Arm Sees Sales Growth of More Than 20% Next Year Boosted by AI

Amy Or and Ryan Gould, Bloomberg News

The Arm US headquarters in San Jose, California, US, on Wednesday, Sept. 6, 2023. SoftBank Group Corp.'s Arm Holdings Ltd. is planning to raise as much as $4.87 billion in the chip designer's long-anticipated initial public offering, marking lowered ambitions for an IPO that was once expected to generate roughly twice that amount. Photographer: David Paul Morris/Bloomberg , Bloomberg

(Bloomberg) -- Arm Holdings Ltd. said on its investor roadshow that it expects revenue growth of 11% in its current fiscal year and an increase in the mid-20% range in fiscal 2025, boosted by demand for chips to power data centers and artificial intelligence, according to people familiar with the matter.

Arm executives made the forecast during an investor luncheon in New York ahead of its initial public offering, the people added, asking not to be identified because the matter is private. The company is currently in its fiscal 2024 year, which ends March 31, 2024.

The SoftBank Group Corp.-owned chip designer is looking to raise as much as $4.87 billion in what’s poised to be the largest IPO of the year. Investor reception to Arm’s growth prospects will be key to determining what Arm will be valued at in the listing.

Investors who attended the event cited Chief Executive Officer Rene Haas as saying that price increases have provided the company with a “larger bump than seen historically.”

The investors, who declined to be identified speaking about the private meeting, said Haas expects robust growth to continue into the 2026 fiscal year, with high-teen percentage increases in revenue.

A representative for Arm declined to comment.

Arm had an adjusted operating profit margin of 29% in fiscal 2023 with plans to expand that to 40% in the first quarter, according to the presentation. The company expects operating margins to be 60% in the longterm, the people said, and profit margins on earnings before interest, taxes, depreciation and amortization of about 65% of revenue.

Arm is expected to price its public offering on Sept. 13 and the stock will start trading the next day.

--With assistance from Ian King.