Arm CEO grows more confident AGI CPU can reach $2 billion in revenue

“We’re feeling good about it. We’re feeling really good about it,” Haas said on CNBC’s “Mad Money” from San Francisco.

The central issue for Arm has not been demand for its first in-house central processing unit for data centers. Investors have instead focused on whether the company can obtain enough manufacturing capacity to convert that demand into revenue as chipmakers compete for limited supply during the artificial intelligence boom.

Key details

• Arm first disclosed visibility into $2 billion in demand for the AGI CPU on its May earnings call.
• That figure was double the $1 billion outlined when the company announced its first custom CPU in March.
• Arm maintained its official $1 billion revenue outlook while working to secure supply for the additional demand.
• Management said on July’s earnings call that its confidence in securing the required supply had improved.

AGI CPU expands Arm’s business model

The AGI CPU represents a major change for Arm, which has historically generated revenue by licensing its chip designs to customers. The data center processor marks the company’s push into selling a complete chip of its own.

That shift makes execution on manufacturing supply especially important. Arm must secure sufficient capacity to deliver the chips rather than relying solely on customers to manufacture products based on its designs.

Confidence rises from May through September

Haas said Wednesday that management’s confidence had strengthened since the company’s July earnings report.

“So what we said in the earnings call I think was May timeframe that we had visibility to $2 billion, and what we said in the last earnings call was that our confidence to achieve that $2 billion number had increased from May to July,” Haas said. “Here I am in September, and what I can tell you is, Jim, I’m more confident today than I was on that July earnings.”

Arm’s shares fell 10% after the company maintained its official $1 billion revenue outlook following the May disclosure. The stock then jumped more than 7% in the session after July’s earnings call, when management reported greater confidence in obtaining the necessary supply.

Arm shares remain below June high

Arm shares have retained their post-earnings gain from July but remain roughly 45% below their June high of $452, which followed a parabolic run in the first half of the year.

Cramer’s Charitable Trust previously owned Arm but sold the position to protect profits after the run-up. The stock remains on the Club’s Bullpen watchlist.