Arm Holdings delivered quarterly results and guidance that beat expectations, while touting strong demand for its new artificial intelligence data center chip launched in March.

U.S.-listed shares of the British chip designer soared as much as 13% after-hours before reversing gains. By 04:00 EST (08:00 GMT), shares were down 5%.

The drop followed executive comments on the subsequent earnings call indicated that the company had not secured the necessary supply to meet an additional $1 billion in demand for its new AGI CPU. 

“Supply constraints led management to withhold raising its revenue forecast,” Raymond James analyst Simon Leopold wrote in a note.

Arm is a well-known player in the semiconductor market, with its chip designs being used by companies such as Qualcomm, Apple, and Samsung in graphics processing units (GPUs) in smartphones, and by cloud computing giants and hyperscalers such as Amazon Web Services, Microsoft, Alphabet, and Meta. Arm brings in revenue from licensing its technology to these companies and then charging a royalty fee for each product that uses its design.

Arm’s technology is used in developing artificial intelligence-focused server chips. The company in March also said it was expanding its strategy beyond offering intellectual property and compute subsystems to producing silicon products. This included the launch of a new central processing unit (CPU) designed for AI data centers, called Arm AGI CPU.

“Customer response to Arm AGI CPU has been strong. We now have more than $2 billion of customer demand across fiscal 2027 and fiscal 2028, more than double what we stated at launch,” ARM top boss Rene Haas and finance chief Jason Child said in a shareholder letter. However, on the earnings call, management only confirmed it had secured supply for the first $1 billion in demand, noting, “For the $2 billion [of demand] we are now in the process of securing supply to support that.” 

“We are on track towards our forecast of $15 billion in this business as stated at our Arm Everywhere event last quarter, and soon the data center will be Arm’s largest business. The direction is clear: customers want Arm at the center of the AI data center,” the executives added.

The chip designer’s quarterly results come at a time when processes such as AI inference and agentic AI have led to a rise in demand for CPU server chips, shifting the narrative that the AI boom was concentrated to GPUs. This trend was clearly showcased by U.S. legacy chipmaker Intel’s quarterly results last month, and by AMD’s results on Tuesday.

Arm said it earned 60 cents per share on an adjusted basis on revenue of $1.49 billion for its fiscal Q4 2026. Analysts had expected a profit of 58 cents per share on revenue of $1.47 billion.

The Cambridge, England-based firm said licensing and other revenue increased 29% Y/Y to $819 million in the quarter, while royalty revenue improved 11% Y/Y to $671 million. 

Turning to Arm’s guidance, the company sees fiscal Q1 2027 adjusted earnings of 40 cents per share, plus or minus 4 cents per share, on revenue of $1.26 billion, plus or minus $50 million. Analysts had expected a revenue of $1.25 billion.