Chip and software designer Arm reported record quarterly revenue bolstered by AI, but a slip in demand from the smartphone market was enough to see its shares take a hit.

The British chip company saw a 22% year-on-year increase in revenue for Q1 FY27, bringing in $1.29 billion, but CFO Jason Child said growth in its royalties business has slowed due to poor smartphone sales.

In an earnings call Wednesday, Child said: “I think we said last quarter that we’re expecting somewhere around 20% year-over-year for the next few years in royalties, including this year. Right now, if I had to guess, that’s probably somewhere closer to the high teens right now.”

Despite the change in outlook, Arm’s overall earnings came in above expectations as it started to ship its first in-house processor, the Arm AGI CPU, and said it expected revenue from the chip to reach $15 billion by FY2031.

Get the full story: Subscribe for free

Join peers managing over $100 billion in annual IT spend and subscribe to unlock full access to The Stack’s analysis and events.

Subscribe now

Already a member? Sign in