06:24 AM EDT, 05/08/2025 (MT Newswires) -- Arm Holdings' ( ARM ) US-listed shares dropped early Thursday as the British semiconductor manufacturer issued a fiscal first-quarter earnings outlook below market estimates, though it recorded better-than-expected results in the prior three-month period.

The company anticipates per-share adjusted earnings to be in a range of $0.30 to $0.38 in the ongoing quarter, it said late Wednesday, while the current consensus on FactSet is for $0.41. Revenue is pegged at $1 billion to $1.1 billion, compared with the Street's forecast for $1.09 billion. The stock dropped 9.6% in the most recent premarket activity.

"Our guidance reflects our current view of our end markets and our licensing pipeline," Chief Financial Officer Jason Child said during an earnings call, according to a FactSet transcript. "We expect to start the year with strong 25% to 30% royalty growth."

Child told analysts it was not prudent for the chipmaker to issue full-year guidance due to "lower visibility" than usual to start the year amid global trade and macroeconomic uncertainties. "Nevertheless, we reiterate our confidence in healthy growth in the coming year and years to come," Child said.

Last month, US President Donald Trump declared a 90-day pause on certain tariffs for non-retaliating countries. Washington and China have been in a deadlock over tariffs, though officials from both sides are due to meet in Switzerland this weekend to discuss economic and trade matters.

Arm expects tariffs to have a "limited direct" impact on its royalty and licensing revenue, but has "less visibility" on their indirect impact on end demand, according to Child. "In our royalty business, we estimate that 10% to 20% of our revenues stems from shipments into the US," the CFO said on the call. "In licensing, we have found in the past slowdowns such as COVID, that impact is minimal as our customers invest through near-term slowdowns given lengthy chip development timelines."

For the quarter ended March, the chipmaker's adjusted EPS advanced to $0.55 from $0.36 the year before, topping the average analyst estimate of $0.52. Revenue climbed 34% to $1.24 billion, just ahead of the market's view for $1.23 billion.

Royalty revenue grew 18% to $607 million, mainly driven by continued adoption of the company's artificial intelligence-enabled Armv9 architecture and increased usage of its chips in data centers, it said. Revenue from licensing soared 53% to $634 million amid "normal fluctuations" in the timing and size of multiple high-value agreements and backlog contributions. Annualized contract value improved 15% to $1.37 billion.

"(The fourth quarter) marked a record breaking close to a strong year for Arm, driven by strong demand for power efficient AI compute from cloud to edge," Chief Executive Rene Haas said on the call.