ARM share price up, reports strong full-year results on robust iPhone sales

British microchip designer ARM Holdings reported double-digit growth in sales and profit for the full-year, boosted by strong demand for Apples iPhone 6.

On Wednesday the Cambridge, England-based company reported a 2014 revenue of £795 million ($1.29 billion), up 16% compared to the previous 12-month period.

Profit before tax climbed 13% to £411 million, or 24.12p a share, versus a result of £364 million, or 20.59p a share.

ARMs financial performance received a boost in the fourth quarter, when Apples iPhone 6 and iPhone 6 plus enjoyed a healthy demand and reached record sales numbers. Apple is among the companies which utilize chips designed by ARM.

In fact, ARMs designs are used in more than 95% of all smartphones world-wide. Additionally, the company designs chips for tablets, smartTVs, laptops and personal computers among other things.

The company gained from the global trend to replace 3G technology with the next generation(4G), which provides better internet speeds and security on a number of devices, including smartphones.

Additionally, the increased interest towards connecting an array of electronics, from refrigerators and cars to heart monitoring implants, to the internet also helped the company, which designs chips used in those devices.

For the final quarter of 2014 ARM reported an 18% increase in revenue to £225 million compared year-over-year, with pre-tax profit up 25% to £118.9 million on the same basis.

ARM stated a net profit of £72.8 million, compared to a £6.2 million loss year-on-year, which was mostly driven by patent acquisitions.

As a result of the strong performance ARM proposed a 25%-lifted dividend of 4.5p a share, bringing its full-year payout to 7p a share.

The company generates revenue every time a chip maker, which has licensed a design from ARM, sells a chip to either a smartphone maker or an end consumer. Processor royalty revenue climbed 16% in the quarter.

Licensing revenue for the three months jumped 27% to $162.3 million, or 46% of overall revenue. During the year ARM inked 163 licensing deals, including 53 in the fourth quarter.

“2015 will bring exciting opportunities and challenges as ARM invests in new products and technologies, and continues to establish itself in competitive new markets,” said Chief Executive Simon Segars.

ARM gained 0.09% on Tuesday and closed at GBX 1 056 in London. On Wednesday the stock climbed 3.60% to GBX 1 094 at 13:39 GMT, marking a one-year increase of 16.76%. The company is valued at £14.83 billion.

According to the Financial Times, the 21 analysts offering 12-month price targets for ARM have a median target of GBX 1 100, with a high estimate of GBX 1 500 and a low estimate of GBX 700.00. The median estimate represents a 4.17% increase from the last closing price.