Arm on Thursday said its fiscal 2021 revenue grew 35 percent year-on-year to $2.7 billion, serving as one of the few bright spots in what was an otherwise dreadful year for its owner, Japan-based SoftBank Group, which failed to sell the chip designer to GPU giant Nvidia after facing pushback from regulators.
During that doomed merger attempt, Nvidia’s submissions [PDF] to the UK’s monopoly watchdog with Arm, arguing in favor of the acquisition, at times painted Arm as some kind of injured swan in need of help to survive. For example, it was stated that “as a standalone business, Arm faces significant challenges to growth,” and “Arm’s original market, and the largest source of its revenue, mobile, is saturated.” Now that the fateful takeover has been called off, Arm can’t wait to assert it was, and is, going gangbusters all by itself after all.
To demonstrate its profitability, Arm said its earnings before interest, taxes, depreciation and amortization (EBITDA) was up 68 percent to $1 billion in fiscal 2021, which gave it an adjusted EBITDA margin of 37 percent. While EBITDA is a popular way to measure financial performance, we should note this does not provide a complete picture of Arm’s financial health.
The chip designer’s fiscal 2021 growth came from license revenues, which increased 61 percent to $1.13 billion, and from royalty revenues, which increased 20 percent to $1.54 billion. This was made possible by what Arm said was a record of 29.2 billion Arm-based chips that shipped last year.
“Our record results demonstrate that the demand for Arm technology and the strength of the Arm ecosystem has never been greater – our compute platform will power the next set of technology revolutions across cloud computing, automotive and autonomous systems, the IoT, the Metaverse and beyond ,” said Rene Haas, who took over from Simon Segars as Arm’s CEO after the Nvidia deal fell through.
“As we look ahead to a future built on Arm, our priority is to continue to deliver on our business strategy, enabling partners with the solutions they need through further investment in our roadmaps and engineering talent, and together with our ecosystem redefine the future of computing,” Haas added in his statement.
Arm was rather vague on what drove growth in its licensing business, only saying in a brief press release that its expanded portfolio of processor designs and its Arm Flexible Access program “gave more customers more reasons and more ways to license Arm technology.”
Thankfully, the company was more specific on the growth drivers behind its royalty business, which makes money from partners selling Arm-based chips into the market. For this, Arm credited the “continuing strong growth of 5G smartphones” as well as automotive sales for in-vehicle infotainment and advanced driver assistance systems.
Arm also said price increases for 32-bit microcontrollers (MCUs) contributed to the boost in licensing revenue, which is great for the company but not so great for the companies that had to pay substantially more money for MCUs that went into their products.
As The Register reported earlier this year, a survey of 530 engineers conducted by distributor Avnet found that the global chip shortage was causing MCU prices to go up “more than 10 and even 20 times that of pre-pandemic pricing” because demand was outstripping supply.
Arm, like other chip companies, may have benefited from the volatility of the semiconductor industry last year, but the ongoing volatility of the stock market may not make now a great time for SoftBank to pursue an initial public offering for Arm, as SoftBank’s CEO hopes to do. ®