Profits plunge again at ARM Holdings after hiring spree

ARM chip
ARM's chips are used in the majority of the world's smartphones Credit: Bloomberg

Profits at ARM Holdings have fallen for two quarters in a row as the iPhone microchip designer counts the soaring costs of a hiring spree under its new Japanese owners.

The Cambridge-based firm reported adjusted earnings, a measure of profitability, of £73m in the third quarter of the year, down from £90m a year ago. It came after earnings halved in the previous quarter, from £165m to £82m.

ARM, which creates the microchip designs used in most smartphones and tablets, was bought last year for £24bn by Japan’s SoftBank.  Some people criticised the takeover as an opportunistic swoop following the pound’s post-Brexit fall, but SoftBank’s chief executive, Masayoshi Son, insisted he was investing for the long term.

SoftBank boss Masayoshi Son
SoftBank boss Masayoshi Son Credit: AFP

SoftBank made legally-binding commitments to double employee numbers over the five years and to maintain ARM’s UK headquarters. According to ARM’s website, the company’s headcount has jumped from 4,438 a year ago to 5,538 today.

The firm has two major revenue streams – licensing deals from selling its chip designs, and royalties from sales of the chips. Revenues from both have increased over the last year, but rising costs from hiring have taken profits down. Revenues increased by 21pc in the last quarter but costs went up at double the rate, rising 42pc.

ARM steadily increased profits in its life as a public company, but insiders say it has been investing more freely in private hands. Since the ARM takeover, SoftBank has announced plans to transfer 25pc of the company to the SoftBank Vision Fund, a $93bn (£71bn) investment vehicle financed by, among others, Saudi Arabia’s sovereign wealth fund and iPhone maker Apple.

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