Arm Holdings CEO Rene Haas pushed back against growing investor anxiety about AI disrupting enterprise software, calling recent market selloffs "micro-hysteria" even as his company's stock dropped 7-8% following Q3 earnings.
The chip designer reported revenue above $1 billion for the fourth straight quarter, up 26% year-over-year, driven by AI deployments in cloud infrastructure, edge computing, and physical AI systems. Non-GAAP operating margin hit 41%, with trailing twelve-month free cash flow reaching $893 million.
The stock decline came despite solid fundamentals. Licensing revenue fell short of expectations, and investors are applying tougher scrutiny to AI-related plays across the board. The timing is notable: Haas made his comments just a day after similar reassurances from NVIDIA's Jensen Huang, suggesting coordinated messaging to calm jittery markets.
Arm's strategic shift from mobile-dominant revenue to AI infrastructure is showing traction. Data center royalties doubled year-over-year in FY2024, which closed at $4 billion revenue (up 25%). The company's energy-efficient CPU architecture is finding homes in inference workloads at NVIDIA (Grace and Blackwell chips), Meta, and OpenAI deployments.
What enterprise tech leaders should watch: Arm's ATA licensing model locks in multi-year revenue streams, insulating it somewhat from quarterly volatility. The company claims its developer ecosystem now exceeds 22 million, and executives say data center revenue will soon surpass smartphone revenue, its traditional stronghold.
Haas frames enterprise AI adoption as still nascent, with inference workloads and AI agents driving CPU demand rather than training infrastructure. This positions Arm to challenge Intel and AMD's x86 dominance in data centers, where Arm already claims roughly 50% market share in certain segments.
The disconnect between Arm's operational performance and stock reaction reflects broader market uncertainty about AI economics. A ten-year AI infrastructure deal in Malaysia and partnerships across hyperscalers suggest the revenue pipeline is real. Whether investors believe the margin story is another question.
History suggests strong fundamentals eventually win out over sentiment. We'll see if Arm's Q4 results, due in three months, validate Haas's optimism or prove the skeptics right.