Arm Holdings' stock initially fell 1.5% during regular trading on Tuesday after unveiling its first in-house AI chip, but surged 6% in after-hours trading as CEO Rene Haas projected $15 billion in annual revenue from the chip by 2031.
Chip Announcement and First Customer
- At an event in San Francisco, Arm introduced the Arm AGI CPU, its first in-house chip optimized for AI inference.
- Meta is confirmed as the initial customer for this chip.
- The chip is produced in a $71 million laboratory in Austin, Texas, which CNBC visited exclusively.
Financial Projections and Growth
- By 2031, the new chip is expected to generate approximately $15 billion in annual revenue.
- Total Arm annual revenue is forecasted to reach $25 billion by 2031, with earnings per share of $9.
- This represents a significant increase from the just over $4 billion in annual revenue generated in 2025.
- Haas suggested demand might be higher than anticipated, stating, "We may be under-calling that number."
Profitability and Strategic Shift
- CFO Jason Child indicated that Arm is selling the new chip at about a 50% gross profit margin.
- This move expands Arm's market to customers not interested in its traditional IP licensing model, provides choices for existing customers, and creates a larger profit opportunity for Arm.
- It marks a strategic shift as Arm now competes directly with some of its previous customers.
AI-Driven Market Context
- CPU demand is resurging due to agentic AI, which changes compute needs.
- Haas predicts a fourfold increase in CPU demand around agentic AI.
- The Arm AGI CPU is positioned to capitalize on this trend with its focus on AI inference.