quarter + Novo Nordisk: weight loss and diabetes drugs flourish + Trump election victory sends bank shares sharply higher + Aurora Cannabis quarterly figures

The chip designer Arm Holdings $ARM (+5,22%) achieved higher sales in the second quarter than in the same period of the previous year. The company benefited from the sale of Apple's $AAPL (-0,79%) iPhones, Arm announced on Wednesday after the close of the US stock exchange. The British chip designer reported a profit of 30 US cents per share for the past quarter, adjusted for share-based payments and other factors. Analysts had expected a profit of 26 cents per share. Arm's turnover rose by five percent to 844 million dollars, compared to analysts' estimates of 808.4 million. However, the company forecast revenue for the current quarter to be only in the middle of estimates. Arm expects revenue to be between $920 million and $970 million, with a midpoint of $945 million, compared to the average analyst estimate of $944.3 million. The company expects third-quarter earnings of between 32 and 36 cents per share. Analysts had projected earnings of 34 cents per share for the third quarter. Arm collects a license fee for every chip sold that uses its technology. Arm's designs power almost every smartphone in the world.

The results of Qualcomm $QCOM (+0,66%) 's fourth-quarter results were better than expected as the chip supplier posted its fifth consecutive quarter of record automotive sales. Adjusted earnings per share rose to $2.69 from $2.02 a year ago, above the $2.57 consensus surveyed by Capital IQ. Non-GAAP revenue rose 18% year-over-year to $10.24 billion in the three months ended Sept. 29, beating Wall Street expectations of $9.93 billion. Qualcomm shares rose 7% in after-hours trading on Wednesday. Sales at Qualcomm's CDMA technology division, which represents its semiconductor business, rose 18% to $8.68 billion, driven by a 68% increase in the auto division to $899 million. Cell phone sales rose 12% to $6.1 billion, while the Internet of Things division increased 22% to $1.68 billion, the company said. Technology licensing revenue rose 21% to $1.52 billion. Qualcomm expects first-quarter adjusted earnings per share of $2.85 to $3.05 on revenue of between $10.5 billion and $11.3 billion.

The pharmaceutical company Novo Nordisk $NOVO B (+0,86%) continues to do good business with its top-selling diabetes and weight-loss drugs Ozempic and Wegovy. Group-wide sales of the Danish company increased by 21 percent to 71.3 billion Danish crowns (around 9.6 billion euros) in the third quarter, as the manufacturer announced in Baegsvaerd on Wednesday. The bottom line profit climbed by a good fifth to 27.3 billion Danish kroner. The Group thus performed better than analysts had expected. The management is now once again narrowing its sales and profit expectations for the year. An increase in revenue at constant exchange rates of 23 to 27 percent is now expected for the year as a whole. This is one percentage point more at the lower end, but also one percent less at the upper end than recently. The Danes are now predicting an increase in operating profit of 21 to 27 percent, excluding exchange rate effects. This means that the Group is also expecting slightly more at the lower end and slightly less at the upper end than before. In the summer, Novo Nordisk had already lowered its target for this key figure.

Donald Trump's clear victory in the US presidential election catapulted the share prices of US banks and financial services providers higher on Wednesday. Goldman Sachs and JPMorgan climbed to record highs in the Dow Jones Industrial benchmark index. Goldman $GS (-0,16%) recently gained around 12 percent, while JPMorgan $JPM (-0,1%) the gain amounted to more than 9 percent. In the S&P 500 Citigroup $C (-0,1%), Wells Fargo $WFC (-0,06%) and Morgan Stanley $MS (-0,3%) were similarly strong. Capital One Financial $COF (+1,65%)gained over 13 percent. A more protectionist trade policy is emerging in the USA under Trump. There is a threat of high import duties and corporate taxes could be lowered. However, debt could also increase. Bank shares benefited on Wednesday from the prospect of looser financial market regulation. In addition, interest rates could rise in view of a possible increase in debt - this would also be to the benefit of banks, for example in the lending business.

Aurora Cannabis figures $ACB (+1,07%)

• Record adjusted EBITDA1 of USD 10.1 million, an increase of 210% year-on-year
• Quarterly net revenue1 increased 29% to $81.1 million, with 41% growth in Global Medical Cannabis
• Reaffirms target of positive free cash flow1 in the quarter ending December 31, 2024
• Maintains a strong balance sheet with ~$152 million in cash and a debt-free cannabis business2

Thursday: Stock market dates, economic data, quarterly figures

ex-dividend of individual stocks

H & M Hennes & Mauritz (B) 3.25 SE

BP 0.08 USD

Ford Motor 0.15 USD

Unilever 0.37 GBP

Quarterly figures / company dates USA / Asia

12:30 Moderna quarterly figures

12:55 Under Armour quarterly figures

22:00 Expedia | News Quarterly figures

Quarterly figures / Company dates Europe

06:45 Adtran Networks | Zurich Insurance | Basler Quarterly figures

07:00 Daimler Truck | Heidelberg Materials | Lanxess | Nemetschek | Nordex | Rational | Arcelormittal | AMS-Osram | Aareal | Hamborner Reit | Knaus Tabbert quarterly figures

07:15 Air France-KLM quarterly figures

07:30 Compugroup | Delivery Hero | Munich Re | Rheinmetall | Telefonica | Adyen | Deutz quarterly figures

07:30 Dürr | Instone | Koenig & Bauer | Mutares | SGL Carbon | SNP Schneider quarterly figures

07:50 Suss Microtec quarterly figures

08:00 Verbund AG | PNE | BT Group | National Grid | CRH Quarterly Figures | Rolls-Royce Trading Update 3Q

10:00 Qiagen quarterly figures

14:30 Hochtief quarterly figures

17:50 Pirelli quarterly figures

18:00 Freenet quarterly figures

Economic data

• 08:00 DE: Trade balance September trade balance calendar and seasonally adjusted FORECAST: +19.0 bn Euro previous: +22.5 bn Euro Exports FORECAST: -2.8% yoy previous: +1.3% yoy Imports FORECAST: -0.2% yoy previous: -3.4% yoy
• 08:00 DE: Production in the manufacturing sector September seasonally adjusted FORECAST: -0.9% yoy previous: +2.9% yoy | Turnover in the service sector October
• 11:00 EU: Retail Sales September Eurozone PROGNOSE: +0.5% yoy previous: +0.2% yoy
• 13:00 UK: BoE, outcome and minutes of the Monetary Policy Council meeting and Monetary Policy Report October Bank Rate FORECAST: 4.75% previously: 5.00%
• 14:30 US: Initial jobless claims (week) FORECAST: 220,000 PREVIOUS: 216,000
• 14:30 US: Productivity ex Agriculture (1st release) 3Q annualized PROGNOSE: +2.5% yoy 2Q: +2.5% yoy Unit labor costs PROGNOSE: +1.1% yoy 2Q: +0.4% yoy
• 20:00 US: Fed, outcome of FOMC meeting Fed funds target rate FORECAST: 4.50% to 4.75% Previous: 4.75% to 5.00%

Arm Holding Q3 2024 $ARM (+5,22%)

Financial performance:

• Revenue: Total revenue for the second quarter of FY2025 was $844 million, an increase of 5% year-over-year. The increase in revenue was driven by record levels of license fees and continued strength in the licensing business.
• Net Income: GAAP net income was $107 million, compared to a loss of $110 million in the same period last year. Non-GAAP net income was $317 million, but a decrease from $378 million in the prior year.

Balance Sheet Overview:

• Assets: Total assets were $8,086 million as of September 30, 2024, including $1,498 million in cash and cash equivalents.
• Liabilities: Total liabilities decreased to $2.074 million compared to $2.632 million at March 31, 2024.
• Shareholders' equity: Shareholders' equity was $6.012 million.

Income structure:

• Gross profit: GAAP gross profit was $812 million, while non-GAAP gross profit was $820 million, representing an exceptionally high non-GAAP gross margin of 97%.
• Operating Income: GAAP operating income totaled $64 million, and non-GAAP operating income totaled $326 million.

Cash Flow Overview:

• Operating Activities: Net cash provided by operating activities was $6 million.
• Free Cash Flow: Non-GAAP free cash flow for the quarter was $(65) million.

Key Metrics and Profitability Metrics:

• Operating Margin: GAAP operating margin was 8%, while non-GAAP operating margin was 39%.
• Gross margin: Non-GAAP gross margin reached a remarkable 97%.

Segment information:

• Royalties: License fees increased 23% year-over-year to $514 million, supported by the launch of Armv9 and a recovery in the smartphone market.
• License revenue: License revenue decreased 15% year over year to $330 million.

Competitive position:

• Arm is benefiting from strong growth in its license fee business, with Armv9 playing a significant role in this increase. The company has expanded its Arm Total Access and Arm Flexible Access programs, demonstrating high customer retention.

Forecasts and management comments:

• Q3 FYE25 revenue guidance: Revenue is expected to be between $920 million and $970 million.
• Non-GAAP operating expenses: Expected to be approximately $500 million.

Risks and Opportunities:

• Opportunities: Continued growth in royalties and expansion of access programs.
• Risks: Fluctuations in license revenue due to variation in timing and size of agreements.

Summary of results:

Positives:

Strong growth in license fees: Increase of 23% compared to the previous year.

High non-GAAP gross margin: At 97%, the company is showing impressive profitability.

Increase in annual contract value: Increase of 13%.

Expansion of access programs: Arm Total Access and Flexible Access show expanded customer loyalty.

Improved GAAP net income: Positive development compared to the previous year.

Negative aspects:

Decline in license revenue: A 15% decrease year-over-year.

Decline in non-GAAP net income: Lower than in the previous year.

Negative free cash flow: Free cash flow was negative in the quarter.

Increased non-GAAP operating expenses: Increased engineering costs due to higher headcount.

Decrease in cash and cash equivalents: Reduction compared to March 31, 2024.

Arm Holdings $ARM (+5,22%)
has just announced its quarterly figures.

The earnings per share (EPS) are $0,30 and exceeds expectations of $0,26.

The turnover amounted to $0,84 billion and is also above expectations of $0,81 billion.

Earnings next week

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