Why Arm Stock Is Sinking Today

Arm (NASDAQ: ARM) stock is getting hit hard in Thursday's trading. The semiconductor-specialist's share price was down 16.4% as of 1:15 p.m. ET, according to data from S&P Global Market Intelligence .

After the market closed yesterday, Arm published better-than-expected results for the first quarter of its current fiscal year, which ended June 30. But expectations were sky high, and investors didn't see enough bullish indicators in the company's forward guidance to support more gains for the otherwise red-hot stock.

Arm's substantial Q1 beats weren't enough for Wall Street

Arm reported non-GAAP (adjusted) earnings per share of $0.40 on revenue of $939 million in the second quarter. The performance came in significantly ahead of the average analyst estimate's call for per-share earnings of $0.35 on sales of $906.5 million.

While the company's licensing segment delivered strong performance and helped power sales and earnings beats in fiscal Q1, headwinds in networking, industrial, and other categories are causing analysts to moderate their expectations. Arm's forward guidance wasn't disastrous by any stretch of the imagination, but its forecasts didn't live up to some of the loftier targets on Wall Street.

What's next for Arm stock?

For the second quarter of its fiscal year, Arm is guiding for sales to be between $780 million and $830 million. The midpoint of that guidance range came in below the average Wall Street target's call for sales of $812.75 million.

Meanwhile, adjusted earnings are projected to be between $0.23 and $0.27. The average analyst estimate had called for adjusted earnings per share of $0.28 prior to the report.

For the full year, Arm reiterated the guidance it had given with its last update. The company anticipates revenue will be between $3.8 billion and $4.1 billion. Adjusted earnings per share are projected to be between $1.45 and $1.65. For reference, the average analyst target called for sales of $3.99 billion and adjusted per-share earnings of $1.57.

Arm stock has seen volatile trading this year, but its share price is still up 59% in 2024. It's possible that the company is being conservative with its guidance again, but the stock could see more big swings in the near term as investors weigh its prospects and await the chip specialist's next quarterly results.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .