ARM Holdings, the company behind the mobile chip architecture that's in the vast majority of smartphones and tablets, reported on Wednesday that it made 25 percent more profits than it expected in the last quarter.
The company's designs were used in 3.5 billion chips in the last quarter. Most of those chips appeared in embedded devices rather than smartphones, but the company saw strong adoption for its ARMv8 architecture and its Cortex-A57 and Cortex-A53 CPU cores, which go into mobile devices.
"Following the acceleration in royalty revenue growth in the second half of 2014, and with a wide range of OEMs (manufacturers) introducing products based on ARM's V8 architecture this year, the outlook for royalty revenues this year is very encouraging," said ARM's Chief Financial Officer, Tim Score.
Qualcomm, Nvidia, Samsung and Mediatek have all licensed ARM's 64-bit designs instead of going with their own this year. Although this may not last for too long, as Qualcomm (the number one mobile chip maker) is poised to release its own CPU core at the end of the year, it should give ARM a significant boost in profits and revenue over the next few quarters.
With the switch to the new architecture, ARM has also boosted its royalty from 1-1.5 percent of the chip's prices to 2 percent. Tim Score also said that the royalties will play a significant role in the company's revenues going forward. He also said that ARM signed 53 new licensing deals in the last quarter, including eight for the ARMv8 architecture. He expects that by the end of the year, half of the smartphones in the market will be powered by an ARMv8 chip.
In the last quarter, ARM made $182 million in profit and $348 million in revenue, so the company is highly profitable as more than half of its revenue is profit. The revenue is split evenly between licenses and royalties. ARM said that it's expecting to get a 10 percent increase in revenue year over year in the next quarter.