Published - August 22nd, 2023 @ 2:13 PM (GMT+2)

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Financial Dip Preceding Major IPO:
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SoftBank Group's renowned chip designer, Arm Holdings, has reported a 1% decline in annual revenue, primarily due to a dip in smartphone sales. This financial revelation comes as the company is gearing up for a potentially monumental U.S. initial public offering (IPO), which many anticipate to be the standout listing of 2023.

IPO's Potential Market Impact:
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Arm's impending stock market debut is set to inject vitality into the IPO market. Over the past year, market volatility has led numerous high-profile startups to delay their listing plans. However, Arm's move could signal a change in this trend.

Despite the broader chip industry's downturn, Arm has showcased remarkable resilience. The British firm is now strategically pivoting towards booming sectors, notably cloud computing.

Detailed Financials:‍

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For the fiscal year that concluded on March 31, Arm's sales figures stood at $2.68 billion. A global slump majorly influenced this decline in smartphone shipments. The subsequent quarter ending June 30 saw sales drop by 2.5%, amounting to $675 million.

Over 50% of Arm's royalty revenue for the past fiscal year was sourced from smartphones and consumer electronics. With the global smartphone market predicted by Counterpoint Research to reach its lowest in a decade, Arm's modest revenue decline indicates a potential increase in its per-chip rates.
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SoftBank's Strategy:

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Previous insights from Reuters have indicated that SoftBank is strategizing to offload around 10% of Arm's shares during the IPO. The valuation target is speculated to be between $60 billion and $70 billion. Although Arm initially aimed to secure between $8 billion to $10 billion from the IPO, this figure was adjusted after SoftBank's acquisition of a 25% stake in Arm from its Saudi-backed Vision Fund.

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Susannah Streeter from Hargreaves Lansdown commented on the prevailing market conditions, emphasizing recent volatility in the tech sector. She suggests that Arm might be hastening its listing due to these market dynamics.

Failed Nvidia Deal & Revenue Model:
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SoftBank's decision to prep Arm for an IPO followed the collapse of a $40 billion deal with Nvidia. Arm's revenue generation hinges on initial licensing fees for its technology, followed by royalties from each chip its partners sell.

Arm's chip designs are omnipresent in the smartphone sector. Their technology is also integrated into Apple laptops and select Windows devices. Arm has captured a 10% market share in the cloud computing realm.

AI Market & Chinese Revenue:
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While Arm's presence in AI is still budding, Nvidia remains the dominant player. Arm's recent fiscal data reveals that 24% of its revenue was sourced from China. However, due to export controls and China's economic downturn, Arm anticipates a decline in the region's royalty and licensing revenues.

Potential Investors & Upcoming Listings:
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Recent reports suggest that SoftBank has engaged in discussions with tech behemoths like Amazon.com and Nvidia for potential investments in Arm's IPO. Arm's listing is expected to catalyze the IPO market, with several big names like Instacart and Birkenstock slated for public listings soon.

Arm intends to list on the Nasdaq under the ticker 'ARM'. Leading financial institutions like Barclays and Goldman Sachs are spearheading the offering.

The information on mexem.com is for general informational purposes only. It should not be regarded as investment advice. Investing in stocks involves risk. A stock's past performance is not a reliable indicator of its future performance. Always consult a financial advisor or trusted sources before making any investment decisions.
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