Arm’s biggest customers are also backing a rival chip design — here’s what you need to know
Dado Ruvic | Reuters
With Arm slated to start trading on the Nasdaq on Thursday, investors are considering the potential upsides — and downsides — of investing in the company.
The British chip designer itself flagged several risks in its IPO prospectus, ranging from its China business to geopolitics, but one potential threat has gained traction as its listing nears.
It’s called RISC-V, pronounced “risk five” — a rival chip design that is backed by some of Arm’s own customers.
While analysts told CNBC it’s not an immediate threat, Arm itself warned that if it gains traction, it could pose a competitive risk.
What is RISC-V?
To understand RISC-V, let’s consider what Arm actually does. Arm designs what’s known as an instruction set architecture (ISA) for chips known as processors or central processing units (CPUs). These chips can be thought of as the brain of an electronic device.
Arm’s ISA is effectively the blueprint for processors that other companies, from Apple to Qualcomm, base their chips on.
Arm charges these companies licensing fees to use its technology to build their own chips. It also gets royalties when these chips are produced and go into end devices. Arm’s designs underpin processors in 99% of the world’s smartphones.
RISC-V, meanwhile, is an entirely different instruction set architecture. RISC stands for reduced instruction set computer.
The main difference is that RISC-V is open-source, meaning it’s free to use.
“If RISC-V-related technology continues to be developed and market support for RISC-V increases, our customers may choose to utilize this free, open-source architecture instead of our products,” Arm said in its IPO prospectus.
Is RISC-V gaining traction?
RISC-V in recent years has gained support from some of the world’s biggest technology companies, many of which are also Arm customers.
Google, Samsung, Qualcomm and Nvidia, for instance, are part of a consortium formed in 2020 to develop RISC-V-based technologies.
Arm warned that if this development is successful, there could be a viable alternative to its architecture.
“Although the development of alternative architectures and technology is a time-intensive process, if our competitors establish cooperative relationships or consolidate with each other or third parties, such as the recently announced joint venture focused on RISC-V, they may have additional resources that would allow them to more quickly develop architectures and other technology that directly compete with our products,” Arm said in its IPO prospectus.
Support for RISC-V was “galvanized” after Nvidia proposed to buy Arm for $40 billion in 2020, according to technology researcher Richard Windsor, founder of Radio Free Mobile.
He suggested that other players were worried that if a major customer like Nvidia controlled Arm, it could be a disadvantage to some of Nvidia’s rivals.
The proposed takeover “raised a lot of hackles in the industry” and some Arm customers are “starting to think twice” about their dependency on the company, Windsor told CNBC this week.
“Maybe we should have a second source just in case things start not going in our direction, or we have problems with Arm,” he added, in reference to the thinking among some Arm customers.
Is RISC-V a threat to Arm?
The general consensus is that, right now, RISC-V doesn’t pose a major threat to Arm. That’s because the technology is currently far inferior to Arm’s offering.
“The issue with RISC-V is it’s much more immature. It doesn’t have the same level of support for more advanced designs,” Peter Richardson, research director at Counterpoint Research, told CNBC.
“RISC-V is quite far away from being at that leading edge, but for some workloads not at the cutting edge, then RISC-V can work quite well.”
One of Arm’s big successes is its huge customer base of major tech players. This has allowed Cambridge, England-based company to build an “ecosystem” of companies that rely on its technology — an advantage that RISC-V doesn’t have.
“Whenever you devise software that runs on one Arm, it will run on all the others as well,” Herman Hauser, founder of Acorn Computers, the company behind the first Arm chip, told CNBC’s “Squawk Box Europe” on Thursday. “So I think Arm will continue to retain its dominant position.”
However, there are fears that Chinese companies in particular could view RISC-V as a cheaper — and more appealing — alternative, particularly if Arm increases its prices.
