00:00Rene, the market perhaps digesting recent run ups in the stock but also digesting what you warned that you're seeing
00:06in a smartphone arena.
00:08And that's because of memory prices. Just dictate a little bit of what you've seen in this space.
00:13Good morning, Caroline. And I'm in San Jose, not San Diego, but that's OK.
00:19You know, in terms of the overall market and the quarter, we could not be happier in terms of the
00:25results that we had this last quarter.
00:26It was $1.5 billion in that neighborhood of revenue, which not long ago used to be an annual revenue
00:34number for the company.
00:35Our data center business doubled year on year. And we're seeing, you know, huge, huge demand for our new product,
00:41the Arm AGI CPU.
00:43So all of that has really added up to a terrific quarter.
00:47To your question as far as smartphones, we have definitely seen a slowdown there as well.
00:52However, I would say compared to some of the other folks in the market, we're not really as exposed there,
00:57probably for two big reasons.
00:59Number one, a lot of our volume comes from the premium segment where the royalty rates are quite rich using
01:04version nine.
01:05And where the slowdown has taken place, we've seen is mostly in the lower end of the market where there's
01:11not a large royalty contribution for us.
01:13Okay. So not a large royalty perspective coming from the smartphones, but where the dictation of growth seems to be
01:20coming from is CPU.
01:22Not only CPU architecture that is used broadly by, you name-checked the Googles, the Amazons, the way in which
01:28we're seeing CPU further grow in your customers,
01:31but also you're building the chip yourself. How do you see that market expanding?
01:35Yeah, we are. And, you know, for 35 years, the way we delivered product to our customers was through IP,
01:42the blueprint that they used to essentially build chips based upon the ARM technology.
01:47As you know very well, we've seen huge growth in our data center business over the last number of years.
01:52Amazon with Graviton had just announced version five, Graviton 5.
01:56Google Axion, Microsoft Cobalt, and, of course, NVIDIA with Vera.
02:01But what we've seen, Caroline, you know, in the last number of months has been this explosion of demand for
02:08agentic workloads.
02:10And agentic workloads essentially mean that agents are now putting queries on the data center that need to have answers
02:17back very quickly.
02:18All of that work regarding the agentic management, orchestration, scheduling, et cetera, that is the kind of work only a
02:26CPU can do, only a CPU.
02:27This is not something an accelerated GPU can manage.
02:30So what's happening? Demand for CPUs is exploding.
02:34And the timing of the ARM AGI CPU launch, I think, just reinforced huge demand for that kind of product.
02:40So we are now seeing demand for not only the IP that people use to build chips based on ARM
02:46in the data center, but the ARM AGI CPU.
02:48And I think I mentioned on the call we had visibility to about a billion dollars of orders that we
02:53had in our forecast.
02:54That number over the last five weeks has doubled to $2 billion.
02:57So demand is certainly not a problem.
03:00Extraordinary since you first announced the move towards building it yourself,
03:05towards what we see as this focus on this particular CPU.
03:10But where from?
03:12We know that Meta has been a key partner on this.
03:15But where else are you getting demand from, Rene?
03:17Yeah, so the partners we talked about at launch was Meta, of course.
03:22OpenAI, a large partner.
03:24Cerebrus, SK Telecom, Rebellions, SAP.
03:29So it's pretty broad.
03:30F5 networks, we're seeing it across network infrastructure,
03:33but largely around simply putting more CPUs inside the data center.
03:38The other thing that we did, Caroline, with this product is,
03:41when you're building something of this nature, it's not just a chip, but it's a system.
03:45And we work closely with partners like Supermicro and Lenovo and Asrock,
03:50who build the systems and racks that customers can order.
03:54And these 36-kilowatt air-cooled racks, one of the beauties of the ARM AGI CPU is that you can
04:01get twice the performance
04:02in the same power versus a comparable x86 rack.
04:06So, and of course, we're known for power efficiency, so that's not a surprise.
04:10But it is one of the other things that's catalyzing demand.
04:13We've got to talk a little bit about supply.
04:15You're talking about how you're built, making sure that the servers are there,
04:18the way in which we can put them in the data centers is there, the partners you're working with.
04:22But time and time again, we're hearing from everyone that the blocker really isn't demand, it's supply.
04:26Have you had any issues with that?
04:29Yeah.
04:29So, what we said on the earnings call was the billion dollars of orders that we talked about,
04:34we have the supply for that.
04:36Now, what we have is additional demand for another billion dollars of demand of product,
04:40and that is bringing it to a total of $2 billion.
04:43And we're working with everybody in the supply chain, whether it's TSMC, the memory suppliers, SK Hynix, Micron, and Samsung.
04:51But the beauty of all this, Caroline, is that this is not perishable demand.
04:54It's not something that if a window closes, there's not going to be a need for compute.
04:59So, we are thinking about this in the long game.
05:02We've talked about a $15 billion target by FYE31, so that's calendar 30 for your viewers.
05:10And basically what that means is we are very confident that we are on track to that $15 billion number
05:16in a very, very short time,
05:18which is quite transformational for the company relative to the size of opportunity and the amount of revenue that we'll
05:24deliver.
05:25Size of opportunities, size of role for you, Rene, has been expanding because you're still CEO of ARM,
05:33but you're also taking on leading the SoftBank International part of the business.
05:37And this is all about working with other parts of SoftBank's ecosystem in the chip arena.
05:42I just think of some of the acquisitions Ampere has been put into the portfolio.
05:46You've got Graphcore.
05:47How do you see your role changing?
05:49How do you see the impact of SoftBank more broadly in the chip space?
05:53Yeah, thank you for the question.
05:55There's a lot of synergy to the kind of work that SoftBank is doing.
05:59When you think about some of the announcements they've made recently around in Portsmouth, Ohio, for example,
06:04a huge 10 gigawatt data center facility working with the U.S. Department of Energy as well as SoftBank Energy.
06:11And then we've got companies in the SoftBank portfolio like Ampere and Graphcore.
06:17A lot of synergy between the kind of work they're doing that could fit into ARM.
06:21So Masa has asked me to help with that orchestration and that coordination across the companies.
06:28So in one extent, yeah, it may look like, oh, my gosh, he's got two jobs.
06:31But on the flip side, there is a lot of coordination that we get benefit from both sides.
06:37So I'm happy to help in any way that I can.
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