By Paul Sandle
LONDON (Reuters) - Britain's ARM Holdings beat market expectations for the second quarter after demand for its low-power chips in smartphones outstripped the industry, providing a firm foundation against growing signs of weakening consumer demand.
Apple, which uses ARM's technology in the iPhone and iPad, missed expectations on Tuesday, hit by Europe's economic woes and a pause in iPhone sales ahead of the next version.
ARM's rival chipmaker Intel and its customer Qualcomm also reduced forecasts in recent weeks, reinforcing fears about the strength of demand for technology.
Chief financial officer Tim Score said ARM's chipmaker customers were sounding notes of caution, but the strength of demand for its technology and a strong performance in licensing meant it was confident of meeting market forecasts for the year.
Shares in the group were up 4 percent at 504 pence by 0751 GMT, the top FTSE 100 riser.
Analyst Julian Yates at Investec said it was a good set of numbers. "It's 5 percent ahead of our profit number, and they have beats on top-line royalties and licenses," he said.
The Cambridge-based company posted a 23 percent rise in adjusted pretax profit to 66.5 million pounds ($103.25 million) on sales of 135.5 million, resulting in earnings per share of 3.58 pence, all ahead of analyst forecasts.
Score said the group was benefiting from strong demand for smartphones, tablets and digital TVs.
But he said macroeconomic uncertainty could hit demand later in the year.
"A lot of the guidance that has come out in the last few days from semi companies has been a much flatter picture," he said.
"It is possible therefore that the royalty uptick in the fourth quarter is not what we usually see. But offsetting that there is strong license momentum, which is why we are confirming the overall picture for the full year."
Analysts currently expect full-year revenue of $875 million, Score said, after slightly nudging their numbers down from $877 million to reflect the weaker economic climate.
ARM licenses its technology to chipmakers, which pay it a royalty on each chip.
It reports royalties a quarter in arrears, so its second-quarter numbers reflect sales of devices in the first months of the year, when some 2 billion ARM-based chips were shipped.
The market expected the company to report pretax profit of 57.8 million pounds on revenue of 129.8 million pounds, and earnings per share of 3.14 pence, according to a company-supplied consensus of 25 analysts.
($1 = 0.6441 British pounds)
(Editing by David Cowell)