Chips for everything shows that ARM has the right recipe for future earnings

Yorkshire-based staff from ARM Holdings are helping to create microchips for the consumer devices of the future.

The 60-strong team at the company’s Sheffield office are also helping ARM to move into the server market, which places it in direct competition with big industry names like Intel.

The Cambridge-based firm, which employs 921 staff in the UK, reported a 22 per cent jump in pre-tax profits to £128.5m in the first half of the year as revenues increased 12 per cent to £422.4m.

The strong results offset any disappointment from ARM customer Apple, which on Tuesday revealed lower-than-expected revenues and net income growth in its third quarter.

ARM shares rose as it also revealed it had signed a further 23 licences in the period for its microchip technology to be used in a range of products, including digital TVs, mobile computers and smartphones.

ARM chief executive Warren East said: “ARM’s royalty revenues continued to outperform the overall semiconductor industry as our customers gained market share within existing markets and launched products which are taking ARM technology into new markets.”

ARM’s semi-conductor chips, which also feature in a number of products which run Microsoft Windows software, consume less power than traditional PC microprocessors, which is essential for battery-powered devices.

The group makes money by licensing its technology to customers and receives royalty payments every time devices with its chips are made by its clients.

Julian Yates, analyst at brokers Investec, said: “We continue to see Arm as a standout tech sector holding. The strong licence growth of recent years, which has continued into the first half we see catalysing royalty upgrades from 2013 which in our view supports 2016 earnings per share of more than 45p, which drives our target price.”

He said they see material long-term value in Arm.