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・Wells Fargo expects little change to Arm's outlook for roughly 20% year-over-year revenue growth in fiscal 2027.
・While robust AI-driven demand from data centers should remain a tailwind, Wells Fargo believes continued weakness in the smartphone and PC markets will offset those gains.
・Arm CEO Rene Haas said during the company's fourth-quarter earnings call that global mobile unit growth could “slip to negative,” with the smartphone market staying very flattish to slightly negative.
Arm Holdings (ARM) shares are on track to end a three-day winning streak in Wednesday's premarket trading as semiconductor stocks broadly declined ahead of earnings from Magnificent Seven members Alphabet Inc. and Tesla Inc. (TSLA).
According to TheFly, Wells Fargo lowered the price target for Arm to $350 from $410 while maintaining an ‘Overweight’ rating on the stock. The new price target implies a potential upside of 23% from current levels.
Arm’s American Depositary Receipts were down more than 1% in Wednesday morning’s trade.
Why Wells Fargo Trimmed Its ARM Price Target
Wells Fargo said that Arm faces a "tough setup" heading into its next earnings report. The firm expects little change to Arm's outlook for roughly 20% year-over-year revenue growth in fiscal 2027.
While robust AI-driven demand from data centers should remain a tailwind, Wells Fargo believes continued weakness in the smartphone and PC markets will offset those gains, limiting the potential for meaningful upward revisions to the company's guidance.
Wells Fargo's view echoes commentary from Arm CEO Rene Haas during the company’s fourth-quarter (Q4) earnings call. Haas said Arm expects global mobile unit growth to “slip to negative” in the near term, with the broader smartphone market remaining “very flattish, maybe slightly negative.”
He added that the weakness is expected to be concentrated in the lower end of the smartphone market and should be more than offset by continued demand for Arm-based chips powering cloud AI and data center workloads.
Arm is scheduled to report its first-quarter (Q1) results on July 29. Wall Street expects the company to report earnings per share (EPS) of $0.4 on revenue of $1.26 billion, according to Fiscal.ai data.
Arm reported EPS of $0.35 on revenue of $1.05 billion during the same period a year ago.
Not Everyone Is As Cautious On ARM
Not all analysts share Wells Fargo's cautious outlook. According to a report by Investing.com, Jefferies on Monday reiterated its ‘Buy’ rating on Arm and raised its price target to $320 from $290.
The firm raised its long-term AGI revenue expectations for Arm to $18 billion by 2031, compared to Arm’s guidance of $15 billion, citing stronger demand fueled by the rise of agentic AI and customer wins with Oracle and ByteDance.
Jefferies also pointed to the potential launch of a SoftBank GPU based on Arm's design services next year as another catalyst that could boost royalty revenue.
Meanwhile, Susquehanna also struck a more bullish tone, raising its price target on Arm to $320 from $300, while maintaining a ‘Positive’ rating.
The firm expects semiconductor companies to post modest upside in the second quarter (Q2) and believes an accelerating industry upcycle and improving pricing dynamics could provide a stronger backdrop for the sector in the third quarter (Q3).
How Retail Traders Reacted To ARM Stock
Retail sentiment on Stocktwits around ARM was in the ‘bearish’ territory at the time of writing.
ARM stock is up 158% year-to-date and 77% over the past 12 months. The iShares Semiconductor ETF (SOXX) is up 129% over the past 12 months, while the VanEck Semiconductor ETF (SMH) is up 107%.
The Invesco QQQ Trust (QQQ) is up 26% during this period, while the Direxion Daily Semiconductor Bull 3X Shares (SOXL) is up 520%.
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