The global chip drought has boosted sales at Arm as the semiconductor designer awaits the results of a government investigation into its takeover by US giant Nvidia.
The Cambridge company, which creates designs for microprocessors used in billions of smartphones, reported sales growth of 60pc in the three months to June 30, compared to the previous year, with revenues of 74.2bn yen (£485m).
Arm’s profits improved to £57.3m against a loss of £42m it recorded in the same period last year, it revealed in results for parent company SoftBank.
The brightening outlook came amid a boom in chip demand as carmakers and consumer electronics companies grapple with a dearth of new silicon chips.
It was the first profitable quarter for Arm since March 2017, excluding a one-off disposal that boosted the bottom line. Arm said its investments in R&D had led to losses over the previous four years.
Chip makers have been forced to ramp up their production lines as a boost in demand for PCs and phones after the pandemic working from home boom and a better-than-expected economic recovery accelerated demand for processor parts.
Asia outgrows the US
The demand boosted sales at Arm, which claims royalties on chips and licencing revenues from customers.
Arm’s profits had fallen under a strategy of investing in internet of things (IoT) technology under SoftBank, which bought the company in 2016.
In September, Arm was sold by SoftBank to US graphics chip designer Nvidia in a $40bn deal. The transaction has raised fears that the sale could harm Arm’s independence and prompted a UK competition investigation.
Oliver Dowden, the culture secretary, has also called in the deal over national security concerns, with Arm viewed as a strategically important company in the global semiconductor supply chain. He is considering a report from the Competition and Markets Authority and is expected to soon decide whether to block the deal.
Simon Segars, Arm’s chief executive, has said that the takeover is necessary to secure the "unprecedented" investment in artificial intelligence. Without a takeover, Nvidia has argued Arm will fall into decline.
However, Arm’s return to profitability may be taken a sign by critics of the deal as proof the company can stand on its own.
Culture Secretary Oliver Dowden is currently considering whether to block the takeover
Arm is in the process of spinning out its internet of things divisions cultivated under SoftBank but have not been bought by Nvidia. Earlier this month, it carved out one such business, Treasure Data, which will remain under SoftBank control.
The Cambridge firm’s results were revealed in SoftBank’s report. The technology conglomorate, which owns stakes in Uber and UK gaming company Improbable, reported a big fall in profits to $2bn, down from a record $8bn for the previous quarter.
Masayoshi Son, SoftBank’s chief executive, said it would reduce investment in China after some of its biggest portfolio companies, including ride-hailing firm Didi and e-commerce giant Alibaba, were hit by a regulatory crackdown.