The 14th of September of 2023 was a remarkable day for investors who’ve been on the edge of their seats for years. The long-anticipated ARM IPO took place after a lot of teasing, false dates, and anxious anticipation.
The British microchip company has been pursued by Nvidia since 2020, but SoftBank didn’t sell, and it’s been preparing ARM for public trading ever since.
Because of its hold on the chip market, investors worldwide have been waiting for the IPO. Now that it happened, let’s see ARM post IPO result!
On the 14th of September, ARM was publicly listed with $51 per share, putting its market cap at a whopping $52 billion.
The over-the-top valuation raised concerns and eyebrows, but ARM’s executives weren’t alarmed. According to SoftBank, the mother company, ARM’s revenue is expected to rise by roughly 11% in 2024 and 25% in 2025.
On top of that, ARM’s CEO, Rene Haas, mentioned that he expects a 40% adjusted operating margin, which is basically the percentage of revenue that remains after covering operation expenses.
The estimation excludes non-recurring expenses that aren’t a part of the company’s regular operations, which means a clearer picture of ARM’s ongoing profitability.
Now that ARM entered the IPO battlefield, the company is under increasing pressure to find the sweet balance between demands for profitability and ambitions of growth.
After the public listing, ARM’s stock took a 25% leap, increasing the share price to $63.59, and, consequently, the market cap to roughly $68 billion.
While this seems like a good thing from the outside, it’s an unexpectedly high number considering the company’s revenue for the past year.
The new valuation put ARM’s P/E ratio at approximately 170. All investors know that a high P/E ratio means that the stock is highly priced and that a price fall is almost inevitable.
Considering that Nvidia’s P/E ratio stands at roughly 104 and that similar microchip companies have P/E ratios of 20–30, ARM’s ratio seems awfully optimistic.
While such a comparison may not be a strong indication of ARM’s post IPO results, it raises some flags with concerns about growth.
Nvidia expects a 170% jump in sales before the end of 2023, and it witnessed a doubling of its revenue over the previous quarters. Meanwhile, ARM’s revenue is going the opposite way.
According to CNBC, Haas is expecting significant growth in the AI field. Most AI devices on the market are ARM-based, and according to Haas, the company is also witnessing growth in other areas, like automotive.
On top of that, ARM is expecting an increase in its market for products over the next two years, which means higher annual growth.
Despite the slippage in revenue, investors are still betting on ARM to maintain strong profit margins and deliver the promised growth.
For now, it’s too early to judge the post IPO performance of the British microchip company. We’re on the edge of our seats to see what the future holds for ARM and its army of investors!
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