Arm stock pops as CEO Haas issues $25 billion revenue expectation

Arm Holdings shares gained 6% in after-hours trading on Tuesday after CEO Rene Haas said 2031 annual revenue expectations are more than six times those in 2025.

Haas unveiled Arm’s first in-house chip at an event in San Francisco on Tuesday, with Meta as its first customer. CNBC got an exclusive first look at the chip earlier this month by visiting the lab Arm is building for it in Austin, Texas.

Gun stocks closed down about 1.5% on Tuesday following the chip announcement.

Haas said Arm expects the new chip to generate annual revenue of about $15 billion by 2031, with total annual revenue of $25 billion and earnings per share of $9.

As agency AI transforms computing needs, central processing units are seeing a resurgence in demand. Haas predicted that CPUs will see a fourfold increase in demand around agency AI.

“We may be underestimating that number,” Haas said Tuesday. “I think the demand is higher than we thought.”

That’s a big boost for the chip design firm, which is looking at just over $4 billion in annual revenue in 2025.

The Arm AGI CPU is a data chip optimized for AI inference. It’s a long-awaited move that marks a big change for the so-called Swiss chip firms as they enter into new competition with their customers.

Arm CFO Jason Child said Arm sold its new chip at about a 50% gross margin.

“This expands our market to customers who may not be interested in an IP model, gives our existing customers choice and creates a much larger profit opportunity for Arm,” Child said at Tuesday’s event.

For 35 years, the UK-based company licensed its instruction sets to fabless chip manufacturers and collected royalties on each processor produced with its designs.

Arm, known as the leading architecture in almost every smartphone, has begun to compete with x86 data center chips. Intel And AMD With the launch of the Neoverse platform in 2018.

Amazon He brought Neoverse into the mainstream with its first dedicated processor, the Graviton. Now Google, Microsoft and others are basing their AI chips on Arm.

“We will not force any of our existing customers to switch to this new model,” Child said.

Arm did not share the cost of the new chip, but head of cloud AI Mohamed Awad told CNBC in an interview that the chip will be “competitively priced.”

Chip analyst Patrick Moorhead estimates it will cost thousands of dollars.

Awad said he hopes the new chip will serve as an option for companies that can’t afford to make their own in-house processors.

“Arm has generally been modeled entirely on licensing and royalty businesses, and now they’ve presented a new market opportunity and business for investors to wrap their heads around and model, so it’s no surprise that it’s taking people a while to focus on valuation and new revenue targets,” Creative Strategies’ Ben Bajarin told CNBC.

Watch: Inside Arm’s $71 million chip lab builds its first CPU