“If Arm raises its prices, what are chip designers in China going to do? They’re probably going to go for the free version. I wouldn’t be surprised if China really scales up on RISC-V,” Cyrus Mewawalla, head of thematic intelligence at Global Data, told CNBC this week.
Armis CEO Yevgeny Dibrov and CTO Nadir Izrael.
Courtesy: Armis
Cybersecurity startup Armis has raised $435 million in a funding round that values the company at $6.1 billion.
“The need for what Armis is doing and what we are building, in this cyber exposure management and security platform, is just increasing,” CEO and co-founder Yevgeny Dibrov told CNBC. There’s “very unique and huge demand right now, and we are continuing to grow.”
Goldman Sachs Alternatives’ growth equity fund anchored the investment, with participation from CapitalG, a venture arm of Alphabet. The security firm brought on Evolution Equity Partners as a new investor.
Armis helps businesses secure and manage internet-connected devices and protect them against cyber threats. The company chose Goldman’s growth fund due to its strong track record helping companies accelerate growth toward initial public offerings, Dibrov said.
“This is the partner for us to go to the next stage and continue to build here a real generational business to get to the Hall of Fame of cyber and SaaS businesses,” he said.
In September, Bloomberg reported that the company was exploring as much as seven stake offers. Dibrov told CNBC the funding round was an outcome of those talks.
Founded in 2016, Armis in August said it surpassed $300 million in annual recurring revenues. The California-based company achieved that milestone less than a year after topping $200 million in ARR.
Armis raised $200 million in an October 2024 funding round with General Catalyst and Alkeon Capital. Previous backers have included Sequioa Capital and Bain Capital Ventures. Armis also raised $100 million in a secondary offering in July.
Dibrov said Armis is aiming for an IPO at the end of 2026 or early 2027, but he said he’s in no rush and is waiting on “market conditions.” The company’s primary goal is to hit $1 billion in annual recurring revenue, he said.
“Going public will be before that,” he said.
WATCH: Tech meets policy: Cybersecurity collaboration necessary in the era AI, says Google engineer
Rick Smith, CEO of Axon Enterprises.
Adam Jeffery | CNBC
Axon Enterprise‘s stock plummeted 17% after the TASER maker missed Wall Street’s third-quarter profit expectations as it grapples with tariff constraints.
Adjusted earnings totaled $1.17 per share adj., falling short of a $1.52 per share forecast from LSEG. Adjusted gross margins fell 50 basis points from a year ago to 62.7%, which Axon attributed to tariff impacts.
Axon’s connected devices business, which includes its TASER and counter drone equipment, felt the biggest pinch during the first full quarter with tariffs. The business segment accounted for over $405 million in revenues, increasing 24% year over year.
“As long as tariffs stay in place, I view that as sort of a one-time adjustment,” finance chief Brittany Bagley said during the earnings call. “Now that’s baked into the gross margins.”
Bagley expects growth in the company’s software business to eventually offset margin losses long-term. Software and services revenues jumped 41% from a year ago to $305 million.
Total revenues grew 31% from a year ago to $711 million, topping the $704 million expected by analysts polled by LSEG. The U.S. accounted for 84% of sales.
The Arizona-based company reported a net loss of $2.2 million, a loss of 3 cents per share, versus net income of $67 million, or 86 cents per share in the year-ago period.
Axon lifted its full-year revenue outlook to $2.74 billion, from between $2.65 billion and $2.73 billion. FactSet analysts expected $2.72 billion at the midpoint.
The company expects revenues between $750 million and $755 million during the fourth quarter, which was above LSEG analyst expectations of $746 million.
Along with the results, Axon said it is acquiring Carbyne in a deal that values the emergency communications platform at $625 million. The deal is expected to close next year in the first quarter.
Axon shares have jumped more than 60% over the last year and are up 18% year to date as demand for its security tools accelerates.
“We are building an elite business that is still nowhere near its ultimate potential, and we are doing it with a team that is rapidly bought into the mission,” said Axon’s president Josh Isner on the earnings call.
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