July 31 -

Chip designer Arm Holdings on Wednesday reported a

stronger-than-expected 39% surge in quarterly revenue, and

forecast fiscal second-quarter sales broadly in line with Wall

Street estimates, yet its shares fell about 9% in extended

trading.

For the current fiscal second quarter, Arm forecast

revenue in a range between $780 million and $830 million,

compared with an average analyst estimate of $804.1 million,

according to LSEG data.

"We're seeing more investment (in AI) than we saw even 90

days ago," Chief Financial Officer Jason Child said in an

interview with Reuters.

Arm's first-quarter revenue rose 39% to $939 million,

exceeding analyst estimates of $902.7 million.

The UK chip designer reported first-quarter earnings of 40

cents per share, adjusted for stock-based compensation, among

other things. Analysts expected earnings of 34 cents a share.

Arm generates revenue from licensing fees for its

semiconductor designs and collects a royalty for each chip sold

that uses its technology.

Arm's designs power nearly every smartphone in the world,

and the company has attempted to make headway in data centers

and other markets. Chips with Arm technology generate $200

billion a year of revenue for the many chipmakers that sell

them, according to research from TD Cowen.

Bets that Arm will benefit from a surge in

artificial-intelligence computing have nearly tripled the chip

designer's share price since its initial public offering last

September, giving it market value of about $140 billion. The

shares recently traded at roughly 75 times expected earnings,

compared with about 31 times earnings for heavyweight chipmaker

Nvidia ( NVDA ), according to LSEG data.

Though Arm's designs are found adjacent to chips that power

AI applications, the company's revenue and profit have not

benefited from AI to the same degree as Nvidia's ( NVDA ).

(Max Cherney in San Francisco; Editing by David Gregorio)