Arm Holdings plc

Thank you for standing by, and welcome to ARM's third quarter fiscal year and 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. I would now like to hand the call over to Head of Investor Relations, Ian Thornton. Please go ahead.

Thank you, Latif. Thank you, everybody. My name is Ian Thornton and I'm the head of investor relations at Arm. I would like to welcome you to our earnings conference call for the third quarter of the fiscal year ending March 31st, 2024. I'm joined today by Reni Haas, the chief executive officer of Arm and Jason Child, Arm's chief financial officer. Hopefully you will all have downloaded and read the shareholder letter. If not, it is available on the Arm Investor Relations website at investors.arm.com. The shareholder letter provides a rich update on our strategic progress in the quarter. Before we begin, I'd like to remind everyone that during the course of this conference call, Arm will discuss forecasts, targets, and other forward-looking information regarding the company and its financial results. While these statements represent our best current judgment about the future results and performance as of today, our actual results are subject to many risks and uncertainties that could cause actual results to differ materially from what we expect. In addition to any risks that we highlight during this call, important risk factors that may affect our future results and performance are described in our registration statement on Form F1 filed with the SEC on September 14, 2023. unassumes no obligation to update any forward-looking statements which speak only as of the date they are made. In addition, we refer to non-GAAP financial measures during the discussion. Reconciliations of certain of these non-GAAP financial measures to the most directly comparable GAAP financial measures and a discussion of certain projected non-GAAP financial measures that we were not able to reconcile without unreasonable efforts and supplementary financial information can be found in the shareholder letter that we released earlier today. The shareholder letter and other earnings-related materials are available on our website at investors.arm.com. And with that, I'll turn the call over to Rene, who has some prepared remarks.

Thank you, Ian, and good afternoon, good evening, everyone. So I'd like to speak a few different comments about the quarter, and then I'll turn it over to Jason for some specifics, and then we'll open it up to Q&A. We had an outstanding third quarter inside the company. We could not be more pleased. Record revenues, we've seen the high end of the range for the guidance and extremely pleased about results overall. For Q4, we're expecting another record quarter. And to that end, we've also raised guidance of which Jason is going to give more color on. But a little bit regarding the why and how we got here, ARM is the most fundamental foundational pervasive compute platform really in the history of digital design. Over 280 billion units in the 30 plus years that ARM has been a company have been built. And that has underpinned a software ecosystem and hardware ecosystem like no other. And given the fact that a CPU design is really driven by the hardware and the software, it creates a flywheel for continuous development. That is the more hardware that exists on Arm, the more software that's written for Arm, the more software that's written for Arm, the more popular the hardware. So we're building off a fantastic base that when we look at what happened in the last quarter, not only did we see growth driven by a number of factors, but growth that we think is long-term and sustainable. For royalties specifically around some of the products that shipped in the quarter, We've seen a significant transition now continuing from our V8 product to our V9 product. Our V9 product garners roughly 2x the royalty rate of the equivalent V8 product. And whereas in the previous quarter, that was about 10% of our revenue for royalties, it's now moved to 15%. And that has seen growth in not only the smartphone sector, but also in infrastructure and other markets, which drives growth. We are also seeing strong momentum and tailwinds from all things AI. From the most complex devices on the planet for training and inference, the NVIDIA Grace Hopper 200, to edge devices such as the Gemini Nano Pixel 6 from Google or the Samsung Galaxy S24, more and more AI is running on more edge devices and end devices, and that's all running on ARM. And what that has done is driven a very strong set of tailwinds for our licensing growth. When we look at demand for new products from a licensing standpoint, what we're finding from the end market is that we've reached nowhere near good enough relative to the capability of the technology. And end customers for new designs are needing more and more ARM technology to keep up, particularly with the AI demands. So with that, our licensing growth has been very strong. We've also seen proof points around one of our strategies that we call compute subsystems. These are complete finished blocks of designs that we put together for our end customers that will save them significant time around validation of their engineering work and also around time to market relative to cycling products through the fab. One of the very first designs that was made public that uses this is the Microsoft Cobalt. which uses our Neoverse cores, a 128 CPUs to be specific. We work very closely with Microsoft around these designs using compute subsystems. And we see this trend only going to continue. So between strong growth and royalties that are driven between V8 to V9, all things AI needing energy efficient compute and compute subsystems, we feel very, very strongly positioned for growth. And again, this is completely underpinned by a ecosystem of devices that are in the installed base and a very, very large software community that develops on ARM. So with that, I will turn it over to Jason, and then we'll open it up for Q&A.