Arm Holdings (NASDAQ:ARM) just posted record-breaking sales, riding the AI wavebut investors weren't impressed. Shares tumbled 4.4% as of 10.50am today, as the chip designer delivered a revenue beat at $983 million, surpassing expectations of $946.8 million, with earnings per share of $0.39 crushing estimates of $0.25. Solid numbers, but here's the catch: Arm tightened its full-year forecast, now expecting revenue between $3.94 billion and $4.04 billion. That's a slight bump over estimates but falls short of the bullish targets some investors had hoped for.

• Warning! GuruFocus has detected 4 Warning Sign with ARM.

For the upcoming quarter, Arm projected revenue between $1.175 billion and $1.275 billion, hovering around the $1.221 billion consensus. Adjusted EPS guidance of $0.48 to $0.56 also landed in a tight range around expectations, signaling a measured stance. Even with a modest boost to full-year EPS guidance, now at a midpoint of $1.60 (up from $1.55), analysts are taking a cautious view. Bernstein warned that while Arm's long-term AI-driven growth story is intact, near-term sentiment could be weighed down by cyclical pressures and the stock's already hefty valuation.

Bottom line? Investors wanted fireworks. They got a candle. Despite solid results and an AI-fueled future, the tempered outlook suggests the stock may face short-term turbulence. With demand normalizing after an AI-driven surge, the market is waiting to see if Arm can justify its premium valuationor if expectations got ahead of reality.